Working Capital The Real Estate Podcast

From News Anchor to Financial Free Through Real Estate with Clayton Morris|EP20

Sep 23, 2020

In This Episode

Clayton Morris is a real estate investor and host of the Investing in Real Estate podcast. He is a former co-host of The Daily Buzz and Good Day Philadelphia on Fox’s WTXF-TV who moved to co-host Fox & Friends on Fox News Channel in 2009. He covered consumer technology for Fox and hosted weekly technology segments for Fox News Radio and Fox News.

In this episode, Clayton shares how his father lost his job and downsized everything to survive financially and eventually started investing in real estate.  Clayton talks about his early deals, the “Freedom Number”, and his turnkey rental company Morris Invest which helped hundreds of people buy their first rental property. He also shares where he believes the best area to invest are, his tried and tested strategies for acquiring rental real estate and how to build lasting net worth through real estate investing.

 

Quotes:

  • “I think this pandemic has taught us that if I would look at the basics of real estate investing, landlord friendly appreciation, market, low crime, job growth, etc. I want to make sure I’m pandemic proof.”
  • “I always grew up with these limiting beliefs around money. You know, money doesn’t grow on trees. We’re not the Rockefellers. So I always had this adverse relationship with money, I never thought I was worthy of it.”
  • “So I think it’s incredibly important to switch that paradigm in your brain to really think about wealth creation, as you know, owning a business and wealth creation rather than working for somebody else.”

 

Resources and Links:

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Transcript

Jesse (1s):

Welcome to the Working Capital The Real Estate Podcast my name’s Jesse Fragale. And on this show, we discuss all things real estate with investors and experts in a variety of industries that impact real estate. Whether you’re looking at your first investment or raising your first fund, join me and let’s build that portfolio one square foot at a time. Hello and welcome to work in Capital. My name is Jesse Fragale and today we have a fantastic show. A gentlemen named Clayton Morris will be on today. He is a real estate investor and host of investing in real estate. The podcasts, he is a former co-host on the daily Buzz and good Day Philadelphia. Soon after that, he moved over to Fox and friends on the Fox news channel.

Jesse (42s):

So very, very unique individual. I don’t think I’ve ever had an Anchor on turn real estate investor. You can check him out on YouTube will put a link to as Channel in the show notes, but without further ado, let’s get into the episode. I hope you enjoy it, ladies and gentlemen, I am fortunate to have Clayton Morris on the show. Clayton, how are you doing today?

Clayton (1m 1s):

I’m doing great. Thanks so much for having me on the show. I’m sure.

Jesse (1m 4s):

Yeah. It’s my pleasure to have you on listen, Clayton we talked a little bit about before this show, I’ve known you online for a number of years now and what I’d like to listeners to hear just off the top is basically how you got into real estate and kind of wealth creation. I know you didn’t have exactly a, you know, a to B to transition into this industry. So maybe you can chat a little bit about your start.

Clayton (1m 28s):

Yeah, I mean, honestly it starts with me growing up, not having a good relationship with money and, you know, I always grew up with these limiting beliefs around money. You know, money doesn’t grow on trees. We’re not the Rockefellers. So I always had this adverse relationship with money. I never thought I was worthy of it. I worked in the TV business for a number of years, all across the country, as a reporter, as an Anchor political reporter or a German, you know, So in the journalism world. I just kept growing and growing and growing and eventually wound up at the network level. And I got to You know to the top number one, cable morning news show in the United States. And it was a long journey, but I watched my dad when I was 12 years old, lose his job.

Clayton (2m 9s):

And I remember it was like a Friday afternoon. He was downsized, you know, and he just came home and he was just devastated. And I remember thinking, Oh my gosh, we’re, we’re ruined, you know, what are we going to do? We’re going to have to move or to it. And I didn’t know it then, but it wasn’t until a few years later I lost my job in Philadelphia. They just didn’t renew my contract because they at a TV station, they wanted to take the show in a hard News, you know, if it bleeds, it leads kinda of direction. And I knew that wasn’t me. And they just said, you know, you’re the fun morning guy where it just not going to renew your contract. And I thought, Oh my God, what? I’ve just lost my job. I, you encouraged me to buy a house here in Philly. Like what I’m I moved in with my parents after that, it was awful.

Clayton (2m 50s):

And, but I remember the moment, like my dad lost his job and here I was like repeating history. And so I said, then I really got deep on and I would journal about it, just meditate, take long walks and think about it as like, I am not going to wind up. Like my dad did it in that way. You know, having my future dictated by somebody else. And I’m going to build a safety net. And for me, the most tangible thing that I could think of that I understood, I could sink my cell at my seat, sink my teeth into it was real estate. The stock market never made sense to me. You know, it seemed artificial and fake, you know, and unless I had 30 TV screens and that was day trading would work for me. So what did work for me was real estate investing.

