저자: Kevin · 외국인
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턴키 부동산 투자(완성형·리노베이션형)의 개념과 장단점을 설명하고, Clayton Morris의 Morris Invest 관련 소송·뉴욕타임스 기사 사태를 분석한다. 원격 투자의 위험(현장 확인 불가, 중개 수수료형 추천 구조, 하청 관리업체 문제)을 강조하며 가까운 지역(30분 거리) 투자를 권한다. 영상 후반에는 자신의 부동산 강의 홍보가 포함되어 있다.
다듬은 글
Friends, if you want to receive passive income from real estate, be sure to watch this video to the end, because today we will talk about turnkey real estate . And, friends, even if the New York Times writes about turnkey real estate , you should listen to this video and understand why it is important for you.
And is this actually a good source of passive income for you? I know that many people ask me about turnkey real estate , and I don't want it to look like I'm procrastinating with my answer. I promise, I'm not lazy, although I make my three-year- old bring me the newspaper because it's too cold for me to go outside in the morning.
We actually ended up talking to Clayton Morris. So we'll take a detailed look at what exactly is going on and what Clayton Morris's opinion is that wasn't covered or revealed in the New York Times article. And then we'll talk about my opinion on turnkey real estate . Let's go. So, what's the point? What are turnkey facilities?
What is turnkey real estate ? And is this an option worth considering when you're thinking about investing in real estate? Well, I'm a real estate broker. I have been doing this for 10 years and understand almost all the principles of turnkey real estate because I have been through it all myself . So let's try to analyze this as objectively as possible.
Most importantly, let's start with what it is all about —turnkey facilities and the companies that provide them. Well, let's start with that . That's the thing. There are two main types of turnkey real estate . Let's define this as simply as possible. One type of turnkey property is essentially a house that you buy, someone else moves a tenant in, and you just start receiving cash flow.
The bottom line is that you take a bunch of money, give it to a company, become the owner of the property, and they move in a tenant and manage the property, which sounds very attractive. That is, you are actually taking away all the headache. You don't need to look for a deal. You don't need to manage tenants.
You don't need to settle tenants, look for them, and conduct inspections. You didn't need to make any repairs to the apartment. Not in that order, of course, but you did n't really have to do anything. Everything was taken care of for you. That's why it's called "turnkey," because "turnkey" is a reference to the fact that I even have a key right here.
And I don't know why it's so important to me , but I'll do it anyway. You take the key, open the door , and everything is already done for you. Actually, that's why it's called turnkey real estate . Everything is done for you. This is one of the types of turnkey real estate . There is a second type of turnkey real estate .
The second type is when the company does not sell you an already renovated house. Instead, they sell you a property that needs repairs. Then they agree to bring the facility into order. After that, they move in tenants. And you get your cash flow while they manage the tenants and property for you. All of this sounds great because it saves you a lot of real estate hassle.
You don't have to mess with it so much anymore because someone else does it for you. You delegated most of the work to someone else. Now we will talk about the advantages and disadvantages of turnkey real estate . Our car is now on autopilot, and we are headed to inspect two objects. One of them is a house that needs repairs.
And the other is a house that I helped renovate, and it's completely ready for occupancy. But I will show you a few pitfalls that I think will add clarity to real estate investing, what you would like to receive as an owner, and what actually creates real estate value . So, let's go look at these houses.
So, I'll show you two houses. This is one of them, and these houses have quite a few differences, although there really aren't many in terms of the company's turnkey work. When we look at this particular house, we see a lot of basic things that the company will take care of: damaged plaster, old paint, and minor cosmetic repairs.
I like this kind of house because you can see the damage without wondering if someone else has covered up the defects by masking them. I see that these are the original windows. I see that the plaster is damaged. I see the extent of termite damage or the condition of the garage door. I mean, this garage door even has a ready-made mouse hole.
As much as I like renovated properties, I have to admit, I like to do things myself. If the electrical panel needs to be replaced and tidied up , I want to know who did it. Sometimes the downside to buying a finished property—that is, one that has already been renovated— is that warranties are not always transferred to you upon purchase.
You get a new switchboard, but you buy the property "as is" and you only know the company's electrician or someone they recommended. But now the house is sold to you in "as is" condition. Let's talk about what the "as is" clause means to you. So, the first disadvantage of ready-made real estate: when buying a renovated house, you usually sign an " as is" contract, which often deprives you of guarantees from previous contractors.
