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FRIDAY, MARCH 09, 2007
Four Tips for sniffing out illicit activity in your Investment Property

Illicit activity is something that every landlord needs to be on the lookout for, and the methamphetamine (“meth”) epidemic that hitting some regions is adding new twists to this concern.  
The Sandusky Register in Ohio recently reported a story on the woes of a landlord there who is facing the economic blow of discovering that a tenant in one of his investment properties was running a meth lab .  

Aside from the obvious social and economic costs to the landlord, a meth lab has a particularly destructive impact on the building where it is housed.  Toxic chemicals can permeate any porous surface: drywall, wood floors, carpet, ceilings – practically all of the materials that go into building a house.  

The best case is that this will turn into a nasty cleaning bill.  Worst case – depending on how long the activity was going on – is that your rental property becomes a teardown candidate.  

A meth lab isn't the only type of illicit mischief that your tenants might be getting into; I'm sure you could come up with a list of shady activities that that would make you life difficult if you were to make the mistake of signing a lease with a bad apple.  But in many ways criminals aren't too creative, so there are some patterns that may tip you off that something bad is going on in there.  Here are four things to look out for:

  • 1:: Tenant pre-pays rent: six months or even a year.  This is a tough one.  Investors know that cash is king, and it’s tough to turn down a big pre-payment.  But be aware that there may be a darker motive.  By paying several months in advance the tenant may be sending you a signal that you don’t need to come around for a while.  Not all pre-payments are sinister in nature (I’ve accepted prepayments before) but when an applicants offers it should cause your antenna to go up.
  • 2:: Tenant pays exclusively in cash: Again, cash is king – but resist the temptation to look the other way.  Nuff said.
  • 3:: Lots of traffic at odd hours:  You’ll notice this if you live nearby, but you might not if you don’t.  That is, unless you make an effort to – which you should.  
  • 4:: Tenant never contacts you:  I don’t get a lot of calls from my tenants, so it’s not like my phone is ringing off the hook in the middle of the nights or I’m schlepping around unclogging toilets.  Far from it; well maintained investment properties inhabited by responsible, well screened tenants are very easy to manage and require very little of my time.  But that said – every blue moon I’ll get an inquiry from even the lowest-maintenance tenant I have.  Be suspicious of a tenant who never ever calls you, not even once.  That guy might be sending you a message that he doesn’t want you coming around.  So go check him out.

There are some other things to look for specifically when it comes to sniffing out meth labs.  If that’s a particular concern in your area then check out the KCI Anti-Meth site.  

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posted by: Chris Smith
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