How to Make Cities Clean Up Meth Properties for You, Then Sell Them to You Cheap
Meth properties have a bad name, and they deserve them. The nightmare scenarios are nearly endless:
- Horrible health issues that are particularly hard on children and adolescents
- Chronic headaches, nausea, and eye irritation
- Unseen corrosion of pipes and ductwork
- Structural defects
- Mind-altering drugs permeating the walls and insulation
And, of course, there is the issue of clean-up, which can run into the hundreds of thousands of dollars before you are no longer living in a toxic waste dump, literally. To make things even more complicated, the rules governing disclosures about methamphetamine use in a property are not comprehensive or particularly clear, providing many loopholes for desperate sellers and agents to claim ignorance, legitimately or otherwise. Since meth properties are not always even documented as such, they are a particular threat to real estate investors who may buy a property “as-is,” sell it, then find themselves on the hook for cleanup or on the wrong end of a nasty lawsuit if it later turns out the home tests positive for high levels of methamphetamine.
So why are we telling you this other than just to give you some nasty nightmares about threats to your bottom line? Well, the fact of the matter is that a meth property is a huge hazard for local governments as well, which can cause them to opt to spend the money to clean up such properties and get them certified clean, then send the current owner a bill for the process. If the bill goes unpaid, it may become a tax lien that has some very interesting attributes.
Case Study: Loveland Meth Abatement Property
In Loveland, Colorado, the owner of a local lot is about to get a bill for more than $160,000. He owes that money to the city in payment for demolition of the two structures on his property and subsequent clean-out of meth-contaminated debris. The city wants compensation for its role in the cleanup since the owner failed to remedy the property’s problems on his own. The owner, most likely, does not have the wherewithal to pay or he would have handled the issue rather than being taken to court over it and ultimately having his property bulldozed.
What will that tax lien mean for a new investor, however? Is it something to steer clear of because it is a “meth abatement?” In reality, the lien could represent some interesting possibilities. The lot itself is located in an area of Loveland that Zillow analysts predict will rise nearly 9 percent in value over the course of the next 12 months. Loveland itself has received numerous “great place to live” awards over the years, including from Money Magazine, USA Today, andAARP the Magazine. The local population of artists and business-friendly environment make the area ideal for growth in the coming year. If that tax lien were to go to auction, the investor holding the lien could end up with a property purchased at “meth property” prices but certified “meth free” by the local governing body.
Pitfalls and Potential With Property Tax Lien Investing
Many real estate investors opt to steer clear of tax lien investing in states like Colorado because they feel more secure with a deed in hand, even if that deed could be taken away if the property owner pays off their debt in a relatively timely fashion. However, with the right strategies and protections in place, the pitfalls associated with tax liens – mainly that they are often overwhelming to novice investors – may be easily and adeptly avoided.
For example, in Illinois, investors who purchase tax liens may have to wait as long as three years in order to take control of a property after the tax lien is purchased. Sound like a timeline that is far too long? In reality, that timeline feels great to Illinois tax lien investors because they are likely collecting as much as 18 percent intereston their investment while waiting to see if they will get a hefty return on the “loan” they made the property owner or be the happy owners of a new property. On the other hand, in Georgia, tax lien investors only have to wait one year and enjoy predetermined, government-enforced interest rates on their investment in the event that the property owner does redeem the property.
Tax lien and tax deed investors get the best of both worlds when it comes to protecting their capital as long as they are investing that capital in property tax liens, deeds, and properties associated with both that meet their strategic goals. The first step to successfully investing in tax liens is knowing what type of property will serve your purposes and what outcome fits your goals best. In some cases, that could be a meth abatement property in Colorado. In other cases, it could be a Midwest property with hefty interest and a long hold time. The clarity of your investment vision will enable you to get the results you want.