This means that if a company sells you a renovated property and you were not involved in the renovation, and a year or two after installation the heater breaks, you may not have access to the contractor's warranty because you don't know who he is. Perhaps the company simply helped you sign a purchase agreement for a ready-made home.
So sometimes the finished objects are not so great, and we will move on to another building where work was also carried out to look at the problems there. But, as you can see, this particular object still needs some work. One of the reasons I prefer this type of property—which is what Clayton Morris sold to clients—is that you are involved in, or at least understand, the entire renovation process.
For example, if I came to you and said, “You know what? You should buy this as a ready-made investment. Here's what we're going to do. We'll sand this bathtub to make it look like new. We will replace these switches, overflow, sink drain, and shower head. We will clean and polish all tiles and grout.
Let's lay new linoleum. Let's paint the bathroom. Let's paint the cabinets. Here are the new fittings. New countertop. Er, the new sink is here. So, we are not doing a complete bathroom renovation , but rather updating it to give it a new look. At least you know that I, as a supplier of finished objects, had the contacts of all the contractors who performed various works.
So if there's a problem now, well, I didn't replace all the pipes in the house, but you knew that. You already knew that I didn't replace the plumbing in the house. You knew it. Oh yes. Because I told you, you know what? Those pipes below are still the original galvanized pipes . That means, perhaps in the future we will have to replace them with copper ones.
If you are buying a house that has already been renovated and you haven't inspected it because you thought it was ready to move in, then be prepared for surprises. One of the big drawbacks of ready-made real estate is the desire to sell you a property that is ready for occupancy and looks only cosmetically updated.
That is, maybe they laid new carpet, maybe they cleaned the ceiling, maybe they painted the walls, but you didn't participate in it. You didn't finance it. So no one was obligated to provide you with guarantees or report on what exactly was happening with the facility. You are simply inheriting what looks like a clean home, but may still have hidden problems.
Let me explain this very simply. When I look at a property that needs renovation, or when a company selling finished real estate says to me, "Kevin, here's the property. It needs some work. You know what? The whole roof needs some attention." Then I know: okay, I have an old roof. If I don't replace the roof during the renovation, I'll know that the roof is still old.
But the problem is that most of these companies can just do the epoxy coating in the garage. They can sheathe the garage walls with drywall to make it look great. But because you're often investing from another location, such as from California to Indianapolis or another remote region, you're not always as knowledgeable about the condition of the property as you should be.
And when you see beautiful photos, decorated interiors, objects that are already rented out and bringing in money. You don't realize that this ridge of the roof, even just looking at it, and I'm not a professional roofer at all, I know that it leaks like a sieve. Yes. You know, usually a hole in the roof can lead to a leak.
See here? Here. When you see a light in the garage, it's probably a bad sign. Yes. I do this every day. I swear. So, we know that on one hand, you have a ready-made property, but since you are not involved in the renovation, you may encounter a bunch of unexpected problems. And then there are turnkey properties where you might be part of the renovation or even invest in it.
But the problem is that you often have to rely on someone who can coordinate quality contractors. And let me tell you, I used to be a licensed contractor. The last thing that is easy to do in our consumer world is to find quality contractors. I'm sorry to say this . I am not criticizing the construction industry.
I was once part of the construction industry in my area. But the point is that quality work often requires more money than people are willing to pay. Another downside to turnkey real estate is the motivation of management companies or those who run turnkey businesses to simply find the cheapest contractor so that you can start receiving rent and they can get their commission.
Participating in a property that needs renovation has its drawbacks. So, what kind of turnkey property is best to look for? Well, actually the best option is a house completely renovated by a licensed contractor. You get all the warranties that are transferable, or it is new construction with warranties from the developer.
Let's go to another house and I'll show you why, and then we'll talk more about Clayton Morris. I'll go put this thing back in its place. That's why, friends , I have a rule in real estate investing: you must invest within a 30-minute drive of where you live. If you are interested in my other investing rules , know that I have a course that will teach you everything I know about this business.
And even if something isn't there, whether it's about wholesaling, property management, or how to buy profitable properties, I'll answer your questions in our closed chat group or during private streams four times a week. If you are in an investment course and in an agent course, don't get confused.
Yes, there is a separate course for real estate agents. And there is also a course for investors. You can be a novice investor or an experienced investor—it doesn't matter. You will learn a lot. Be sure to use the promo code spring 2019 and you will receive an 18% discount. But in reality, friends, the problem is with real estate—and that's why you can find so many great deals on it.
