Cabbage, Onions and ….What’s In That Crate?! A Story of Drugs, the DEA, and Real Estate Investing

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I think most real estate investors would agree; you just never know what is going to happen in this business on any given day. Or another way of putting it would be “there’s never a dull moment”.

It doesn’t matter if you invest in single family homes, commercial properties or really even if you are big or small as real estate investing companies go. You know how important it is to educate yourself and become a master problem solver. Even then, there are just some things you can’t predict or prevent.

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The Whole Story of Cabbages, Onions and …. Pot

I know someone very well that got a big surprise a while back. This gal works for one of the larger real estate investors in my city who owns 200+ houses, apartment buildings, various commercial buildings as well as office space and office warehouse combination types of buildings.

She had an appointment that morning to meet with someone to rent some commercial space which was located in the same complex where her office is located. So she picked up the keys to the unit, and walked the short distance to wait for the perspective tenant.

Once she arrived in the area, she saw two things; a number of men with big letters on their jackets AKA the “DEA”, and one of her current tenants. She heard the fellow from the DEA ask the tenant if he was the property owner to which he pointed to my friend and said, “No; she’s the one you want”. OK; that’s not exactly how you want to start your day off is it?

My friend introduced herself and said “I’m the property manager. How can I help”? (You can tell this isn’t the first time she has encountered “men in jackets with big letters on them” in her career).

He said. “Do you have the keys to this unit” and she replied, “Yes; they are in my office”. He told her that he had a search warrant and would need to get in the unit. She went to get the keys and when she came back shortly, she told the DEA officer she had just rented this unit 10 days ago. Also about this time she saw a whole bunch of workers sitting on the curb that had been handcuffed and were waiting for transport. She did note that they were not the actual people she had rented the space to.
Ferm Valey Produce 2100_1658

What’s In the Boxes?

You will see from the picture that it really doesn’t look like that much produce (at least to me). But the short version is, there was just under 5000 pounds or about 2 ½ tons of marijuana hidden in those boxes of cabbage and onions. The fellows from the DEA said it had a street value of about $5,000,000. They had tracked this shipment all the way from it point of origin.

The agents from the DEA asked her what story the tenants had told her when renting the space. What type of business did they plan to operate?

She was able to tell them in great detail what they had said, because this landlord has strict policies in place for businesses that have anything to do with cars or car repairs. The tenant’s story had been that they would be doing some restoration of expensive automobiles so there would never be any cars sitting outside (which wasn’t allowed) or any onsite painting which also wasn’t allowed. They had also told her that they would be using it for storage for items used in their other business which was construction.

That sounds reasonable doesn’t it?

Is There A Way to Prevent This From Happening to You?

Not really. It is not that unusual for commercial landlords in an industrial or mixed office/industrial area to rent to “start-up businesses” especially for warehouse space. The criteria for screening these folks can also be a little different too. The landlord does the standard credit report and background check of course. Even though they get a security deposit, there is nothing really to tear up in a concrete block building.

According to my friend the biggest problem with these folks is that they have no business credit history. So if their personal credit history is OK, then they will usually rent to them.

Are There Any Lessons To Be Learned?

According to the DEA agent’s onsite, there was really nothing that the landlord could have done differently to avoid this outcome. They said that the landlord’s role was simply “to do their job and screen the best they could”. Beyond that there was no way they could have known or predicted this would happen.

*One point to note is that these agents told her that these folks are renting just as many single family homes as commercial spaces for their drug activity.

 

What Do You Do With a Warehouse Full of Cabbage and Onions?

Donate it to a local food bank quickly before it begins to spoil. This stuff starts to smell really bad pretty quickly. I might point out that it was the DEA that mentioned this first. I guess that was the voice of experience speaking.

Has anyone had a problem like this in their business?

About Author

Sharon Vornholt

Sharon has been investing in real estate since 1998. She owned and operated a successful home inspection company for 17 years. In January of 2008 she took the leap of closing her business to become a full time real estate investor.