Clayton (3m 30s):

And I could sink my teeth into that. And that’s how I got started on that journey of starting to study and learn

Jesse (3m 35s):

That’s. Yeah, that’s incredible. So, you know, it’s funny. I was just a, but an hour, hour and a half ago, I was watching a, I guess it was kind of a montage of your last couple of years as a From the news industry in kind of moving into real estate when, when that happened, when you made that decision to actually get into real estate. So that probably predated the actual leaving the industry as many people, you know, we’ll, we’ll do the dual career for awhile. When you first got started. What, what type of deal where you first got involved in? Were it was a single family multifamily. How did you get your first start

Clayton (4m 10s):

From investing in real estate? I mean, it, honestly, it all started for me on a flight to New Zealand and it’s kind of a weird story, but it’s the moment that changed my life. I had a buddy who was one of the greatest photographers in the world. He lives on the South Island and New Zealand. He invited me to come there to shoot photos and stay with him for like five days because I had to get back to work, you know, I’ve had a job. So I was on this flight and I’m next to this couple that we’re in their fifties ending after 16 hours. And I finally got to talking to this couple that was in their fifties and they said, Oh, you know, how long are you going to be here in New Zealand? And I said, Oh, five days. And they said, five days, that’s a short trip for New Zealand. I said, I know, but I got to get back up kids.

Clayton (4m 50s):

And I got a job, you know, I said, what about you? How long are you going to be in New Zealand? And they said, we’re going to be here for two months. I just said, what do you do that you can come here for two months. They’re not retired. And he said, Oh, I’m a real estate investor. My partner. And I, we buy single family homes. We renovate them. You know, he told me the specific areas of the country that he, that he buys. And we placed tenant’s in those properties with our property management companies. And we don’t fall in love with real estate. We really focus on the return on investment. He told me the market demographics, what he looks for. And that was it. I mean, I do the exact same thing today based on what he told me on that flight. I said, that’s it, I’m doing it. I saw the proof was in the pudding, watching this guy to get, to go to New Zealand for two months.

Clayton (5m 31s):

So a single families, single family is a duplex is that’s what we do. That’s my favorite it’s work for me. You know, I, if I maybe would’ve started with a a hundred unit apartment complex is that might be their, but for me it was, I grew up in a single family house. I understood having a yard, having a fence, having a space that you can call your own. My tenants tend to stay for many, many years, five, six years. You know, I don’t, you know, tenant turnover is where you spend your most money. So for me, you know, I didn’t want transient tenants. I wanted larger duplexes that almost feel like single families cause they’ve got vaulted ceilings. And as those are the properties we build right now is larger duplexes for our clients.

Clayton (6m 11s):

So, you know, new construction, stainless steel appliances, granite countertops, vaulted ceilings, and they feel like single family homes. And I have nothing has changed for me. I still do the same thing.

Jesse (6m 23s):

So you, you get back from, from the strip in New Zealand and what’s the, what are the next steps then your you’re looking, you know, you want to get into real estate. You know, what steps did you take? Cause I, I assume it’s not like today where we have, you know, two clicks away. We have all the knowledge we need in, in our industry. I know, you know, when I started, which wasn’t too long ago, but even 11 to 15 years ago, we didn’t have all of this, a, all the resources that we have today. So, so where did you start in that regard?

Clayton (6m 49s):

You know, I started, I think listening to podcasts. Yeah. Back in the day I was listening to some Podcast and started learning about cars at the time. I didn’t understand the, I didn’t understand the idea of buying a property that was, that will like it. You could find a deal that was off market that needed some work that needed some fixing up, et cetera. And I, I just assumed like everyone else, he would just call our realtor. You know, you’re just would call a realtor, you’ll get the best house in the neighborhood. And that’s what you would do to invest in real estate. And you know, for me at that time, I, there were so many deals you could find there were foreclosures or short sales or things like that. So I just started doing some research. And one of the areas that this gentleman told me where he was investing in the Midwest and S you know, South West and things like that, I just started doing some research on those areas and found what was then called, like a distressed property realtor, which I didn’t even know they exist, you know, because most realtors don’t want to deal with the stress property they want, they want to stage the best house and make the best bang for their buck.

Clayton (7m 50s):

They don’t want to deal with fixing properties up and dealing with the ugly duckling duckling property’s, you know, like the million dollar listing show’s, you know? Yeah. I mean, that’s my experience with my friends who are realtors. And I found this guy and I connected with him. I flew out there and started walking through properties. And the first two properties that I bought, I bought a short sale and a foreclosure. And those were the first two properties that I bought and fixed up and found a contractor. And I still own those properties today in my portfolio.

Jesse (8m 20s):

So your strategy, just from kind of listening to you online, it seems to be kind of a buy and hold strategy. You’re going to buy properties and your going to hold them for, you know, quotations for the rest of your life. Is that, is that kind of the angle that you take with these properties?

Clayton (8m 34s):

Yeah, that’s what I try to teach. That’s what I try to teach all of our, all the people that listen to my podcast and my YouTube channel is buy and hold. I mean, that’s been, my goal is, you know, to me, I did the wholesaling thing for years. I was a wholesaler. I saw the flippers in New Jersey that I would wholesale properties to, and I’d make 10, 15, $50,000 on a wholesale flip to, but they would spend nine months, 10 months, 12 months renovating these properties. And a lot changes if we’ve seen in the past few months. Right. A lot changes in that amount of time. So, yeah. You know, so I would see these guys spending that so much time working on these properties and, you know, they’d invite me back a year later after I’d wholesale the property Clayton he got to come see in the property that, you know, we wholesaled from, you know, or that you wholesale to us.

