What to Do When You Hear the Words, “Your Rental is a Meth House.”

by | BiggerPockets.com

“Your rental home is a meth house!”

Imagine hearing these words from a trusted contractor. As he’s standing in your rental home… 1,486 miles away.

That’s exactly what happened to my friend and fellow real estate investor, Brian Hamrick.

This is a story about the importance of trusting your partners and contractors—and getting second opinions. And it reminds me why I love multifamily investing.

Brian is a seasoned Grand Rapids investor now. Like me, he is crazy about multifamily investing. But like all of us, he had to start out somewhere. And “somewhere,” for Brian, was in distant Albuquerque, New Mexico.

The year was 2003, and Brian was eager to get into the real estate investing world. He acquired a three-bedroom, two-bath home long-distance through an investor network. They did all of the hard work, and he got in for only $5,000 down.

For about six years, Brian rented out this home successfully. He wasn’t making any profit, but he was paying down his mortgage and had never regretted his decision to own remote single family residential property.

Until he got that phone call in 2009.

Brian’s management firm had just evicted a very bad tenant. This had cost him a few thousand dollars. And it was his first indicator that perhaps his management company was not doing a great job screening tenants.

Then his home sat vacant for a few months. It seemed the management firm had no qualified tenants who were interested. Brian’s irritation turned frustration was now at a boiling point, and he fired them.

Brian was remotely screening new firms, and one of them was touring the home when the neighbor showed up with a startling announcement:

“The last guy who lived here was running this as a meth house!”

The manager immediately called Brian with the news. (Have you ever had a moment where you were stunned or upset, but you didn’t even know how upset you really should have been?)

Though Brian was stunned, he had no idea how badly he should be stunned. Yet.

He hung up the phone and began Googling “meth house” and “remediation of meth house.” What he found shook him to his core.


The management company informed him that they wouldn’t touch it. They said he had a huge problem.

A house that’s used to cook meth basically becomes a toxic waste dump. Biohazard Central. It’s really a big deal. All of the surfaces can be contaminated. And the plumbing. And perhaps the heating and cooling system.

Related: What to Do if You Find Out Your Tenant is Involved With Drugs

Brian said, “I was beginning to see how extensive the remediation may be. I found a trusted local guy who immediately asked me if the police knew: ‘Because if they know, they’ll slap a red tag on the door, and it will be marked forever. Like a Scarlett Letter!’”

The guy had elevated Brian’s pain and fear, but he calmed him down a bit when he informed him that he was an expert in testing for meth. “Maybe it was a false alarm. Maybe the neighbor is full of crap. I can tell you the truth with complete certainty!”

Brian asked the expert how common meth was in Albuquerque.

“You see it everywhere now,” he said. “In every socioeconomic sphere. Not just lower income tenants, but rich and poor alike. You may find it anywhere and everywhere.”

Thankfully for Brian, this guy could sniff out meth with his nose, and he had a blue light to detect it with certainty.

Brian got the guy in the house, and the long distance call came minutes later. He had walked into the living room and immediately confirmed Brian’s worst fears.

Brian’s rental home was a meth house.

“I could smell it as soon as I walked in. And my trusty blue light doesn’t lie. They’ve been cooking meth in here. This is gonna be costly to fix!”

In shock, Brian asked the guy for a remediation estimate. Fortunately, this was the guy’s specialty.

He hung up the phone and hung his head in discouragement. His dreams of quitting his day job and a Trump-like real estate empire were slipping through his fingers faster than the digits in his bank account balance.

His thoughts were racing. “Could I get called into court? Will I have to bulldoze this home and sell the vacant lot? Will even the lot be contaminated?”

It wasn’t long until he got the expert’s estimate. Much to Brian’s surprise, it was much less than his fears had told him to expect. Only $15,000.

“We can thoroughly scrub the walls, then repaint.”

Brian was relieved—and about to learn a few lessons in trust. “Apparently the dire warnings I read about were overstated. I guess you never know who to trust on Google.”

This guy with a good sniffer and the blue light had become Brian’s beacon of hope.

The management company who rejected him said that his insurance company might actually cover this. Brian called the insurance investigator who said he would probably not be covered for remediation, but may be covered for certain damages.

He also convinced Brian to get an independent chemical lab to verify the existence of meth. This turned out to be providential.

Brian already had a free estimate from the Blue Light guy, so he was initially unwilling to pay a lab $2,000 to verify meth. But after considering it more, he reluctantly ordered the lab test.

To Brian’s happy surprise, the chemical lab returned a surprising result:

No trace of meth in his rental home.

Zero.

Blue Light Bob was a complete fraud.

Stunned and relieved, Brian realized he almost blew a lot of money trusting a guy he’d never met to sell him remediation services he never needed—for a problem he never had.

Brian hired a new management firm, got a new tenant, and sold the property a few years later. This home cash-flowed for almost a decade, but in the end, Brian said he only made a few dollars. The eviction, the empty months, and the $2,000 lab bill ate up virtually all of his profits.

Brian said he learned that in single family investing, one or two problems can eat up your cash flow for years. A costly eviction or a tenant who trashes your home can devastate your investment.

“And imagine what would have happened if they really had cooked meth in my home!”

Brian went on to sell six of his seven single family rentals, and he’s trying to sell the seventh one now. He has completely realigned his strategy into the realm of commercial multifamily investing. Brian likes the economy of scale in multifamily investing much more than in the single-family world.

Related: I Checked Out a Drug House So You Don’t Have To (With Pictures!)

Like me, Brian knows several people who have had success in the single family rental world. “But those people are hyper-local and hands-on—totally focused on their investments.”

