Found a Fannie property I want, possible"Meth Lab"

Foreclosures
10yFollow

Found a Fannie property I want, possible"Meth Lab"

Dustin Palls
Investor · Denver, CO · Member since 2016 · 15 posts · 8 votes

I found a great deal on a Fannie Mae property. I am concerned because both neighbors mentioned "there were lots of drugs done in there" when I visited the property. All of which is speculation, so I decided to contact the local police. When I had given them the address their faces lit up. I was told that officially no busts/incidents/police reports involving the property in question exist. BUT I was also told that given the fact that both of the police officers to whom I had spoke knew of the previous owner and the company they kept (small town), that there is a "good chance" meth was used in the home.


What do I do with this information? Am I legally responsible if I rehab the house and rent it and someone gets sick? Do I ask for a test to be conducted prior to closing? If so and the test comes back hot, the state will then be involved... regulatory issues galore. The meth abatement could quite possibly bring rise to an asbestos abatement (old home)... which would in effect make this property worthless to me.

I HAVE NO INTENTIONS OF RENTING THE HOME UNTIL I AM CERTAIN IT IS SAFE TO DO SO.

What I can't wrap my head around is the following:

1. I can most certainly perform all of the "clean up" that an abatement company would, without being regulated by the state, for a 10th of the price. (I have the necessary skills to do so, SAFELY). 

2. I have no definitive legal proof that meth was ever even in the house.

3. If I had the house tested post-rehab and everything came back clean, wouldn't it all be the same in the end anyway, i.e. the house will have been abated/cleaned up and safe to live in?

Obviously I don't want anyone to live and work in an unsafe house, but could someone with experience here tell me to what extent these so-called "Meth-Labs" are "cleaned up"? I would like to purchase, THOROUGHLY decontaminate just to be safe, rehab, test and then rent. The only issue I see here is if for some reason it doesn't pass the test post-rehab, I will then have wasted a considerable amount of money as the liability/ethical issues surrounding its rental or sale would be too great to assume.

Any advice here is greatly appreciated!

Dustin

0Reply
88 views

Most Popular Reply

Desirae Putzier
Wholesaler · Greeley, CO · Member since 2016 · 26 posts · 13 votes
10y

@Dustin Palls you asked for someone with industry knowledge, I gave you advice based off of what you said in your post. I never accused you of having a "meth-Lab" I only told you what could happen if it was one like you speculated. You seem to have it all figured out so good luck to you and your future projects. It's only a matter of time before the school of hard knocks teaches you about the laws and regulations here in Colorado. I only say this because we have come in behind countless investors who thought they could do the same only to have the state shut them down and call us in to do things right way. 

3Reply
See this reply in the discussion

20 Replies

Jump to latestLatest
  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    10y

    @Dustin Palls, local cops seem friendly enough. 

    See if they'd be willing to bring a drug dog out. Probably been aching to do just that for years, but pesky old 4th Amendment previously got in the way. You can't tear sheetrock out of a home while in contract (typically), but you can sure as hell give that dog a chance to smell around and see if it detects anything. 

    Think of all the places in a home that an industrious profit-driven drug creator could squirrel things away. Behind the sheetrock, crawl spaces, etc.

    I'm by no means an expert at "de-meth-ing" a home, but that seems like a cheap way to get a better idea of what you are getting into.

    2Reply
  • Desirae Putzier
    Wholesaler · Greeley, CO · Member since 2016 · 26 posts · 13 votes
    10y

    Hey there, I own an abatement company so I figured I would give you the advice from a professional point of view. 

    1. It could result in a $75,000 or more fine if you get caught doing an abatement/meth-lab clean up without proper certification. I'm guessing the property in question is in Colorado, if so, it is illegal to do any abatement/cleanup without the licensing and state certification. 

    2. Abatement of asbestos is not always extremely pricey, just depends what you are dealing with. I would suggest spending the few hundred dollars to test it from the get go just to make sure you don't find out too late and have done damage to it creating a "spill" which is a lot more money. 

    If you have any questions or need any more info about the process or anything you can send me a message and we can talk more. 

