Property Walk-Through: Illegal Marijuana Grow House Fix & Flip

Property Walk-Through: Illegal Marijuana Grow House Fix & Flip

4 min read
Tarl Yarber

Tarl Yarber is the CEO and founder of Fixated Real Estate LLC, a Pacific Northwest leading investment company with over $45MM in single family residential properties purchased, rehabbed, and re-sold.

Experience
Within a four-year span, Tarl has never had more than four team members (including himself) at any one time, averaging 17 simultaneous projects going on at any one time. How? Systems! Systems that allowed him and his wife to run their business from their phones and travel the world 102 days in 2018 alone.

With over 600 real estate transactions under his belt since his career began in 2011, Tarl and his team are considered experts in the investment industry and specialize in real estate systems for success. Tarl has been a guest on episode #189 of the BiggerPockets Podcast, along with numerous other shows, including Target Market Insights, The Nuts and Bolts of Real Estate Investing, Landlord Survival Radio Show, The Real Estate Foundation Podcast, Real Dealz, and Simple Passive Cashflow.

After creating Fixated on Real Estate, the No. 1 Pacific Northwest real estate meetup for investors, and the PNW Big Badass Real Estate Wealth Expo, the largest real estate conference in the PNW, he has become passionate about helping others scale their businesses to the next level.

In the last few years, Tarl has been fighting his addiction of fix and flip and focusing on a new passion: BRRRR investing. Since he started working on BRRRR, Tarl and his team have accumulated 22 single family rentals in the Seattle market (in addition to their usual fix/flip volume). Why is this awesome? The average BRRRR in his portfolio has less than $5,000 of capital left in the projects, with an average LTV of 63% and an average net cash flow between $400 to $500/month.

Tarl has taken his years of experience in rehabbing houses that were about to fall over and transferring that experience in mastering the BRRRR method.

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My company just purchased a property to fix and flip in Seattle, but it’s not your average house.

I’ve never seen this property until today. Walk with me through our newest acquisition—a former marijuana grow house.

Before we get started, here are the numbers:

  • Purchase Price: $300,000
  • Anticipated Rehab Costs: $120,000
  • Expected Sale Price: $550,000 to $575,000

From Raising Plants to Budding Profits

As I walk through the property in the video above, I’ll explain the rehab and the processes we’re going to go through.

Exterior

The outside of the house looks pretty great. It was a huge selling point for us.

The siding is brand new, the windows are brand new. Heck, there’s even a one-car garage with a new roof.

But the truth is, the outside of the house is so nice because the former owners didn’t want anyone to know anything was going on inside.

Interior

As I head inside, the first thing to note is the door is busted. Why? Because the sheriff’s department rammed their way in!

Basement

The electrical panel looks decent at first glance, but there’s a good chance that it’s been hacked into and spliced through in other areas of the home to power the growers’ heat lamps and other things. We’ll likely have to put in a lot of money to repair it.

Currently, the basement (where we entered) is unfinished, but I think we can finish it. The ceiling is high enough—at least according to Seattle standards.

What used to be plants and growing materials will all have to be removed. Like I thought, the electrical throughout the grow area is all spliced into.

But this is about 800 square feet of space. After some sheetrock, fumigation to remove the smell, and lighting, this area should be good.

There’s also a one-car garage attached. The owners walled off the garage door, but we’ll open that back up. We’re also planning to convert the one-car unattached garage into two cars.

The stairs to get upstairs aren’t up to 2019 code, but as long as we don’t touch them and put in handrails, we can leave them.

It appears there’s some knob and tube wiring along the staircase, but it may have already been terminated. If it hasn’t, we need to rip that out and get newer electrical in order to get the best resale price.

Seattle skyline panorama at sunset as seen from Kerry Park, Seattle, WA

Related: Video Walk-Through: How to Analyze an Investment Property

Main Level

Up one level, there’s sheetrock damage. We’ll replace that and refinish the walls and ceilings. A good chunk of money will be going into drywall.

Doors and windows have been barricaded up here, too, so we’re going to have to repair that.

Because the stairs to get up to the main level from the basement are kind of funky, there’s a bump out in the wall up here. We don’t want to see that, but it’s going to have to stay. We’ll probably end up creating a big coat closet right there to hide it.

The only bathroom in the house is on this floor. It needs to be gutted. We’ll add a double vanity and probably reposition the toilet. We’ll tile it up and make it beautiful.

And since there are four bedrooms in this house, we need to add a second bathroom somewhere in order to make a master suite (probably upstairs).

So far: a lot of sheetrock is needed, a lot of electrical will be replaced, and the plumbing will likely need to be redone, too—most of it looked galvanized to me.

Trash removal is going to be a huge expense here. The grow equipment is everywhere and there’s additional HVAC equipment throughout.

There’s acoustic tiling on the ceiling. It’ll also need to be ripped out to improve the resale value.

But throughout the main floor, these arched walkways are super cool. We’re going to keep those.

There’s a bedroom right next to the dining area—people don’t tend to like that. Maybe we’ll make it a den instead.

Currently, the kitchen is closed off by a wall. We might open that wall up if it’s not load-bearing, or if it is, we could either beam it or create a pocket window. Our designers will figure that out.

In the kitchen, the plumbing looks okay but, again, the electrical does not. And everything else in there will need to be replaced, as well—that $120,000 is going to go quickly.

Second Level

This is actually what’s called a one-and-a-half story house, so the ceilings are low. You wouldn’t be able to build something like this today. But since it’s already here, we can keep it.

Most of the walls that were built up here are plywood. All of this will need to be ripped out and sheetrocked, or sheetrocked over (if we want to save some money).

There are two big bedrooms up here—this is good. We could put the master suite up here or on the main floor, where there are two other bedrooms. If we built it up here, we could make it huge and eliminate the second bedroom in lieu of a six- or eight-piece bathroom.

To keep it a four-bed, we could add a bedroom in the basement. Alternatively, we could convert the basement into an accessory dwelling unit and make this a multifamily property. But putting in a bathroom in the basement could get expensive, so I doubt we’ll go that route.

For the most part, structurally the house is super sound—which is great news.

Would you buy this house? This is a big project. But once we get everything out of here, this will be a blank slate. Right now, all the junk in here is just a distraction.

This is actually kind of good for us. It scared other buyers away.

Related: Flipping Houses: The Ultimate Step by Step Guide

Final Thoughts

1. Don’t get distracted.

All this grow equipment is like walking into a hoarder’s house. Pay attention to the big things. In this house, that means sheetrock and electrical. Everything else is cosmetic.

2. Don’t be afraid to bring in help. 

If you look at a project like this and get overwhelmed, that’s okay. Bring in help.

We bring in a drafter to create a 2D or 3D floor plan so that we can spot rooms and nooks and crannies that are messed up. Then we fix them.

Bring in a designer. Bring in a contractor. (If you ever want to get a bid though, it’ll be less expensive if you get a demo and trash out company in here first and get all the junk out.)

Watch the video above for additional fix and flip tips!

Do you have ideas about what we could do with this house? Master bedroom upstairs? Master bedroom on the main floor?

Leave your ideas in a comment below!