Clayton (9m 19s):

We added a whole second floor to this property, you know, and yeah, they bought it from me for 400,000 and they flipped it for 900,000. That’s great. That’s up, you know, but it’s Tran it was transactional. And its, you know, when its it’s still a paycheck, win is the next property, your only as good as your most recent property. So for me buy and hold the tax benefits, you know, being able to get that depreciation, the cost segregation analysis that we’re able to do on our new construction. To me, there’s just nothing better than it being able to do that in my opinion.

Jesse (9m 49s):

Yeah, no, that’s great. The, you know, it’s funny too. Cause we talk a lot about cost sag on the show in, and just different strategies that you get with that. But even now you, you know, talking about coronavirus virus kind of what’s going on with the pandemic. I think it was, it was on Bloomberg masters in business and they were talking a lot about, however, the past few years there’s been this, all this talk about apartment buildings and multifamily and the argument that this guests was saying on the show was that I think we’re going to see a secular trend going to be back towards single family, people that are going to be able to start working from home, leaving the city is not, not in anything drastic like five, six, 7%, but he was talking specifically about Manhattan.

Jesse (10m 29s):

So just moving on to that. W what is it about a single family? You know, as I’ve heard you talk about single family before, it seems to be the sweet spot for you. Talk a little bit about, you know, why that is and what your thoughts are and of that asset class in general.

Clayton (10m 45s):

So just from an idealistic perspective first The maybe, maybe the intangible. It’s the idea that when you pull into your driveway at night and you live in a single family property, it’s, there’s no one banging on the walls. It’s your own property. You can play, you know, you can watch Netflix as loudly as you want, and you can have the dog running around in the backyard. It was fenced in backyard and its your property. And I just know from having grown up in a single family home that has always been this ideal of the American dream is getting to this space that you can call your own, right? Three bedrooms, two baths So or more, but that’s my sweet spot.

Clayton (11m 26s):

Is that a three bedroom, two bath sweet spot. And so in the same thing we do when we build our duplexes is our duplexes are a three bedroom, two bath, and it divided nicely the way that we have them laid out. So you’ve, it almost feels like two separate single family homes, vaulted ceilings. And, and so you feel separate from those, from the other families. So just from that perspective, and I think that that’s important, just the, and our tenants tend to stay a long time. You’re going to move a neighborhood with it as a good school district, then your going to stay for a long time because that daughter, that son is going to go through that school district. When you want to see them grow up with those same friends and you’re not moving, I’ve just found my experience. When I was wholesaling properties in New Jersey and watching these guys who were doing that, they were buying large duplexes.

Clayton (12m 12s):

In fact, a friend of mine who started with one property has now 3000 properties. He said, what? I found the tenant’s that stayed the longest stay in the property’s with the largest rooms. So if I was going to wholesale him a duplex in New Jersey or a triplex, the room’s had to be a huge he’s like, I don’t want tenant turnovers. And he was right. And they was stay for a long time because they had that additional space. So I took what I learned from him and rolled that into what I do, but just more broadly in the market now. Cause you bring up a great point. Yeah. There’s an Exodus in America from these big cities. The realization is, Hey, I don’t have to live in San Francisco and work work at Twitter Jack Dorsey.

Clayton (12m 53s):

My boss says I can work from home. So Y in the world, would I pay three and $4,000 a month to live in San Francisco when I can live out in mountain view or some other spot, you know, up in the mountains and work remotely with good wifi network in a good Good ethernet. So I think you’re seeing this trend all across the country. I did a report on my show just the other day, about the 10 cities that saw all of these people, leaving Chicago, Denver, New York, Miami, going out into the mountains. There’s bidding Wars in the United States now happening like up in the Hudson Valley, up in the Pocono mountains where it was never a bidding war, they would only ever have one bid. Now their having eight bids above asking price.

Clayton (13m 33s):

So there’s a demand for these rural, rural, single families in a lot of my friend’s in the commercial real estate space are just getting crushed right now. It’s been a bit of a bloodbath, unfortunately.

Jesse (13m 43s):

Yeah, its a, it definitely So for me, you know, as listeners know I’m a broker and the commercial real estate. And so, you know, we’re doing downtown tomorrow, a Toronto office class retail, industrial, a multifamily as well. It clearly any of their commercial types, butt retail obviously is taking a huge hit in that goes without saying offices. Really? That one, that, that question Mark right now of, you know, AAA office space, you as an investor, it’s stuff that we didn’t, we don’t look at, but as a broker, you know, the pension funds or the real estate investment trusts, there are starting to, I think question are, take a second look, even though they’re triple, you know, AAA tenant’s that are going in these buildings, how many of them want to actually have the footprint that they’ve been having over these past few years?

Jesse (14m 26s):

So it was actually Jonathan lit that’s just came to mind on that was on Bloomberg talking about this. And he was going, you mentioned you are you’re from Jersey who he was basically saying even a 1%, you know, 50 basis points to 1% year after year, Exodus out of the city will have extreme consequences for how we’re going to actually utilize land in the burbs. You know, are those retail malls going to be, it converted, you know, industrial are, they can be converted to a single family. So when you started Investing geographically, you talked a little bit about New Jersey. Was it just a more, did you scale up in New Jersey or did you go to different markets in the States?

