April 9, 2012

How Big of a Problem are Meth Labs for Landlords?

One of my dad's biggest worries as a landlord is that someday one of his rentals will turn into a meth lab and he'll be "ruined" financially.  He certainly has cause to worry.  Meth labs are expensive to deal with.   If you've ever watched the show Breaking Bad then you can imagine the kind of damage that a meth lab can create.   However given where my dad lives and the realistic costs of clean up I honestly think he's worrying too much about meth labs.

How bad of a problem are meth labs for landlords in general?    That depends a lot on the situation and the risk vary greatly in different geographic regions.

Whats a meth lab?

If you don't watch  Breaking Bad then you may be unfamiliar with the concept.  Meth labs are where individuals use a chemical process to create the illegal  methamphetamine drug in their homes or elsewhere.   The labs use toxic and dangerous chemicals that can be a serious health hazard and in rare worst case scenario could cause a violent explosion.   The cost of cleaning up a meth lab involves hazardous waste disposal and complying with government rules.

Costs of clean up

It seems to me that when people talk about meth lab cleanup costs they are relaying a worst case horror story or assuming that a meth lab would financially ruin any landlord.   While these worst case scenarios can happen such that you literally have to demolish a building, that is not the typical scenario.   Meth labs are expensive to clean but they are not going to cause you to demolish a building or drive you bankrupt.

The DEA says that : 
"DEA estimates that the average direct cost to clean up a lab several years ago was about $17,000, but is now $2,000 to $3,000 per lab."    They also point out that : "There are additional ancillary costs associated with meth lab cleanup, such as property damage, reduced property value,.."
I would think the DEA would be a good source for this information.   However costs can vary and individual cities and states may have different rules.   So I figured I'd find a few more sources to see what they say. 

The METH Awareness And Prevention Project of South Dakota claims that "Averages $5,000 to clean up each lab, but costs can run as high as $20,000"
An article on the Tenant Screening Blog says "cleanup costs of $1,000 to $5,000 for each meth lab"

The Republic says :"That detailed procedure can cost in the thousands of dollars, approximately $3 to $4 per square foot.  One local landlord reported that it took $40,000 to decontaminate one of his properties where police had found a meth lab operated by a tenant."
 Evansville Courier & Press says : "State law requires that a property be tested before its occupied again, which costs about $800. Subsequent cleaning by a licensed crew could cost about $8,000 and could take about two weeks."

That gives us a sample of costs ranging from $1000 up to $40,000.    It seems the typical average costs are closer to $2000 to $5000 level.   Thats a pretty hefty bill for anyone.  Don't expect insurance to bail you out either.    It also doesn't cover things like loss of rent or the difficulty you may face in trying to rerent a former meth lab.

How Common Are Meth Labs Really?

In 2011 there were over 10000 meth labs busted in the USA.    The DEA tracks Meth Lab Incidents over the years.    The numbers vary drastically geographically however.   Some areas like some of the Midwest have particularly bad problems and other areas see very few labs.

Here's a state by state report on the number of labs busted in 2011:
(click image for full size)

It really depends on where you live.  As you can see in the map above the vast majority of meth lab busts are in the Midwest and the South.   The Northeast has many states with ZERO activity and the numbers in most of the West are relatively low.

Missouri had the largest total with 2,058 incidents.   With about 2.7 million households in the state thats almost 1 in 1000 homes were busted as meth labs and thats in just one year.    On the other hand a state like Maine only had 5 meth lab busts across about 500k households so their rate is 1 in 100,000.   Therefore you're probably 100 times more likely to encounter a meth lab bust as a landlord in Missouri as you would be in Maine.

Other Costs

As I mentioned before you'll likely see other costs from a meth lab other than the direct cleanup.  At minimum you're likely to experience a vacancy.  Its also quite possible your former meth cooking tenants may leave abruptly in handcuffs with some unpaid rent.   I doubt that meth lab cooks make very good tenants in general.   The meth itself may only be part of the damage that the tenants do.   You may have to legally notify prospective future tenants that drugs were manufactured in the residence as well, (check your local laws) and this could make renting the unit much more difficult and/or require a drop in rents.    Of course this is all separate from the impact of the drug itself to the users which is extreme.  Individuals who have a meth problem really need to seek Crystal-Meth treatment before it ruins their lives.

What to do?

First you should know the risks and be aware of it.   Understand that the costs are always significant and can be gigantic.     I think that not renting to known drug users is just common sense of course, but you should be careful in tenant screening.   I wouldn't want you to stereotype people or subscribe to any vague bias about what kind of person would be a likely meth manufacturer.    Instead employ solid screening practices to look for well qualified renters with good rental and credit history.   You should also be vigilant and inspect your properties and look for warning signs.   You should be aware of   How to spot and report a meth lab.

Bottom Line :  Meth labs are a serious and expensive problem.   Its quite unlikely an individual rental will end up a meth lab but landlords should be vigilant.

Portions of this article promoted by Addiction-Treatment.com

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