That's why I always talk about finding great opportunities and show how I personally close deals or help others buy great properties—because it's hard to do that from a distance. And when something is difficult to do at a distance, what happens? There is less competition. And when there is less competition, what does that mean?
You can earn more money. And that's why I consider real estate investing to be one of the best asset classes. But let's talk a little more about turnkey real estate. Let's look at another example, and I'll show you a slightly better-equipped facility, and then one that hasn't been renovated. Come on.
So, I'm on the second property now, and I wanted to show you some things that look really nice on the outside, but, you know, if you look closer, you start to realize, oh, wait a minute, it's not renovated. So let's take a look at the property. If you look around, everything is freshly painted . The ceilings have been cleaned, but the doors and windows—everything remains original.
We still have what are supposedly original wall heaters. And yes, this kitchen, for example, still has Formica countertops. I'll show you some " before" photos so you can see what this kitchen looked like before. Then we'll look at the bathrooms and compare the "before" and "after" photos. It is worth noting that we have only made a very basic update to make the property look more attractive for sale.
We are not a company that sells turnkey real estate. We do not manage this facility. We don't hide the real condition of the property or anything like that. We reveal everything as it is. Buyers do their own inspections and things like that when this property is sold . But all we did was a very basic cosmetic repair.
Painted cabinets, appliances, painted house , newer light fixtures, newer carpet, newer ceiling fans ; you know, little things like new hardware to get rid of that plain brass finish that usually comes with it, new simple handles for the interior doors just to bring the original doors up to date , new smoke detectors, fire alarms, basic things to make the property more attractive and presentable.
So one of the problems that can arise with a pre- renovated turnkey property is that you may purchase the home without realizing what else it needs to be updated. Plumbing, roofing, electrical. What other things do you not know about when buying turnkey real estate ? So, the secret is that everything looks great in photos.
Perfectly. This is already rented. We could move a tenant in here and call it a "turnkey" renovation, but I know that's not true because we didn't do any plumbing. We did not update the systems. We haven't done the things that ensure durability. We only did what we could to make it look presentable, depending on the buyer's review.
And that's full disclosure . Again, we do not run a turnkey company. So now let's move on to the Clayton Morris aspect. Let's find out what happened there. Because now, I think, we have not only thoroughly explained what turnkey real estate is , that is, you can invest money in something that is already finished, or invest money in something that needs renovation, and then get a rental property, usually at a distance.
It's a bad idea to invest from a distance, but whatever . Uh, let's talk about the Clayton Morris program and what happened, the lawsuits and the New York Times article. Let's go. OK. OK. So, at this point in the video, you should have a pretty good understanding of what turnkey real estate is. You have to understand that there are turnkey properties that you can invest in, and then this company gives you a practically renovated property and manages it for you, or they give you a property that needs renovation and manages the entire process from start to finish.
And we discussed some of the pros and cons of these things. So you should be pretty familiar with the basics of turnkey real estate . But what does this have to do with Clayton Morris of Morris Invest? And as the New York Times writes, the former Fox News host from the Fox and Friends program. Uh, yeah, I decided after 18 years on television.
Uh, I didn't think I'd do that . Um, today will be my last day. I'm serious. I am very, very nervous. So if I faint, just keep going. "Fox and Friends" starts right now. Four hours of fun this morning. Welcome back to this wonderful weekend. So, friends, I spoke with Mr. Morris on the phone and got his perspective on what was going on.
And in addition, we will add my perspective on what I think is happening, because I am a realtor and have been doing this for 10 years. I have a pretty clear idea of where the problems are here. But let's delve into the details. So, The New York Times reports that Mr. Morris intended to connect small investors with ready-made properties in Detroit, Minneapolis and Jacksonville.
And this is quite typical for companies offering ready-made investment solutions . Such companies usually try to invest your money in areas with potentially higher returns but lower asset value growth. If you are taking a real estate investing course, you already know that return on investment and capital appreciation are two opposite sides of the coin of real estate investment income.
But The New York Times is not about profitability at all . No, we're talking about nearly two dozen people suing Morris Invest, essentially over allegations of fraud. Here are some quotes from people interviewed by The New York Times: they claim that the condition of the property was much worse than advertised, and that repairs that were supposed to be done in advance were done poorly or not done at all.