20 Comments

    • Glenn –

      Isn’t that just a story and a half? The DEA stopped by again today and asked the owner this question; “Do you have any SFH’s that don’t appear to have anyone living in them all the time or tenants that seem to be gone a lot?

      That’s something to ask yourself. He said, “They may be using your property for something other than housing”.

      Sharon

  1. Ali Boone

    Lol. I love the part about donating the produce. I mean, might as well, right?

    My theory is, you know what, do the best you can and whatever stuff like this happens after that just makes for great stories around the campfire with a few libations!

    Great story, Sharon. Thanks for sharing.

  2. It’s actually pretty funny how common this sort of thing has become here in the Los Angeles area. I get a lot of calls from people who are “looking for warehouse space that’s secure and has ample power and is kind of hidden from public view”.

    Every single time I’ve heard that, it’s followed by “We’re marijuana growers…but we’re totally legit with papers and everything!” Ask them to provide a P&L or a bank statement and you’ll probably never hear from them again.

  3. karen rittenhouse

    We received a letter years ago from the local police telling us that one of our properties was under surveillance for drug activity. They were kind enough to say “landlords are usually unaware of the activities in their properties” and we were just being informed.

    I forwarded the letter on to our tenants. They moved.

    🙂

    • Karen –

      A letter like that almost always works. They issued over 100 warrants in conjunction with this “event”. I think the agents were happy with the results, and the tenant will have “free rent an board” for a long time.

  4. Well you are so right Sharon – You do run into something different just when you think you have it all figured out. I will have look through those boxes of cabbage now if I come across any. LOL.

    • Sounds reasonable Shaun especially since they took the pot out of the mix.

      Here’s a quiz for you: How many Ford F150’s does it take to transport 5 million dollars in drugs to wherever they take 5 million dollars in drugs???

      Sharon

      • Assuming it would be in the back of the truck and not being towed I’d say 2-3 depending on the model year. I believe that payload has increased a lot the last few years.

        Of course this is assuming you have firmly packed bricks of Pot wedged into every bit of space in the back. Probably at least double or triple that number to look a little less obvious. 🙂

        • Sharon Vornholt

          Shaun –

          That was my guess but then what do I know? It actually took 4 trucks. I couldn’t believe they didn’t have some type of enclosed truck like a box truck or vans.

          Have a great day!

  5. Melodee Lucido on

    Sharon, your article made me lmao!! SO many interesting chapters in our career path. A very good crei friend called to say she got a KILLER response to her mailing and she was going to look at the prop.

    Yeah it was dirt cheap because it had been a million dollar house turned into a MAJOR growing house. MAJOR. She and her hub turned it into a great profit—bought for $600k and sold for $1.3 after renovations—GREAT roi.

    The story is juicier than I’m relaying here but it just underscores that you . . . never . . . know :>

    As always Sharon, thanks!

  6. Sharon,

    That’s a great story to drive home the point that real estate investors really need to be on the alert at all times.

    I once had a house that was under surveilance by the police too. Looking back, there was a lot of suspicious things the tenants did that didn’t alarm me at the time..

    I thought Karen’s idea of sending the police report to the tenants was a great techinque.

    • Yes it was Terry.

      This is certainly a case of “live and learn”. There were no tell tale signs in this case. They rented the space, and 10 days later the “produce” arrived. Luckily the authorities were expecting the shipment. I think it is a little more troublesome when it is SFH rentals, because you are away from the property in most cases.

      Apparently one of the biggest things to look for with this type of situation is a tenant that doesn’t move in or is never there. A lot of the investors here have language in their leases stating that the tenant must move in within 30 days. This would be easy enough to check. But if they are gone a lot such as someone that travels for their job, that would a little harder to figure out. I think the neighbors would be your best ally for spotting this type of situation. Thanks for your input Terry.

      Sharon

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