Worth buying rental property with lead status unknown?

Question

When is it worth purchasing a rental property when the presence of lead paint is "unknown"?

There are cities in MA where nearly every buy-and-hold investment property was built during the days of lead paint. The gross majority of these have not been tested. I am under the impression that lead paint remediation can easily run $30k or more. but it is hard to find exact numbers.

How do you handle lead paint risk in your investments?

Thanks for taking the time to reply!

Russell Brazil · Answer

If it was built before 1978, and the status is unknown...the status is known...it has lead paint.  There are areas I would buy a property with lead paint, and other areas where I would not.  Massachusetts is one I likely would want only de-leaded properties.

Ned Carey · Answer

A "Lead Safe" certificate will not even slow down a lead paint law suit. What is required by law and what is the lawsuit risk are two different issues.

To clarify, I am referring to MD law replying to @Eric H.

Derreck Wells · Answer

In my opinion, it's always worth it. You can use the "unknown" status as a negotiating point. It generally costs $3000 to $5000 per unit, counting the exterior as a separate unit. So a 3 family would have 4 "units", the 3 apartments plus the exterior. So knowing that a 3 family could potentially cost you $20,000 to delead, and the MA state law basically says you have to delead (can't rent to families, but can't discriminate against them either), it becomes a strong tool to getting a better deal.

"Since you've never had a lead inspection done, my offer will reflect the fact that I'll have to delead the building." Then offer $40k less then the ask. You can always negotiate to splitting the cost and still be knocking $20k off the ask.

As was mentioned, you don't have to delead unless you're renting to a family with kids under 7, but it's best to do it when the building is empty. It saves on labor which saves you money and if there are tenants in place, you need to put them up somewhere for the duration of the project.

There are loan programs that will help you pay for deleading. MA may be strict, but they want the properties safe, so they do what they can to help. You can see the options here... MA Lead Paint Financing Options and here... Mass Housing Get the Lead Out

Let me know if I can be of any more help.

Derreck

Shaun Reilly · Answer

I wouldn't buy one here without knowing or really cooking in the costs of doing it in my offer.

Unless you are going in with no contingencies just test when you do other inspections.

Matthew Brenner · Answer

I want to say thank you to everyone for sharing their thoughts. Here are my takeaways:

Lead is always there. Maybe not strictly always, but often enough that you need to be aware of it. This matches my research and gut feeling, and it flies in the face of every real estate agent I have spoken with who likes to say, "It just as easily could not have lead."

At least one state is even more strict with lead paint than Massachusetts. Wow, I do not envy those of you who must buy older homes in Maryland. That said, there is still no "quick fix" for lead in MA, like removing flaking paint. We are held to a fairly strict standard, and rightly so. Kids don't need that exposure, and we cannot choose to not rent to families.

I can use a lack of lead inspection ("unknown" status) as a bargaining tool. Having a rough estimate of $3k-5k per unit plus the exterior gets me far ahead of my previous understanding. I see that, combined with MA's strong lead laws, could be used effectively.

I had so far limited my interest in properties to those that already have a letter of compliance, but that is difficult in my current budget. I now have the intellectual and negotiating tool to broaden my search while mitigating risk. Thanks for your collective input!

Rich Baer · Answer

@Matthew Brenner

Matthew,

I am doing a lead paint renovation in Baltimore right now. In that Baltimore is the lead paint lawsuit capitol of the world, I always build the cost of remediation into my offer price. Sometimes I am pleasantly surprised when the lead report comes back but sometimes not. My current lead paint removal costs are more than the price I paid for the house. But to answer your question better, just get the lead out completely (as opposed to containing it) before you rent or you are asking for trouble. That way there is no risk. Also never buy an older house with existing tenants. I would be happy to answer any other questions you may have.

Rich Baer, Esq.

Tim Wilkinson · Answer

It all depends if you want to be able to rent to families with small children. Lead paint doesn't always have to be removed, there are economical ways, also. Some folks encapsulate baseboards and remove window trim to cut costs. It won't be lead-free. It will be lead-safe.

Max T. · Answer

I have older houses in Philadelphia. None of them have ever been lead-tested. Instead I make sure that I remove any/all flaking paint and paint over before anyone moves in. If the old paint is encapsulated it isn't a  danger. Toddlers who crawl get sick from it if they eat the paint chips. It is also hazardous if it is sanded and breathed in. If I'm doing that work I'll buy the higher end respirator masks at HD.

Joe Norman · Answer

I personally will only rent out Lead Free units (which is different then Lead Safe, at least in MD, as Ned posted out).  I agree with Russell that if the status is known, and it was built before 1978, then it has lead paint and you should account for the cost of remediation in your offer.  This is not something I would compromise on - its not worth the risk of a lawsuit.

Derreck Wells · Answer

Ned, in MA you get issued a letter of complience. That absolutely stops a lawsuit. You've done exactly what is required to make the property lead safe for children. That's why the laws exist.

I always recommend people get a PCAD (Post Complience Assessment Determination) when they turn over a tenant or at reasonable intervals if they have a long term tenant. That way they're sure the unit stays legal and they stay covered. There's no law on the books about PCAD, but I use the term "reasonable intervals". What a judge would deem reasonable is open for discussion.

Worth buying rental property with lead status unknown?

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