The Meth House, The Cops, and Me: A True Real Estate Investing Story

by |

I started writing an article this week that went over investing terms and rules like the 70% rule and ARV. 

After about two paragraphs I was bored out of my mind and I decided to write about something more fun and leave that article for another time.  After last week’s article about the economy, I needed something fun to write about anyway.  Here is a story about a house my father and I bought back in 2004 as a fix and flip.  The situation was not much fun at the time it happened, but everything worked out okay and it was a good learning experience.

The 20 Best Books for Aspiring Real Estate Investors!

Here at BiggerPockets, we believe that self-education is one of the most critical parts of long-term success, in business and in life, of course. This list, compiled by the real estate experts at BiggerPockets, contains 20 of the best books to help you jumpstart your real estate career.

Click Here For Your Free eBook!

Our Foreclosure System in 2004

Back in 2004 our market in Colorado was just past it’s peak and our county was about to lead the nation in foreclosures.  We had an abundance of builders and building going on in the area, much more than the population and local economy could support.  There were plenty of foreclosures available back then in our area and we purchased our fix and flips almost exclusively from the Public Trustee foreclosure sale.  The Public Trustee had different rules back then and there were many tricks to getting a good deal at the sale.  At the time, there was a 75 day owner redemption period after the foreclosure sale.  Junior lien holders could also redeem the home after the foreclosure sale, which made for an interesting 75 days.  We would bid on the homes at the sale and then wait to see if anyone redeemed or we would try to buy 2nds, we would try to buy judgments or we would try to contact the owner and create a lien with them.  With a 2nd, judgment or lien we could redeem the home from whoever bought it at the foreclosure sale.  We had to pay off the bid amount, any interest from the sale and other costs like insurance or whatever the trustee would allow.  It took a lot of strategy and risk to get a great deal at the trustee sale and there was a lot of fraud going on as well.

The Purchase Process

This particular house was built in the 1990s and was a ranch with a basement.  The home looked a little neglected from the outside, but not too bad for a distressed home. On this home we did not bid at the trustee sale, but we did contact the owners and create a lien with them. This was all legal back then, but seems very sketchy thinking back on how things were done.  We loaned them $1,000 to create a Deed of Trust, they signed a Quit Claim Deed giving us rights to the home and we also had an agreement saying if we ended up purchasing the home, we would give them another $4,000 if they left the home in good condition.  There were many deals where we bought 2nds or did a Deed of Trust like this and lost our money, because we didn’t end up with the house.  At the end of the 75 day redemption period we ended up with the home and no one else redeemed ahead or behind us.

Warning Signs

When we first saw the home, the owner let us walk through the entire house.  There were many things we saw that should have sent us running away from the home.  At the time, we saw a great price and we weren’t that knowledgeable about an up and coming drug: meth. 

There were security cameras on each corner of the exterior of the home, which is a huge red flag on homes in a lower price range.  When we went in the house it smelled weird, but we were used to horrible smelling homes.  We though it was a mix of cigarette smoke and trash at the time.  They took us downstairs to the basement and there was another guy messing with some stuff in a room that they said we couldn’t go in right now.  Another red flag is when the owner won’t let you see the entire house.  The last and most disturbing sign of something amiss, was there was an entire family living in the home.  We met the children who were probably teenagers and they were not all there.   My guess is the chemicals in the home had affected everyone and the children more so due to them developing.  We never put any of this together until a little later in the story. To us at the time, everything looked great and we made the deal with them.

A Surprise in the Paper

We had given the occupants a few weeks to move out when we saw a rather disturbing article on the front page of the local paper.  It was a story about a meth house being busted that was very close to the house we had just purchased.  Then I read the address and realized it was the house we had just purchased

The gentleman living there, who had been our main contact had decided to get some gas without paying for it.  A policeman happened to be in the area and followed the gentleman home (the house we owned).  The gentleman in his brilliance went inside and left the front door wide open, the policeman went in and found them cooking meth.

The gentleman went to jail, the police took over the house as a crime scene and we were a bit overwhelmed with everything.  The gentleman even called us from jail and asked my dad if he was going to get the rest of his money.  Um….. No.

How to Clean up a Meth House

We had never dealt with a meth house and at the time we didn’t know much about the drug.  We did some research and were not very pleased with what we were finding out.  It looked like a complete gut job might be in store and of course insurance did not pay for this type of incident.  On top of everything else, we had no idea when the police would release the home and how that situation would work out either.  I had heard of police seizing drug houses and possessions and auctioning them off.

