Meth Houses and Real Estate Investing: 5 Questions to Ask Before You Buy
Meth Houses and Real Estate Investing: 5 Questions to Ask Before You Buy
Denver real estate agent Erik Nelson decided to try his hand at house flipping, but quickly learned a hard lesson about meth-contaminated houses. After rehabbing a Longmont, Colorado home and putting it under contract with the new buyer, a meth test came back positive. Erik then spent an additional $26,000 on meth-related decontamination measures to ensure it was safe for his new buyers to occupy the home. Talk about a hard lesson!
If you are a real estate investor, you may have heard a story like this about a methamphetamine-contaminated house. As the buyer of a house that may be contaminated by the drug “meth,” make sure you ask yourself five important questions before proceeding with your purchase:
- Is Meth Present in the Home?
Get every home tested! There are not always obvious signs of meth use or meth production in a home. A home could appear to be completely clean, and located in a low risk area, but may still be contaminated by meth. Homes can be toxic to occupants even if someone has just smoked meth in the home a handful of times. Although the chemical residue left behind by methamphetamine does dissipate over time, it can still test positive for up to 15 years later. Don’t ever take the risk! Get every one of your homes tested, not just when you suspect meth’s presence, but 100% of the time. The testing guidelines vary from state to state and the cost of the test can range from $250 to as high as $1,500. So what if your house tests positive? Then ask yourself the next question.
- Will disclosing the presence of meth in the home shrink my pool of buyers? Disclose, disclose, disclose. Real estate agents and homeowners in certain states are required to disclose meth contamination in a home for sale. So yes, this disclosure could shrink your pool of buyers because some buyers could quite easily research the topic and find out that meth cannot be fully eradicated from a home. After a home is decontaminated it may pass a state minimum-level test, but it is impossible to test every surface in a home. And if a potential buyer of your property has young children, your disclosure about the presence of meth (prior to your decontamination), may be a deal killer for them even though the house may pass the state minimum-level test. Take this factor into consideration once you discover a home that you’re buying is contaminated with meth.
- How high is the contamination level?
The levels of contamination in a home can vary greatly depending on whether meth was manufactured in the home, (e.g. a meth lab was present), or whether someone was just smoking meth in the home. Every state has a different level of contamination that has been deemed “unsafe” for habitation by humans. California has established anything over 1.5ug/cm² as an unsafe level, and in Utah, anything over 1.0ug/cm² is considered unsafe. The level of decontamination that is necessary for a meth lab is obviously more extensive than the level of decontamination that is necessary for a home with light contamination. Once you know the level of contamination, you can better answer the next question.
- How much will it cost to remediate the level of meth contamination that is present in the home?
The cost of meth decontamination varies by how heavy the contamination level is. For example, cleaning and removal of certain items in the home may be all that’s necessary to remediate a home with light contamination. But for a home with heavy contamination, such as in the case when meth is produced or “cooked” in the home, a homeowner may have to strip the inside of the home down to the studs and start over from scratch. This type of extensive remediation can obviously be very costly. Depending on the level of contamination, proper remediation can range from $7,500 to $25,000, or more, as shown in the previous example of Erik Nelson.
- Can you still make a profit?
In order to determine if you will make a profit, it’s necessary to get a quote for the meth remediation with a money-back guarantee. Once you know what the cost of decontaminating the home will be, only then can you determine if you can make a profit on the home. And don’t forget to factor in question number two again, will a disclosure hurt your pool of buyers? If the numbers don’t show a profit, once you answer all of the questions above, then you know that buying the property is no longer an option.
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