Brian said he learned several lessons above everything else from this scary episode:

  1. Don’t invest in single family homes (unless you want to make this your life).
  2. You have to be sure to trust the right people.
  3. Always get a second expert opinion.

Brian Hamrick now manages multifamily real estate through the Hamrick Investment Group.

So what about you? Have you had success with long-distance single family rentals?

Let me hear your best stories!

About Author

Paul Moore

Paul is author of The Perfect Investment - Create Enduring Wealth from the Historic Shift to Multifamily Housing, leads Wellings Capital , a multifamily investment firm, and hosts the How to Lose Money podcast. Paul was 2-time Finalist for MI Entrepreneur of the Year, has flipped 60 homes and 30 waterfront lots, developed a subdivision, and appeared on HGTV. Paul's firm invests heavily to fight human trafficking and rescue its victims.

24 Comments

  1. I am not a fan of investing in SFH long distance and using a management company to manage one SFH. You will get a $10 / hour employee from the management company as your point of contact and decision maker to allow renters into your investment. You are at the mercy of a management company that has you very low on their totem pole for priority. You are at the mercy of contractors and charlatans you find on Google.

    Buy locally ( within 45 minutes or closer to where you live) . Even if you don’t manage it yourself, you can drive by the property and check it out. There are a lot of creative tips all over BP on how to find deals, analyze the cash flow, run comps, etc. There is simply no reason to invest 5 or 6 states away or even 5 or 6 counties away.

  2. Christopher Smith

    This sounds more like a not so subtle scare tactic to promote a business dealing in multi’s than an objective fact based non anetodtal article on real estate.

    The SFR “story” told here has absolutely no resemblance whatsoever to my many years of experience with SFRs or anyone else competent I know. That goes for both local and long distance SFR investors.

    • Stephen Shelton

      I don’t see how this became a debate on the wisdom of SFH. In this specific example the only advantage a multiunit may provide is a nosy neighbor that would complain to the property management or police that Jesse Pinkman is on the other side of their wall cooking up some meth, and shortened the duration of the problem.

      I think this example provides lessons. I agree with Gary in that you should live close to the properties so that you can see them at least once a month. It also calls into question the value of relying entirely on property managers to run anything.

      If the article is anti-anything it’s anti long distance and anti peppery management, and then it isn’t really condemning either. It’s just a real life story that you can take and learn from our leave.

    • Christopher and Zach,

      There is absolutely nothing wrong with SFHs. I own 40 of them and 3 two units. They are very rentable and very marketable. There is very strong demand for houses and it is still very difficult for first time buyers to get financing.

      The owner in this story made a variety of stupid and preventable mistakes. Buy local. Drive by your houses. Get to know the neighbors, code enforcement , and police in the towns where you invest. It is really not that hard. I highly recommend the books by Brandon Turner who is frequently featured on BP.

  3. Laura Koppel

    Wow. I have heard a lot of scams but a “blue light” to detect meth is by far the most ridiculous. I own a meth lab remediation company and there is no absolute way to determine meth presence other than a laboratory test. Everything else is a complete fraud. Great job going with your gut and having it tested. We test every house regardless of what the client says. How else can you provide a scope of work if you don’t know contamination levels.

      • Alan Majors

        Laura, thanks for the insight. Wouldn’t you be concerned that other tenants in the same building might be looking for ways to break their own leases and get away from ‘that place?’

        I know multifamily offers economies of scale, but I’m scared this kind of ‘cancer’ might not heal too quickly. Eventually, yes, but at what kind of joys in the meantime?

  4. Theresa Minifield

    I have invested in SFRs for over 20 years both locally and out of state with great success. Where you buy e.g. Good schools, low crime, excellent rents, etc. makes a huge difference. My income is not completely passive because I like to keep a check on my investments. Therefore, I make an agreement with my property managers that before placing a tenant, I need to receive, by email, the screening docs e.g. Credit report, eviction report, and application. If I like what I see, I will approve the placement. Also, all repairs have to go through me because I don’t like shoddy jobs or skimping that will Just be a band-aid rather than a true fix. This has worked well for me. I have not had an eviction (knock on wood) and every tenant that left maintained my investments well. I retired in January, and my net investment income from my SFRs is four times my gross retirement income. Yes, SFRs, can be great investments as long as you begin with the end in mind and set a goal amount to retire on very comfortably at whatever age you choose.

    • Jami Lynn

      Theresa – thank you very much for your experience – this is very encouraging. My Dad used to buy up rundown SFHs in our little town in Texas – my brothers and I spent summers cleaning them and painting everything to freshen it up while my Dad took care of basic repairs (he was a plumber, so was able to do a lot himself). It’s good to know this is still a valuable investment option.

    • Paul Moore

      Theresa,

      You’ve had a great experience! That is really wonderful. I think one of the key takeaways here is that you selected homes in great areas. That makes a big difference. You get what you pay for.

  5. SHEREEN S.

    I’m also curious as to how one would handle a multi-family unit where one unit was actually used as a meth cook house? Would you have to get the entire building lab tested or the one unit? No matter how well you screen your tenants, you have no idea what they have planned. Can one put a stipulation in the rental agreement for potential damages and cost?

  6. Laura Koppel

    It has been my experience that meth lab decontamination coverage is under the “vandalism” clause in the insurance policy. Insurance adjusters are typically ignorant of meth and its effects so they are quick to deny claims. Do not take the denial as the last word. Get a public adjuster if necessary to research your policy and find where your coverage lies.

  7. Suzanne Nelson

    We use a meth detection kit in the Western Washington area-you can get them off of Amazon and you swab and then test with a “pregnancy test” type indicator. This has saved us from buying 3-4 houses in the last few years which came up positive. It is very costly to fix, but these kits run about $400 for 10-15 test, so pretty cheap.

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