    1Reply
  • Matthew Botos
    West Norriton, PA · Member since 2016 · 23 posts · 4 votes
    10y

    @Chris Mason Your drug dog inspection idea is brilliant! Writing that as an offer contingency would certainly be unique.

    @Dustin Palls Look forward to hearing how this your story evolves...

    0Reply
  • Bill S.Pro Member
    Moderator
    Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
    10y

    @Dustin Palls so here are my thoughts as an owner of a house contaminated with Meth. It was supposed to be a quick flip but then the buyer got wind from the neighbors and did an "informal" test which came back hot. There the story begins and it's a long story that is not yet done.

    If you suspect meth, you can do your own sampling and have the test run (costs about $75. If your test comes back hot then you go and hire a licensed industrial hygienist who will come out and do a full blown sampling and produce a report. Costs about $1,500 depending on the size of the house and the number of samples needed. If that sampling comes back hot, the house goes on the state list and remains there until it's been cleaned up. Once it's clean then no disclosure is required by state law. 

    I would not recommend the DIY cleaning you spoke of. Everyone already knows the house is a drug house. When you sell the house the buyers will find out it was a drug house and they will find out that you did a DIY "cleaning" and then head on down to the lawyer's office. Your goose is then cooked. 

    In your shoes I would do my own sampling because just because the former occupants used drugs does not mean that they used meth. In addition, even if they did use meth they may not have done it in the property. If your informal sampling comes back positive then I would do the full testing and the house would likely get put on the meth house list. At that point, it has to be cleaned legally prior to anyone living in it. 

    If you are really ambitious you could form and LLC and become a licensed meth remediation contractor and do the work as a licensed contractor for yourself.

    Let us know how it turns out.

    2Reply
  • Dustin Palls
    OP
    Investor · Denver, CO · Member since 2016 · 15 posts · 8 votes
    10y

    @Desirae Putzier

    Please explain to me how my purchasing an old, run-down foreclosure and cleaning it up followed by a remodel would constitute an "abatement" of a meth-contaminated property? It is my understanding that until a test is conducted and the positive results of said test are filed with the state, no "meth lab" exists... Nobody is asking for/pushing for a test, which is precisely why I am inquiring about this topic. If I WERE to request a test, and the results of which were positive, THEN you would be correct in the fact that I couldn't legally clean it up. Hence, I would be forced to pay a company like yours to do what I believe I can do. Regulations surrounding this issue are relatively new and vary by state... some states simply list instructions for "cleaning up" the "contaminated" property... the same steps that companies like yours are trained to follow I would assume.

    @Bill S. I see what you are getting at. I was thinking along similar lines when I initially posted. I guess this may be a question for an attorney. But A., I don't plan to sell the home only rent it, B. there is no "meth house" to my understanding, at least not until I ASK (because no one else involved seems concerned) for a test that results in positive findings... If I "cleaned it up" (the way any investor would clean up any home to be remodeled, i.e. this home is OLD, plaster and lathe... would replace with sheet rock, EVERY surface in the home would be new) and later conducted a meth test ONLY to satisfy my curiosity... and said test results were negative, where is the meth house? Where is my liability??

    0Reply
  • Desirae Putzier
    Wholesaler · Greeley, CO · Member since 2016 · 26 posts · 13 votes
    10y

    @Dustin Palls you asked for someone with industry knowledge, I gave you advice based off of what you said in your post. I never accused you of having a "meth-Lab" I only told you what could happen if it was one like you speculated. You seem to have it all figured out so good luck to you and your future projects. It's only a matter of time before the school of hard knocks teaches you about the laws and regulations here in Colorado. I only say this because we have come in behind countless investors who thought they could do the same only to have the state shut them down and call us in to do things right way. 

    3Reply
  • Dustin Palls
    OP
    Investor · Denver, CO · Member since 2016 · 15 posts · 8 votes
    10y

    @Desirae Putzier

    Ok, first, when I say "meth lab" I am referring to any property contaminated by the manufacture or use of methamphetamine. 

    Second, why won't you answer my questions? I am *speculating*, as did the local police, that this property *may have* had meth used/manufactured in it... I want to know what the state regulations say about someone that purchases a home (me in this scenario) with no formal knowledge that meth was used/made in the home... cleans up/rehabs the home?