Jesse (15m 9s):

No, So I, you know, I’m sure

Clayton (15m 11s):

I’ve realized early on that. There’s no way I was gonna really invest in New Jersey that it was way overpriced property taxes, way through the roof. Just way too expensive from an ROI perspective, to make sense. Unless of course you were in some of the triplexes quads, that kind of thing where you could, you could scale, but even there, it’s still not landlord friendly. I talk a lot about, on my channel about, you know, investing in landlord friendly States. And so like where we build our properties right now, we’re building about 400 properties houses this year in Texas, West Texas is, are, are hotspot. It’s the most landlord friendly state in America. I mean, its, you know, without a doubt is at the top of the list at every time, you know, and for a variety of reasons, but no New Jersey for me, I’ve realized, you know, if we want to get an eviction in New Jersey, I mean, you’ve got to hire a lawyer, you got to go through an entirely process or someone could be in your property for nine months to a year and not paying rent, which is ridiculous.

Clayton (16m 5s):

The same thing is true of California. You know, in Oakland, California, you now see that you cannot do a criminal background check on a tenent in Oakland, California. Like what kind of crazy world are we living in? Where eye as a landlord who have the liability of this property, can’t find out if the person who’s going to move into my property has a prior crazy conviction. It’s up to me to decide if I want to rent to that person. And then what if that person commits a crime, then that’s on me as a liability. So it’s going to be a legal field day for, for trial lawyers. And of course they need more money. So no, I, you know, I looked for areas where the return on investment could be the highest. I always look for the criteria of, you know, lower crime, you know, low vacancy rates.

Clayton (16m 51s):

I want jobs that are coming that are diversified, not just one hoarse, you know, one horse town kind of oil refinery, one super Walmart. So all of those things go into the criteria that we look at before we’re building properties or before I’m going to buy anything.

Jesse (17m 5s):

Yeah. Just curious on the, on the Jersey. Cause as I had to have a couple cousins in Morristown in, and it was always curious as landlords out there are, you kept in terms of how much you can raise rent annually.

Clayton (17m 18s):

It guess it depends on the County. I am not. So I actually did an experiment and my wife and I, we bought 10 properties that we fixed up in South Jersey and know were not kept up on that. You know, it’s going to depend on the municipality. So, you know, you may have in Newark, New Jersey, although I don’t know of it yet, From from my experience. And I think it would be, I think you, that would be a disaster for real estate investors there if they suddenly had a cap because you know, those areas have been revitalized tremendously, thanks to investors pouring money in to, to building renovating those properties that had been left fallow. So, you know, they need a lot of work. So I don’t think they’re going to do that, but no in New Jersey, I hadn’t faced any of that.

Clayton (17m 59s):

We bought 10 properties, renovated them, but they’ve been nothing but a pain in my, my backside. So,

Jesse (18m 4s):

Well, it’s just funny how investors, you know, we, we will adjust to any market. The reason I ask is because Toronto is probably, you know, we, we talk about a bunch of the different States in the us, but in Toronto, in general and Ontario, we a were kept at a pretty much inflation in terms of what you can raise your rent unless a tenant leaves. So the way landlords adjust to that is what is lawful is that they can’t arbitrarily raise it above the guidelines, but they can go to a tenant and say, listen, if you sign this basically giving back your suite, here’s a onetime lump sum payment. And that’s what investors have started doing. Maybe it’s a buyout of a tenant in a apartment at $3,000, $5,000 because only then can they reset the rents to market and actually Mark to market.

Jesse (18m 47s):

So it’s something we talk about a lot because like I completely agree with you. If you have to look at areas that are friendly to the trade that you’re in specifically for us Investing and write, you know, it just leads me with Texas. When you M you know, you’re saying your, your building properties out there, I’m curious to know, like when you started with the duplex is, you know, you started with a buy and hold strategy, and now you’re starting in your starting to talk about construction and building. How did you make that transition? And what are you, what are you basically doing today with the investor hat on?

Clayton (19m 21s):

Well, you know, We for me personally, and for what we do and our company, you know, we really, we went through a Rocky period a number of years ago, where we were dealing with trying to find the one off a single families that needed a lot of work and getting the right contractor help in these areas to, to go after and find these properties. A lot of these properties had dried up. And so you saw even in the move of the big hedge funds right now, instead of trying to find these one off properties in these neighborhoods, these existing neighborhoods that need work and need renovation, which can be difficult to find, or your having to get them from bank tape or other places, that’s all that dried up. And who knows what’s going to happen in the next few months with foreclosures in the United States, we could see a wave of it again, unfortunately, but right now that’s been the case.

Clayton (20m 8s):

There’s an incredible demand for a single family homes and the United States. We had an affordable housing crisis, so we don’t have enough of them. And so to do it at scale, where we can then reset the reset, the table, build an entire subdivision near rowing, you know, growing communities like in Lubbock, Texas, or Amarillo or other spaces where you are getting fortune 500 companies coming in universities, healthcare systems, low crime, low vacancy in incredible demand university expansion. It also helps with Patrick My homes when in the Superbowl does it, does it hurt if it doesn’t hurt? So if we were there know a few years ahead of that, because we were looking at the data and we were studying where we could see the best growth where we can also then, you know, do at bulk scale where we’re able to go in and do 40 properties at one time, and then be able to get those discounts on materials, able to get those discounts on a furnaces, water heaters, to do all those things.