Luckily we did not have to deal with any of the clean up, because the house burned down

We saw that article in the paper as well before anyone informed us.  One night someone had broken into the home and either accidentally or purposely set the basement bed on fire, which spread to the curtains, walls and ceiling.  The fire department was able to put out the fire before then entire house went up in flames, but the damage was done.  Due to smoke and water damage the house was a total loss.


Not only did we buy a house that turned out to be a meth house that burned down, but we were investigated by the local police for setting it on fire ourselves.  I guess it made sense to look at the owners first, since the meth clean up was not covered by insurance, but the fire damage was.  Bother my dad and myself were interrogated by a local policeman in one of those little concrete rooms.  I am not sure if they were just going through the motions, but the policeman interviewing me was very young and reading all the questions off of a piece of paper.   It only took about a week for them to clear us and decide it was one of the previous owners friends who had broken into the house looking for meth, who set the fire.


After we were cleared of setting the fire, we had to deal with our insurance company.  They had to conduct their own investigation and it took six months before they approved our claim to rebuild the home.  Luckily we knew a great builder and he was able to demolish the old house and build a brand new home on the existing foundation.  About a year after we had purchased the home, we were ready to sell it! 

The crazy part, is we still made a little bit of money on the deal even after waiting a year for the insurance approval and the rebuild process.

Photo: Ian Forrester

About Author

Mark Ferguson

Mark Ferguson is a has been a real estate investor and real estate agent/broker since 2002. He has flipped over 165 homes in that time, including more than 70 in the last three years. Mark owns more than 20 rental properties that include single family homes, as well as commercial properties, including a 68,000 square foot strip mall. Mark has sold more than 1,000 homes as a real estate agent and is the owner/managing broker of Blue Steel Real Estate in Greeley, Colorado. Mark started the InvestFourMore blog and website in 2013, which has hundreds of article on real estate. Mark is constantly sharing his insights, case studies, and interesting things that happen to real estate investors on both his blog and well-known sites like Forbes.


  1. Mark, nice article. Thanks for posting it. The odor for cooking meth is closest to cat urine. Unfortunately there is a new cold cooking method that is equally dangerous but I have not taken classes on detecting that yet. It sounds like you escaped the worst of the flooding down there. please post if the housing market market changes as a result of all the damage.

    • Thank you Jerry,
      Greeley was one of the harder hit towns by the floods, but luckily I was not affected personally. The Platte went up to 20 feet and the old record was 12! Many houses were flooded that were not in a flood plain and did not have flood insurance.

      I think the market I staying pretty steady. I would guess that the market might tighten up even more with the flooding because there are people looking for places to stay and less houses for sale.

      I have seen a few places come on the market that have been good deals in the last few weeks. I have not seen that recently. Let me know what you are looking for and I can let you know if it’s possible. [email protected]

  2. Interesting article, Mark!

    I’m curious – now that you’ve been through this once, what’s your take on meth houses? If you were to find another one, would you just move on, build the remediation costs into your offer, wholesale it to someone who specializes in meth remediation, or something else entirely?

    • Thank you Dennis,
      We now have no owner redemption period and a 10 day junior lien redemption period after the sale. The junior liens must be recorded before the notice of election and demand, which is the first public notice of the foreclosure.

    • Hi Dawn, It really depends on how bad the house is and if meth was just used or cooked in the house. I have seen some homes that just needed cleaned and some homes that needed gutted. One house I sold that was an REO needed all the drywall, cabinets, appliances, furnace, duct work, floors and subfloors replaced. Usually an environmentalist can test the home to see how much is needed.
      I once saw a 30 unit building be condemned by the city because of a major meth lab bust. Most of the interior had to be redone.

  3. Great story. I’ve always wondered what the cost would be for remediation of a meth house. I did a rehab across the street from a house that the neighbors told me burned from a meth lab. My contractor told me never, ever, buy a meth house. I guess the toxic fumes permeate everything, so yes, you would have to get it incredibly cheap.

    On another note, I also had a property that burned down right after I bought it. Very stressful at the time, but a huge learning experience about fire remediation and insurance companies. I elected to take cash value payout, then wholesaled the property for the price of dirt.

      • Hi Shaun, our insurance did not really give us the option. They would not pay out the full amount until the home was rebuilt. They paid out the money like a construction loan, once certain things were complete they released increments.