    You say the "right way"... we aren't dealing with radioactive waste here. If the home is stripped to the studs, and I personally do the work, wearing a P99 full face respirator along with full body disposable suit... the place is aired out, I give the chemicals time/heat to volatilize... EVERY surface in the home is replaced/renewed... please explain to me how it would be possible for contamination to remain? Are you completely demolishing structures in the "abatement" of methamphetamine contamination? 

    I work very closely with a Class A contractor. I am in the process of obtaining a Class B license myself. I am very familiar with asbestos abatement and the issues surrounding it. I have personally never dealt with meth contamination before. I don't mean to be rude but I don't see what you/your company could do that I couldn't do... unless for some reason I was legally bound to use such a company, which I believe (at least in THIS circumstance) I am not.

    You may have your opinions, as I have mine, but I am trying to determine whether or not the situation as outlined above is in compliance with Colorado law... again I realize that once I ASK for a test and the test is hot, that everything is THEN regulated by the state. But why would I do that (not rhetorical)? A valid reason hasn't been demonstrated to me at this juncture.

    Thanks for your insight!

    Dustin

    0Reply
  • Desirae Putzier
    Wholesaler · Greeley, CO · Member since 2016 · 26 posts · 13 votes
    10y

    @Dustin Palls

    If you do a remediation/abatement style removal then yes you are liable. If you don't believe there is meth/asbestos then don't remove anything in a way accordingly. The state will think you are way more shady if they show up and you are wearing a respirator trying to remove regulated material than if they show up and you just play dumb.  For any other information look below.

    If you get on the state website here you should be able to find out more information. All the laws and regulations are there. 

    In any case, if you think it is a meth-lab the right thing to do is go ahead and have it inspected so you do not harm others or yourself. 

    0Reply
  • Jerry W.Pro Member
    Moderator
    Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes
    10y

    @Dustin Palls, it is my understanding that contamination can often result in the removal of air ducts and even attic insulation.  If you know what you are doing to that level just get a license and do it legal so you can be absolutely sure there is no risk involved for your future tenants.  If nothing else after having the test run and it is negative great you have a clean bill of health.  If it comes back positive you should be able to get the property for a song.  I have rarely seen an investor having regret over doing something right, but it does happen, I have seen a lot of them upset over having tried a shortcut that went wrong.

    0Reply
  • Jon Q.
    Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
    10y
    Originally posted by @Dustin Palls:

    I found a great deal on a Fannie Mae property. I am concerned because both neighbors mentioned "there were lots of drugs done in there" when I visited the property. All of which is speculation, so I decided to contact the local police. When I had given them the address their faces lit up. I was told that officially no busts/incidents/police reports involving the property in question exist. BUT I was also told that given the fact that both of the police officers to whom I had spoke knew of the previous owner and the company they kept (small town), that there is a "good chance" meth was used in the home.


    What do I do with this information? Am I legally responsible if I rehab the house and rent it and someone gets sick? Do I ask for a test to be conducted prior to closing? If so and the test comes back hot, the state will then be involved... regulatory issues galore. The meth abatement could quite possibly bring rise to an asbestos abatement (old home)... which would in effect make this property worthless to me.

    I HAVE NO INTENTIONS OF RENTING THE HOME UNTIL I AM CERTAIN IT IS SAFE TO DO SO.

    What I can't wrap my head around is the following:

    1. I can most certainly perform all of the "clean up" that an abatement company would, without being regulated by the state, for a 10th of the price. (I have the necessary skills to do so, SAFELY). 

    2. I have no definitive legal proof that meth was ever even in the house.

    3. If I had the house tested post-rehab and everything came back clean, wouldn't it all be the same in the end anyway, i.e. the house will have been abated/cleaned up and safe to live in?

    Obviously I don't want anyone to live and work in an unsafe house, but could someone with experience here tell me to what extent these so-called "Meth-Labs" are "cleaned up"? I would like to purchase, THOROUGHLY decontaminate just to be safe, rehab, test and then rent. The only issue I see here is if for some reason it doesn't pass the test post-rehab, I will then have wasted a considerable amount of money as the liability/ethical issues surrounding its rental or sale would be too great to assume.