Clayton (21m 7s):

And instead of trying to do one off renovations, which is what we were doing, we would still do some of that. I’d say like five, five, 7%. But most of what we do is now this new construction, if you just can’t touch it, and then we have tenants that just stay forever. And one of the things that we do for our clients at closing is we do a cost SEG for free. So we’re doing that ahead of time when we’re closing on the property. So we can hand that to someone and they get the additional benefits of, of being new construction and a cost segregation analysis that you don’t get if its just a renovated property is, you know, from a cost segregation experience. So it was just so many benefits to the new construction and it’s all new.

Clayton (21m 48s):

So I don’t have to do anything. We know we have our footprint, their, and we know that we had our hands in this property from the very beginning and that, that it goes a long way.

Jesse (21m 57s):

Yeah. So for, I mean, first of all, for those that don’t know cost segregation, we’ve talked about it on the show, that’s basically, you know, you’re itemizing the amortizations to, to basically increase the amount that you can amortize in terms of you doing that for individuals that a, that are going to lease the space or rent it out. Are any of those construction units that you’re building in these areas that you’ve actually flipped for sale or are they predominantly held and leased out?

Clayton (22m 25s):

So we, yeah, I mean that’s what our company does. It Morris Invest is full service. So we’ve, we’ve really grown over the years from just a smaller sort of turnkey operation to a full service company. So when we decided to go into the new construction space, we said, how can we just do this the best of the best? And one way we decided to do that for our clients who are going to buy the properties and, and keep them in their self directed IRA portfolio or whatever outside of their portfolio, however their going to hold it. We work with them because we work with like 60 different lenders so that we can piece these things together. Maybe they come to the table with 40,000, from their self directed, are there their IRA. If they’ve got a 401k they’ve got at 10 31 exchange, we can pull all of these things together for them.

Clayton (23m 10s):

And so, you know, once they then close on the property, we’re able to hand them a cost segregation analysis that they can take right to their tax account. So if a down payment on one of our duplexes is like 45,000, they’re able to basically get that entire amount back on their taxes because they’re getting a cost segregation analysis when they close. They’re able to accelerate, accelerate that new construction depreciation in this calendar year. And it’s just been a game changer for us because then that way it’s almost like an infinite return. You know, they’re getting that money back. They’re fully the money from a bank, which these interest rates in the United States right now, we’re the lowest we’ve ever seen.

Clayton (23m 50s):

Yep. So operating and building a portfolio and other people’s money. So yeah, that’s exactly what we do.

Jesse (23m 56s):

It is the structure itself, you know, we’ve heard over the last five to 10 years and I think it’s, it’s going to be interesting to see the next few years given everything that’s gone on, but we’ve heard so much about syndication, especially with the apartment buildings, with this type of structure, our, you, are you kind of walking the securities a tight rope or is it, is the structure different in that you, you know, you don’t look for exemptions. It’s just, it’s kind of more so on. The turnkey are, are selling side.

Clayton (24m 23s):

Yeah, no, it’s just a straight up house sale. So there’s no, yeah. There’s no syndication. There is no, it was none of that. I mean, we mostly work with high, you know, high net worth individuals anyway, but no, there’s no syndication. They’re not buying a part of a property. They own the property fully deeded to them at closing, they can do whatever they want with it. They can sell it the next day. So there’s yeah, it doesn’t hit that securities, securities field at all.

Jesse (24m 49s):

So in terms of the geography talked a little bit, you know, with Texas where you started investing in, what other areas, you know, have you maybe not invested yet, but that you, you like in terms of demographics and the old, a, a pig in the Python right now in terms of, of the demographics.

Clayton (25m 6s):

Yeah. I’m happy to pull back the curtain on that. I think it’s important for people to understand like where you’re seeing the best bang for your buck, but also the most landlord friendly areas of the country. You know, you know, I’m, I’m, I’ve been a fan of Indianapolis for years. That’s where I was when I, you know, but I don’t really do much. There are any more right now we’re seeing an uptick in crime in that area. So I haven’t been terribly a big fan of that lately. I was a, you know, I still invest in Michigan. So I have properties on the outskirts of Detroit in, in some really nice areas from established old brick brick neighborhoods that have been growing. Those have been some of my most consistent property’s. In fact, the first two properties I ever bought were just outside of Detroit and are still in my portfolio today.

Clayton (25m 51s):

And we’ve been able to raise the rent when we bought, I think that the rent where we’ve started out was around 800. Now they’re renting for 1100 a month. So yeah, that’s been, that’s been great Florida. I own some properties in Florida. I think one of the areas you are seeing some of the best bang for your buck who’s in the Jacksonville area is still, it’s one of those areas that still not gotten bit buy the Florida bug. Now the Orlando overpriced Tampa overpriced markets. So I think Jacksonville still has a lot to offer, although things had changed. You know, I think this pandemic has taught us that if I would look at the basics of real estate, investing landlord friendly, appreciation market, low crime, job growth, etc.

