Alleged Meth lab, should we be overly concerned?

6 Replies

We have been analyzing 30 to 150 unit opportunity in Indiana, Ohio and Kentucky for almost nine months. Made a few offers but the market is competitive. We found a 50 unit (4 building) property in a tertiary market of southern Indiana. We like the city as it has good population and job growth with a variety of employers. It really seems like a good property with solid cash flow out of the gate and good value add opportunities we have run the underwriting very conservatively and are comfortable with the ROI. This property has been on and off the market for a couple years and just as we were prepared to write up and LOI today we learn from a very trusted source that a couple years back there was a meth lab in the property. We are obviously working to validate this with local town officials and law enforcement but this brings me to the question. Can anyone advise us on how the remediation process works on a building that has been used in this manner? What types of things do we look for in due diligence to assure the remediation was done and done right? Is this somethings one should run from? After all we are in the as a value add investor we’re in the business of fixing problems. Any advise would be appreciated. Thanks in advance.

That stuff gets in the ducts and leaves behinds dangerous chemical compounds . It gets everywhere and could hurt children if inhaled . Do a search on here I almost bought a meth house but backed out because they never remediated the building and insurance wasn’t ok and I wasn’t ok with prospect of a unsuspecting family living there with young kids . Once that crap is cooked in a building it gets airborne and the process is long and expensive to fix it . Personally I’d hard pass on this . Meth houses are no joke

@ Dennis M thanks for the input. I know this building has independent wall units for each apartment. If it is isolated to one unit and one building wondering if that limits the risk. Did your insurance company deny coverage based on previous meth activity?

I'd start with validating it like you said with the police....there should be record of that address if it was used that way and busted. Speak with the seller about what action they took to remediate the structure.....i believe all the drywall would have had to be replaced, along with any other porous surface. Ask for proof work done, what contractor they used, what guarantees exist.....but with it being a few years ago, i wonder if its of any concern...call the health dept

From what I’ve read it seems having a central heating or ac pushes that stuff around into all areas of the building .This was a 25k large house that should have went for around 60k . It was a converted SFH to a rehab center for former drug addicts to get clean . Well One of the guys living there got the idea to cook meth in the basement .this was all found out by me from researching the history of the building . It was listed on the mls from a national realty chain and they never even disclosed this or described what happened to anyone ! I only stumbled on it by doing due diligence on my own accord trying to learn the back story

@David D'Errico Thank you for the input we will certainly inquire of the seller and try to get to The facts.
@Dennis M. The please we’re looking at has a similar story, seems it served as a halfway house and what do you know someone starts cooking. However our broker had a similar situation go down in a deal on another transaction and after thorough investigation come to find out it was simply rumors in the community because they weren’t excited about the proposed use of the property. Thanks again.

@Mike Montana

You can test for meth just like mold, lead, and radon.  Call around to home inspectors to find someone who will do this for you.  It may get expensive if you want to test every unit.

There may be state law regarding remediation and disclosure requirements.

The local health department should also have information.  Be careful when talking to officials (including the police) because there may be mandatory reporting requirements which would make everyone's life more difficult.

If the sellers haven't tested, I don't know how much help they'll be because you'd be asking them to speculate.  The facts are it either tests positive for meth or it doesn't.

Remediation for a single unit shouldn't cost that much.  It's typically a chemical process that will peel paint but, unlike mold, doesn't require removal of sheetrock.  We do single family houses out here in Utah for under $5K.

Good luck.