    Any advice here is greatly appreciated!

    Dustin

    If these are your concerns, you don't want it!...unless you are ex-military and strive on self-inflicting pain upon yourself and your wallet.

    0Reply
  • Jon Q.
    Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
    10y

    I suggest investing like Warren Buffett. Only invest in assets that are innately valuable and do not get involved in investing in things you do not adequately understand.  Based on your description, it sounds like there are way too many roadblocks between you and generating a decent return with this property.  There are plenty of others worthy of your time.  Never compromise your investment criteria for these types of risky deals. Risk is too high and potential return probably is not equivalent. I'd pass.

    2Reply
  • Account Closed
    investor · McDonough, GA · Member since 2015 · 230 posts · 77 votes
    10y

    @Dustin Palls

    Andy McFarland has a good video about this on his YouTube channel "I love real estate stories". I think it's called "Can you make money from a meth house?"

    He talks about paying for the house to be tested and other issues involved in these types of houses. 

    0Reply
  • Kelly Crone
    Investor · Littleton, CO · Member since 2016 · 47 posts · 9 votes
    10y

    Test the house yourself for the $75. If it comes back hot, move on and find other houses. If it comes back clean, buy it. I wouldn't waste my time and money on further testing.

    0Reply
  • Dustin Palls
    OP
    Investor · Denver, CO · Member since 2016 · 15 posts · 8 votes
    10y

    I agree the risk is likely too much when considering the reward. I was trying to quantify that risk as difficult as that may be...

    I am going to pass on the property. 

    Thanks for the advice Everybody!

    0Reply
  • David Dachtera
    Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    10y

    @Dustin Palls,

    You should, at least, do the low-cost meth test.

    "Cooking" meth can produce considerable contamination, yes.

    Consuming meth can take different forms from simple ingestion which leaves no residues  to smoking which will will leave residues. 

    Until you test, you have only speculation, no hard knowledge.

    There are, however, some tell-tale signs...

    Are there splashes on the ceiling over the stove which do not easily dissolve in water? Do you find such substances anywhere else in the house?

    If a gas stove, do any of the burners not work? Is the oven trashed? 

    If so, good chance they "cooked" there. Take a pass.

    If not, take the cheap test.

    0Reply
  • Bill S.Pro Member
    Moderator
    Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
    10y

    @Dustin Palls almost no meth is cooked in the US anymore. We have regulated the components so strictly that it's very challenging to acquire them and they usually cost more than the meth you could make would cost. Most meth comes from Mexico made with components shipped there from China by the freighter load. That said, it's possible that it was cooked there by some rookie using a recipe off some website. 

    If meth was smoked in the unit it contaminates everything, attic, crawl space, insulation, air ducts, appliances, light fixtures, and etc. Just removing old plaster doesn't cut the mustard. It's clear from your post that you don't understand the challenge that meth presents. I am not an expert but I have done lots of research on the topic. I have been told it does not decompose on it's own and the concentration is not diminished by air exchanges. That doesn't make sense to me but that's what knowledgeable people told me. 

    Unlike asbestos which is removed from the property, meth is cleaned from the property. Now if the contamination is too great or so much time has pass that it "soaked" into the drywall/plaster then demo might be the easiest way to address it for those surfaces. That only solves part of the problem, the rafters and the floor joists still need to be cleaned. Sure if you gut the property down to a shell you will likely remove most of the contamination but if every remaining surface is not cleaned and then that surface is sampled it will test positive I have been told. For example, the return air duct often runs between floor joists. You can take out the pan but what do you do with the subfloor and floor joists. The return air is often the most highly contaminated area. 

    Now the short answer is, unless you clean every square inch the property is still contaminated. Cleaning is expensive because they clean or remove every square inch that could have come in contact with meth smoke

    So the risk from tenants is no less than the risk from selling it to a new buyer.  Say a tenant hears from the neighbors that the house was a meth house so they have it tested and they hire someone that knows what they are doing. The tester will likely find meth if it was in the house. Now say the tenant has been sick (perhaps the flue or a common cold) and they live in a meth house. I can't imagine what one of those late night lawyers could do with that. 

    I like what @Kelly Crone suggested. 