Clayton (26m 40s):

I want to make sure now also that I’m pandemic proof. And so think about tourism. So Vegas, Orlando, these areas that rely heavily on tourism, when you have 50,000 Walt Disney world employees being furloughed, and then many of them being told, Hey, now you have to reapply for your job. Cause you may not have a job. That’s a concern. So if you are investing in those Rose really tourism, heavy areas, that’s a concern also So Florida. Just, you got to be careful, North Carolina. There’s a lot of good spots in North Carolina that we love. So we’ve had properties in North Carolina on the outskirts of Raleigh that has done really well for us, sort of those grow those growth communities outside of the triangle area.

Clayton (27m 22s):

And yeah, Texas is, ah, is, is fantastic.

Jesse (27m 25s):

Okay. I just want to a, I want to talk a little bit, you know, just mentioning the pandemic, I’m just curious with your own investments, you know, what have you seen as a, as a result of this in terms of your space? You know, just, you know, from my point of view, we’ve been actually surprisingly good in the apartment side. That’s predominantly what we invest in office has been a little challenging, but you know, has not been hit as hard as what we’ve seen in retail. So how, how have you just on a more granular level, how is how of your investments in terms of percentage that actually continue to pay or did everybody pay throughout this up until now? Yeah, I was stunned.

Clayton (28m 4s):

I mean, I was scared. I was terrified. I’m like what’s going to happen. Yes. Not only to our portfolio of properties that my wife and I own, but what about the client’s that we’ve helped them buy their first rental property or, you know, we have clients that have bought 10, 15, you know, so they depend on that cash flow and what’s going to happen there. We can’t control the market, but fingers crossed fortunately overwhelmingly everyone’s paid, which has been stunning. But then also, you know, when you’re, maybe you have tenants that had working at the hospital system, working in the university system or working in the, in the jobs that are part of those fortune 500 companies that are nearby. That’s important now in New Jersey where we had some properties personally, in our personal portfolio, we had ’em we had about a 50%.

Clayton (28m 50s):

So these 10 properties in Southern New Jersey, umm, and this was a bit of an experiment in a, in a kind of a shift of your area. This, that we’ve got hurt. There are about 50% payment for our property. Is there overall though in our property is, has done really, really well. And I was one of our big concerns early on was about materials. Where are we going to see, you know, an ability to get materials and fortunately all the lumber that we get you get from Canada. So that hasn’t changed thanks to you guys. So, you know, that’s been a big part of it, very little had, you know, we don’t have anything coming out of China. We had to worry about just in this pandemic. Right. And I, I was stunned.

Clayton (29m 30s):

And then just at a business level for Morris Invest for our company, we’ve had a record past two months where I’m guess, I don’t know if it’s the stock market, craziness, people being worried about the U S dollar. They don’t want their money tied up in the us dollar, which is going wacky right now. And way down stock market is totally out of align with Americans right now. And that doesn’t make much sense to people. So our office, we at a higher to additional people in our office I’m just to deal with the additional Flo that we’ve had coming through. So it’s been stunning actually really surprised knock on wood. I hope it continues. Yeah. But that’s kind of where we are right now.

Jesse (30m 11s):

Yeah. It’s been a, it’s definitely been a pretty incredible, it’s not something, a, not something anybody could’ve forced foreseen in a way. And I guess we’re just kind of living in it and trying to get through it. Clayton I wanted to talk a little bit about something I saw in line and its the Freedom Number your talks about this? Maybe you could, you could let the listeners know what is it and yeah, let us, let us hear it. Well, thanks.

Clayton (30m 34s):

It is for asking. I thought it was honestly the thing that changed my life from my wife and I, and it’s totally free. If anyone wants to download it, it’s like three pages. It’s like a PDF. I, I, I it’s been downloaded hundreds of thousands of times now in our website, if anyone wants it, it just, it Morris invest.com/freedom and its just as simple cheat sheet that shows you what your Freedom Number would look like based on the expenses in your family. So one night, you know, I was working in the TV business, my wife came downstairs and she said, we can’t pay the mortgage this spot. And I said, what two kids? We lived in New Jersey. I don’t understand. Like I can’t figure this, that we had to rental properties at the time.

Clayton (31m 14s):

Those too in Michigan, I told you about and my contract was up for renewal at the TV, you know, network. And every time that that happened, you’re always sort of living on that edge. You know, am I good enough? Are they are going to renew me? Am I going to go look like my dad losing his job years ago, what’s going to happen? And my wife said, you know what, if we could figure out how many rent, like how many rental properties would it take for us to cover the salary you make in the TV business that we never had to have this conversation again, worrying about a mortgage worrying about your contract being renewed. And I said Eureka. And she said, what? And I said, I grabbed a, a, a, a Sharpie ran up to my whiteboard and I said, you’re not going anywhere. She was going to go back and do laundry. And he said, that’s it. And that’s when we came up with the idea of the Freedom Number, which is looking at your monthly expenses.

Clayton (31m 59s):

So in this, in the cheat sheet, we teach you how to analyze over the six months, what your expenses look like. And then we tell you how to figure out the house formula for bringing in that PO that passive income from real estate every month. So that you’re covering all of those expenses. I mean, it’s not revolutionary, but it was revolutionary to me because this was not something I was ever taught growing up. I was taught that you have to work for somebody else and get a paycheck is how you cover your expenses. But what if you could have passive income from real estate that would do that every month, regardless. And then you could live around the world, do whatever you want and live the life of your dreams. And that’s what that Freedom cheat sheet is on that.