You might think this is an investor's worst nightmare. But we're dealing with Brian Freeman, a California lawyer who paid $40,000 for a dilapidated house that was in such poor condition that he was fined. This also applies to other sites, where people suddenly started receiving fines for houses that were partially burned down.
And they learned that these objects had partially burned down, only thanks to the fines they had received. These fines were issued by the city, not by the company that was supposed to manage the property, or Morris Invest. Of course, these photos, stories about lawsuits, lost money, or videos on the Internet where lawyers talk about Morris Invest create a very unattractive picture of what is happening here.
But we want to look a little deeper and find out why this happened and how such a situation could have been prevented. I mean, it's definitely more than just a regular guy selling houses. You know, he...he left. He seemed to have quite a passion for rental properties . Big enough to quit my job at Fox.
And that's when I decided I needed to talk to Mr. Morris himself. So, what did I do? I left a comment on his YouTube channel: “Hey Mr. Morris, send me a private message so we can discuss what’s going on here.” And on March 30, we did just that. Clayton Morris and I talked on the phone , and I wrote everything down, no notes, just notes about our conversation.
In that conversation, Mr. Morris was very candid about what happened. And the first thing that made me think, "Oh, now the picture is a little clearer," was when Mr. Morris said, "He had a relationship that he believed in," with the company that, quote, "also managed my personal real estate." End of quote.
Friends, for me it was a moment of: " Wow, wait a minute." To understand why I had this reaction, you need to know a little about how the real estate industry works. You can get a commission for the recommendation and not tell anyone about it . In most cases, you should warn people: “ Hey, I can get paid if you click on my Amazon affiliate links.” Or: “ You know what?” “If you buy a real estate investing course, you pay me.” But with real estate, things are different.
In fact, recommendations in real estate work completely differently, and here's what it looks like in practice. You come to me, let's say your name is Freddie Mercury, and you say, "You know what, Kevin?" "I want to buy a house in Texas for $500,000, and I respect you, Kevin." "I want you to find me an agent in Texas." And I answer: "No problem." "I'll find you an agent in Texas ." I turn to the most reliable resource on the Internet, google.com, and there I am—a realtor.
"Hello, realtor, I have a client I want to send to you." " He is going to buy a house for $500,000." "He's already been pre- approved for a loan." " Would you like to work with him and pay me a 30% referral commission after the deal is closed?" Keep in mind if the buyer's agent commission is 3%. And I get 30% commission, so I can earn $4,500.
just by making that phone call and saying, "You know what? If you agree to give me 30%, I'll send you a client ." Then I come back and say, "Hey, Freddie, I have a great agent for you in Texas." Call this agent. I already told him you would call. That's all. I don't have to tell Mr. Freddy that I'm going to pocket $4,500.
Such is the legitimate nature of referrals in real estate. And I mean, I'm not a lawyer, so I'll knock on wood to make sure everything is correct. I'm just a real estate broker here. So, back to Mr. Morris. Mr. Morris has created a great company that markets itself very well to find people interested in investing in real estate.
Most of these people are usually not from this region. That's why you see California investors pouring money into what appear to be high-cash flow areas like Indianapolis, Jacksonville, or Detroit. And friends, this is where I think everything went wrong. In fact, the New York Times on the cover of the business edition, because I get the New York Times delivered to my home, literally says right here: "He got referral bonuses, clients got financial holes." Now, I think this is a bit like clickbait, but I don't want to minimize the problems of the people who are affected here.
But here's how it really is . Most people assumed that Mr. Morris would be involved in the projects from acquisition, that is, buying the properties for renovation if they needed renovation, to finding tenants, and then managing them from A to Z. Well, my conversation with Mr. Morris revealed, and I'm sure he's said this in other places, that he actually has contracts with various property management companies in other places.
This contract says, and I quote: "They are responsible for the repairs, construction, and management. We are just a source of referrals for them." He goes on to say, and I quote: "We really trusted them." And at that moment, they become the target of an article in the New York Times. And while their faces weren't plastered across the front page of the article, though perhaps they should have shared front- page space, Ocean Point was clearly the referral contractor from which many of these lawsuits stem.
Now, I am not claiming that all the lawsuits arose solely through the fault of Ocean Point. And I'm not trying to say that Mr. Morris is not guilty. I'm not trying to take anyone's side at all. I just see that Mr. Morris, from my perspective, is using a referral system that legally exists. But if now that referral deal is being passed on to a property management company, and the management company—which (if you've seen before, how hard it is to find local managers , contractors, and good agents, especially when you're not there)—then we understand that this is like a powder keg for problems.