    You either get the property at enough of a discount to legally decontaminate it and make money or you walk. 

    I guess the other option is to get your own license and do your own cleaning. BTW getting a license is not cheap. I have looked into it. My question would be, why work for yourself? Why not just become a contractor and do the business? The question then becomes, which are you? a real estate investor or a meth remediation contractor. I'm sure you can save some money by donating your own labor so that might get your foot in the door. If that's what you want to do, fine but get licensed and follow the law. In reality, the biggest cost of remediation/cleaning is the damage done to the property by the cleaning operations. Many items are simply removed because there is no way to actually clean them. You end up buying, new HVAC, paint, drywall (maybe), electrical fixtures, kitchen cabinets (maybe), flooring, and appliances.

    The law actually protects the person that follows it. If a property is cleaned and signed off by the state of Colorado then no disclosures are required and you can not be sued for the meth contamination. For me there is great security in that.

    1Reply
  • Dustin Palls
    OP
    Investor · Denver, CO · Member since 2016 · 15 posts · 8 votes
    10y

    @Bill S. I may test and see what comes back... I can appreciate the fact that my experience/knowledge doesn't shine through on some internet forum, so I don't take offense to your comments. I dropped out of dental school (when I realized I wasn't making money fast enough) after being accepted with a 4.0 gpa in undergrad... many of the courses which I have taken are firmly rooted in chemistry... I could probably make the stuff if I had a mind to! LOL

    I was planning to strip the home to the studs/rafters... no insulation. The home is so old there is no central air system... furnace would be new, duct work new... EVERYTHING NEW.  I'm pretty sure I could research and find the correct/safe/legal (as you all seem to put it) manner in which to remove/dispose of these potentially hazardous materials along with the right chemical/cleaning agent to pressure wash any meth residue from the structure's skeleton...

    With all that said, it doesn't seem like much fun and I think I will pass on this deal, and by the way I would be giving the same advice as everyone here if some anonymous "investor" asked about this online... so I appreciate the words of wisdom.


    The thing that isn't clear to me is: would I, or would I not be breaking the law by continuing with my "plan"?

    I haven't seen anything supporting the fact that what I want/wanted to do is illegal. There has been no testing performed. There have been no police reports that document or point to illicit activity on the premises... So how would this (in a legal sense) be any different than an investor buying a home to flip and doing a reno? 

    Where does the liability fall? 

    I have not been formally notified of any meth used/cooked in this home. It is only because I am personally familiar with the community that the though even crossed my mind at all...

    0Reply
  • Bill S.Pro Member
    Moderator
    Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
    10y

    Where does the liability fall? That is a question for your attorney. The attorney will probably say that it depends on the judge and jury you get. One of my objectives is to avoid situations where the likelihood of being sued goes up significantly and then the likelihood of loosing is above normal (I realize I can't avoid everything unless I do nothing, think woman with hot coffee and McD's). For me DIY meth removal falls into the category of above normal risk. If you have been around remediation projects you will see that most of the actual work is done by slow moving low paying low skill labor. I don't want to be doing that kind of work when I can hire it out. Sure there is profit in the margin for those companies that manage those kind of workers. My guess is they are better at that than I am. 

    Not sure I have answered your question but it's one of those situations that when you get close to something is likely to stick to you. Now can I say absolutely you will get caught and when you do you will spend time in jail, No. Will you get caught and spend time in jail, probably not. The down side is so great compared to the upside that I concur with your decision not to pursue it.

    0Reply
  • Dustin Palls
    OP
    Investor · Denver, CO · Member since 2016 · 15 posts · 8 votes
    10y

    @Bill S. I'm with on the juice not being worth the squeeze. I get it and that is why I will pass. It's not worth the headache. 

    But I am amazed at how you are throwing around the phrase "get caught" etc. I don't believe that any part of what I mentioned was against the law or any other regulations I am aware of. 

    0Reply
  • Bill S.Pro Member
    Moderator
    Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
    10y

    @Dustin Palls getting caught means getting mired in a mess created by your actions. I think we all know you can be legally right and still end up loosing. The point of my post was that your scenario seems like a good candidate to prove that axiom. 

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free