Jesse (32m 37s):

Wow. Yeah, that’s great. And I think it, you, I think it was a separate video, but you talked to, you talked about, you know, cashflow in general, but then you talked about wealth creation and you know, how, what we’re doing. I think any real estate investors are that serious about this is what we’re trying to do is create wealth. Yes. Cashflow, obviously it’s, you know, it is part of a, the mixture of ingredients that goes into that, but maybe you could talk a little bit about, you know, what your view is on that and why wealth is so important in, in creating a kind of a lasting legacy, whether it’s in business are with your family.

Clayton (33m 10s):

Well, I think I’ve thought a lot about this over the past few months, being home during this pandemic and our, you know, our rental properties have continued to perform for us during that time. So we’ve been able to live under quarantine, homeschooling our kids, running our business, doing what we do and we’ve continued on and I’ve seen so many people losing their jobs. You know, I do my YouTube show and people are struggling and hoping to get that $1,200 a month stimulus check from the United States, you know, in Canada, you know, $2,000 a month has been amazing. But in America we haven’t had that in. So people, you know, about to be kicked out of their houses. So I think it’s incredibly important to switch that paradigm and your brain to do, to really think about wealth creation as you know, owning a business and wealth creation rather than working for somebody else.

Clayton (33m 58s):

People think that working for somebody else’s as a safety net and in my mind, nothing could be further from the truth. Look at my dad losing his job on a Friday. He thought on Monday, he’d be back. You know? So he had everything, it had everything in his office ready to go. He was let go done two weeks severance and that’s it, that’s it. I lost my job in Philadelphia. They didn’t want to renew my contract. I was, Oh my God, what am I going to do? And so when You, that’s not a safety net, most people say, well, what about my health care for my job in the, in the, in the United States? Well, that’s also golden handcuffs. Cause you can get a better plan by starting your own business and investing in real estate than you can with your employer sponsored healthcare plan.

Clayton (34m 39s):

So a fun, a lot about wealth preservation during this pandemic. And I think of real estate investing, not so much as the passive income cashflow, as I do wealth preservation for thousands of years, real estate gold and silver, that’s it. Right? And I, when we talk about the three different types of money government, all the government money Fiat currency, the us dollar has always collapsed. All government currency has collapsed in world history. Why wouldn’t the U S dollar collapse eventually we’ll and then you of God’s money, which as you know, gold, silver in real estate, and you have peoples money, which is a crypto in a sort of been dabbling a little bit in that as well.

Clayton (35m 21s):

But to me, the tried and true thousands of years, going back to the Romans is real estate and that’s, it just works. And why reinvent the wheel.

Jesse (35m 31s):

Yeah. And I think it’s funny when you hear somebody that’s not in real estate, they’re like, why do you love real estate so much? And it’s like, you know, it’s, it’s bricks and mortar. It’s not, it’s nothing to love. It’s a, it’s a conduit. It’s something that takes you from, you know, the place that you want from a wealth creation standpoint to that place you want to be all right. So we’ve got a couple standard questions we’d like to ask guests. I know we’re kind of wrapping up here Clayton so if you wanna, if you can play ball with us here, number one, who we’re the mentors, you know, whether it’s in real estate or, you know what you’ve done online in regards to actually teaching people, a boat wealth and money in real estate, who were the mentors that a, that kind of got you, got your, where you are today?

Clayton (36m 14s):

Well, that was a child I used to sneak downstairs and watch well, there’s two people really, but when I was a child, it was David Letterman. I used to sneak downstairs when my parents thought I was in bed and I’d watch David Letterman, I’ve watched Carson and Letterman. So in the TV business, he was my hero because he was not afraid to break down that fourth wall, you know, of the TV screen, where he could, if his cue card guy spilled cue cards on the floor during the show, he flipped the camera around. It didn’t make fun of him for five minutes and they’d have a blast. You know? So I always did that on the air. I tried to, if I spilled coffee on the set or I’d bring John or a camera guy on the show, I just, I love that immediacy of broadcasting. And that’s why I love doing my YouTube channel.

Clayton (36m 54s):

I always loved that. So David Letterman was a hero of mine and got to see him a number of times, a live in New York, which was amazing. And then I ended up working like two blocks away from the late show, his, you know, right there in 30 rock and in Rockefeller center. So it was amazing. I pinched myself as a kid growing up there. My second mentor was honestly Robert Kiyosaki and yep. You know, has become a good friend over the years. And the kinda person who, when I was going through a really Rocky period in my life a few years ago, you know, I would call me on a Saturday just to see how I’m doing. But he’s the guy who, he’s the guy who gets it. And we sat down at lunch one day after I was leaving television.

Clayton (37m 36s):

And he said, you know, you have, he said, you have worked in one of the most important jobs in television. You, he said, no one would do what you’re doing, which is walking away from this job. And he said, I think it’s amazing. And he said, you have an opera. He said, you have an obligation to teach others about wealth building. And to hit this younger generation in a way that he said, I can’t. And he said, just do it. You’re an educator, you’re a teacher. Get your message out there. And so I’ve just been focused everyday trying to do that and helped people get started into real estate investing and help get over those limiting beliefs around money. So those two would be my biggest drivers.

