Real men love mold

So you’ve come across a great deal but it needs mold remediation. Do you freak out and run away as fast as you can like most people or do you like the seasoned pro you are smell the money? Finding a property with mold damage can be like finding a moldy bag of gold in the corner of the room that everyone else has passed over. If you know what you are doing it can be quite lucrative.

But first a little bit of history. Mold has been with us for thousands of years but since as recently as the early part of last decade when Mold came onto the Real Estate scene it has been akin to asbestos in the eyes of RE agents, asset mangers, lenders, insurance companies and lawyers. In fact it was the lawyers that drummed up most of the scare as they saw the opportunity for tort cases. Then the insurance companies got hammered with mold claims (which most policies no longer cover) and the mold remediation companies also began to perpetuate the hazards of toxic mold.

The first step is to realize that the mold health issues are un-provable at best and total bull shit at worst. They have been perpetuated largely by the scarred memories of industry players and the mold remediation companies. For example, a study by the National Academy of Sciences found no adverse long term health effects from mold exposure. Now granted if you were allergic to mold I wouldn’t recommend living in a moldy house.

So even if you still believe mold is the new asbestos that doesn’t mean that you cannot profit from it. However if you use a mold remediation company their charges will eat all your profits. The key is to do the mold remediation yourself which basically means ripping out everything with mold on it.

Now the rest of this article is going to be Texas centric but may still apply to your state. The Texas Administrative Code the Department of State Health Services has this to say on mold remediation rules

(b) Minimum area exemption. A person is not required to be licensed under this subchapter to perform mold remediation in an area in which the mold contamination for the project affects a total surface area of less than 25 contiguous square feet.

(c) Residential property exemption. An owner, or a managing agent or employee of an owner, is not required to be licensed under this subchapter to perform mold assessment or mold remediation on a residential property which is owned by that person, and which has fewer than 10 residential dwelling units. This exemption applies regardless of the total surface area within the residential property that is affected by mold growth. This exemption does not apply to a managing agent or employee who engages in the business of performing mold assessment or mold remediation for the public.

But I won’t be able to get insurance I hear you cry! Nope, wrong again. The Texas Department of Insurance has a code to protect you from such unfair trade practices. This also applies to previous water claims that the Insurer may find the CLUE database; water and mold always going hand in hand of course.

(a) Restrictions on the use of a water damage claim in underwriting. An insurer shall not use an underwriting guideline based solely upon a single prior water damage claim either filed by the applicant or on the covered property. Nothing contained herein shall preclude an insurer from the surcharge and renewal provisions of §551.107.

(1) An insurer shall not use an underwriting guideline regarding a residential property insurance policy based upon previous mold damage or a prior mold damage claim filed either by the applicant or on the covered property if:

(ii) inspected by an independent mold assessor or adjuster, who is licensed to perform mold assessment in accordance with rules promulgated by the Department of State Health Services under Chapter 1958 of the Occupations Code and the independent mold assessor or adjuster provides to the property owner written certification on a Certificate of Mold Damage Remediation (MDR-1) that based on the mold assessment inspection, the property does not contain evidence of mold damage.

§551.107 basically states that if you keep filing water damage claims they can charge you more or choose not to renew your policy. That does not apply here.

If your lender needs you to have insurance at closing, which is of course prior to you fixing the mold issue, then you can always get supply line insurance as a stop gap measure. This is the expensive non-licensed insurance market that will insure anything for the right price.

So now you’ve done the work you will need a MDR-1 before you or your buyer can get insurance. This is a Certificate of Mold Damage Remediation (MDR-1) which is a standard form filled out by a Mold Assessment Consultant licensed with Texas Department of State Health Services. The assessor simply states: I hereby certify that I have inspected the property described in this certificate and that based on my inspection I have determined that the property does not contain evidence of mold damage. A copy of the written evaluation that forms the basis for my certification has been provided to the person named in this certificate.

Now you can rent it out or sell it and make a boat load of cash. The best part of rehabbing moldy properties is you don't have much competition and the industry has been so conditioned to be terrified of mold that they will practically give the property away.

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Disclaimer: Check with your lawyer, accountant, or other professional advisor before using this information.