That is, a small match sets everything around on fire. So, let me quickly clarify this. Mr. Morris probably didn't make it very clear to his clients—and I'm just assuming here— that the nature of this relationship was purely referral. That is, Mr. Morris took your data and then passed it on to the property management company.
They were engaged in the purchase of the object. They put the property in order, and if mistakes were made , it was their problem. That's probably why Mr. Morris was sued. It should have been a little more explicit that no, he's not the one coordinating. This is actually what a property management company does.
Well, unfortunately, if the consumer doesn't know this, you end up in court. So this is pretty damn annoying. Perhaps Mr. Morris can get away with this through contracts with these third-party management companies , because he says, quote, "We know the truth, so we're fine." And he believes that 90% of the article in the New York Times should be about Ocean Point, not him.
Of course, we know that there are three sides to every story . There is the client's version, Mr. Morris's version, and then there is the truth. I'm not saying that anyone is lying or that anyone is wrong. Actually, the point of this video is to tell you something I've been saying for a long time. Invest in real estate near your place of residence.
By the way, during the conversation with Mr. Morris, it was also mentioned that he visited these facilities . Keep in mind, he has projects all over the US, he has probably completed thousands of projects and has received perhaps over $5–6 million in commissions, at least according to the New York Times article.
And, my friends, maybe he has a great business model, and these are just a few bad apples in the basket. But the main conclusion for you, as a consumer: if you are not there, you do not know what is happening there. So, I had a proposition for Mr. Morris. I suggested, "Hey, Mr. Morris, why do n't you install a Ring camera on the front door or maybe in the kitchen so the client can log in and see who's at the house?" When are they near the house?
Is there a renovation going on ? Did squatters get into the house? Is everything going according to plan? " And he really thought that was a great recommendation for property managers to start using it on their properties. I definitely advise my sellers to pay for it, because I think it's a great idea, especially for vacant properties.
But for me, there's no substitute for the argument that if you don't invest on- site, you don't know what's really going on. And unfortunately, I think Mr. Morris was a victim of not being on-site. So the main lesson is that if Mr. Morris had been on-site in Indianapolis during all of these projects , he probably would have been able to spot these problems.
And I don't believe that Mr. Morris is a bad person. But I do believe that he was getting a lot of referral fees and referring a lot of people to different companies and then trusting them to do the work without actually checking that they were actually doing it. And that's where Mr. Morris gives us a great quote.
When I asked him what he would do differently now, in the future, because he's still working, he said, " Kevin, trust but verify." And, my friends, it's an old political saying, and I think Mr. Morris said it best for us . Trust but verify. Because when you're not there, it's very hard to verify. Now let me give you a little bit of a different perspective on this, just to make it simple and clear.
I was talking to an employee of mine yesterday who mentioned investing in Idaho, and I said, " Hey, would you ever invest in this part of Idaho?" "And his reaction was a quick, 'Oh, no way.'" I'm not going to invest in that area." And that made me laugh, because I thought to myself, " You can say nothing." I get it ." Because that's the thing .
When you grow up in a city, when you go to school, to college, to the bank, to the gym within 30 minutes of your house, you know what? You start to learn which streets to avoid. And when you start to understand which streets to avoid or walk on, you know what? You understand which streets to avoid investing in.
But when you invest across the country, as you're encouraged to do by turnkey companies, what are you missing? Well, my friends, I've said it over and over again, and I hope you learn this lesson when you think about turnkey real estate as a bottom line. You think about passive income. You think about cash flow.
Honestly, look no further than your own backyard. Understanding the internal rate of return from a combination of appreciation and capitalization, like cash flow or cash-on-cash yield, is exactly the model that I teach in my course. on real estate investing, the link to which you will find below, and don't forget to use the coupon spring2019 for an 18% discount.
Now, about my conversation with Mr. Morris, it was a very, very good conversation. We ended the call with the realization that 2019 was probably going to be the toughest year of Mr. Morris's life. But there was one quote he left me with that I thought was particularly powerful. Here it is. At the end of the conversation, he mentioned that when he goes on stage in front of 2,000 people, there are, quote, "2,000 thoughts about me." None of them are true.
I can focus on the 1,000 people who love me, or on that one troll. End of quote. And at the end, he suggested that if we stay true to ourselves, we have nothing to worry about. Thanks for watching.
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