Jesse (38m 15s):

All right. So that’s a good segue to the second question, which would be the, a favorite book or books that a, that helped you a, you know, in this journey, whether its real estate or a life.

Clayton (38m 26s):

Well, my favorite books, I have to say the Alchemist is, you know, an amazing, it really is an journey of the soul. I think we’re all here on a soul journey. We all go through really difficult periods in our life on purpose. For me a few years ago, it was going through a really bad business partnership that a, where someone totally lied to me and other companies and really, really hurt. It hurt me and my family. Big time. You don’t just get put on this earth to just lollygag around and have no conflict in your life where we grow through adversity. So the alchemists was a game changer of a book for me to realize that, you know, you go on this full journey and then you end up coming back to who you are at the beginning.

Clayton (39m 14s):

You know, you on this big Lupe and your going to meet people, who’ve guide U all the way through and you are meant to growth through adversity. And so at that book really was one of the most important books in my life. I would also say the new earth by Eckhart Toley at <inaudible> of course famously he is like a stage walking among us. He wrote the power of now, you know what? His second book, I think more profound, umm, which is the new earth really eyeopening way of looking at life. And to know that there’s, you know, tomorrow does it matter yesterday as a matter of the only thing that matters as this very moment. And that’s that changed my life. It’s sad.

Jesse (39m 51s):

It’s fascinating. You you think of some of these writers being some of the You know the best things or the best works you’ve written and you forget how good they are. I had a buddy, it’s funny, you just mentioned that because he’s like, Hey, have you heard of Eckhart toll? And I’m like, yeah, of course he’s like, this stuff is amazing. So he just discovered it right then. So, okay. So if you could go back, what’s one thing you wish you knew about real estate investing or, you know, in the construction side that you wish you knew when you started that you do know now,

Clayton (40m 23s):

You know, I, I went through a LA you know, I had went through a real difficult time, like as I mentioned with a guy with a partner that I trusted and I w I was always a very trusting person and I would, I would even see the work that he was doing, you know, I would fly out and see what he was doing and umm, but that wasn’t even enough. You know, I, I trust, I trusted and verified, flew out. So at what he was doing, got inspections, everything he still managed to, you know, do, do a whammy on us in a big, big way and not just me in like other companies as well. And you know, so I would always say in real estate, you’ve got, it’s very easy for people.

Clayton (41m 3s):

I get emails all the time from people that are like, Hey, I found this property. The landlord says that M you know is a tired landlord story, right? The, how the landlord says has his tenants have been there five years? They’re not, they don’t want to move. And it would be cash flowing from day one. Should I buy it? And pen, it was always like, you know, those inherited land, those inherited tenants, like trust, but verify, you know, so this landlord is telling you one thing, that’s great. You can get inspection, go through that process, but you’ve got to make sure yourself that those are gonna sign a new lease or are going to be they’re that doesn’t need additional work. Umm, so if I could talk to a younger version of myself, maybe it does go back and not to not be as trusting cuz I’m a trusting person go just even take in an extra mile or go the extra steps, you know, to do, to make sure that you’re safe and protected.

Clayton (41m 53s):

Yeah, for sure. Okay. Last question. This is a, the easy layup. This is a, my hat tipping to Barry Ritholtz at a Bloomberg first car make and model. That was a 1989 Ford escort. It was my first car and the blue, the blue bomb lasted me through college in 16 years old, all the way moving to Los Angeles for my first TV job or is it failed me at, to, in the morning on the drive into to the, to the studio at East LA. And I had to say goodbye to that car right on. Okay. Let’s get Clayton thanks so much for being on the show. What I had just like for listeners, you know, obviously they can go to the show notes. They could find you on online pretty much everywhere type in Clayton Morris is there anything you’d like to just kind of sign off with whether it’s your YouTube channel or the Podcast you have a yeah.

Clayton (42m 42s):

If there’s anything you’d like listeners to know just to show. Yeah. So what we did recently is we started a brand new YouTube channel just focused on real estate investing and it’s I’m pouring my heart and soul into this Channel so are Morris Invest Channel kind of exploded and it’s more of a broad based finance Channel now So he said, I want to service real estate investors specifically again. And so I, it, the new Channel, which is called the real estate investor and yeah, it’s just youtube.com real estate investor with me. We’ve got a few videos up there now we’re working really hard on that Channel so if anyone wants to subscribe or it could be one of the early, the early fan’s on that channel, we’re going deep dives on the topics that are PAC, that I’m passionate about at our company that we do every day.

Clayton (43m 30s):

So it’s, it’s kinda like taking all my years of knowledge of real estate and pouring it into these new, this new channel. So if anyone wants to check it out, they can do that. I guess today has been Clayton Morris Clayton thanks for being on working capital. Thank you so much. It’s been a real pleasure favor, listening to the Working Capital Podcast my goal is to help individuals break into real estate investing as well as educate experienced investors. If you enjoyed this show, please share with a friend subscribe and give us a rating on iTunes. It really helps us. If you have any questions, want to learn more or likely to cover a specific topic on the show, please reach out to me via instagram@jforgalsorheadtowwwdotjessefragale.com.

Clayton (44m 15s):

My name is Jesse Fragale and I’ll see you back here for the next episode or the Working Capital The Real Estate Podcast.