        • I will fully admit I find insurance confusing at times and I have never suffered a total loss (Knock on wood!), but my understanding is that if you do not rebuild then your policy would pay out like an ACV plan even if you have Replacement coverage.

          Yeah they would only give you a portion of what you would get if you rebuilt, but you would not have the costs to rebuild.

          Maybe I read it wrong but I had the impression you didn’t have that much money tied up in acquisition so I was wondering if you had taken the ACV payout and then just sold the land to a developer who did what you did if you could have made more or been around what you did make with a lot less risk and hassle.

  4. wow Mark. Thanks for sharing your war story. I thought i was alone on deals like this. Just kidding. That was a lot more interesting than the 70% rule for me. Stay away from Meth labs or atleast now you will be better prepared to buy one.

    • Thank Michael, When you do a lot of deals there are bound to be hiccups along the way. I know what to look out for now for sure. I would not buy a meth lab unless I had a crystal clear idea of what had to be done and it was an amazing price.

  5. Had a long term tenant start cooking meth in garage and then smoke in house…they got busted and then about 10 days later I got a letter from health dept telling me I had to remove the tenants….I thought maybe the police should have taken them to jail! The home is a duplex upper and lower with one furnace. I removed the tenant then tested the home and my tester told me that one furnace is not good for the residue and may be in the upper unit also. Sure enough both units needed clean up. The upper tenant moved to another unit we have and then we spent about 5-6k in clean up.

      • The inspection itself was 1250.00 that included retesting. The tester told me he does the clean up as well as I could do it but it would never pass. I put on my painting suit with mask and cleaned walls and ceilings and then painted with oil base primmer then a good semi-gloss. Removed all floor coverings. Called him back to retest and guess what…it passed and was cleared from health department to occupy. I did not even ask him what he charged but I’m sure it would have been around 10k.

        • I would be careful about painting over meth. It may test clean right after, but the meth could leach through the paint as mentioned in another comment. This is why ou have to remove drywall in most cases.

  6. I had the same thing happen to me a couple of years back. Went to the police station, fire station and building department informing them there might be a drug problem at my rental. They all said “NOPE” no problems we know of. One week later there was a fire, total loss 🙂 Police been watching it for 6 months, Insurance paid me double of what I had in it. Bought a 10 year old double wide and set it myself, had enough money left over to by another nice rental. Was going to start buying more mobiles but my bankers told me not to, one’s enough. Some days are pure gold.

  7. I’ve linked my notes from a methamphetamine presentation by attorney Tim Gablehous in Denver a few weeks ago. Here are some key points:

    • Smoking will contaminate a property. It doesn’t have to be a lab.
    • In certain parts of Colorado, foreclosure fix and flips are nearly 100% meth labs!
    • Painting (encapsulation) is NOT allowed – meth will leech out through the paint
    • You are always liable for what you know. Disclose!
    • No insurance of any kind will cover this – pollution exclusion in every policy

    Full notes and rough audio here –

    • Thank you Jason

      I would always disclose no matter what, but I believe Colorado law states you do not have to disclose a meth lab if the house was remediated to state standards.

      In my experience smoking meth will contaminate, but not nearly as much as cooking.

      I have actually seen a lot less meth labs recently, I think it is due to cheap meth coming up from Mexico.

      100% of foreclosure fix an flips seems a bit high.

  8. Man this is a small world. I specialize in buying and cleaning up Meth houses in Northern Colorado. After reading this article I new you were in Greeley but this was ringing to many bells. I bid on a meth house 3021 43rd Ave listed by one of your agents Matt Rivette. Maybe that is the one you mentioned in a comment Homepath had allready paid to have it cleaned so I think it was less scary and my offer was way lower than what was accepted.

    Unfortunately that house and three others lately I haven’t gotten. Seems like people aren’t afraid of Meth houses anymore. People are buying them real close to retail value when you subtract out the meth cleanup and rebuild.

    Awesome stories about redeeming with the junior liens. As far as I know that still goes on today, just not by creating your own lien like you did.

    • Hi Blake, thanks for the comment! I know that house, but I don’t think I ever referenced that particular one. I haven’t seen to many meth houses in the greely area lately, but I saw a pretty good deal sell in dacono a few moths ago. We don’t buy much at the sale anymore. Hoas used to be the big thing, but the courts seem to have decided te purchaser at the sale can pay them off now before they redeem.

Leave A Reply

Pair a profile with your post!

Create a Free Account


Log In Here