My most popular prior post BY FAR was dealing with form MGO or Marijuana Grow Ops. There is a lot of possible profit and potential gain for those that can afford to buy, fix, and flip them, IF you know the required steps.
This video addresses what you need to do in ANY part of the country if you want bank financing to finance a past grow op. If you want private financing, these rules don’t apply, but most people would rather pay 3.5% over 10% privately. This video blog shows you what is needed. Enjoy!
Transcript of Video Blog:
Hi, everybody, Rowan Smith with the Mortgage Centre. My most commonly hit blog topic of all time, consistently, is talking about former marijuana grow operations. So I’m going to do another one that’s going to cover a little bit more detail.
For those of you that are not in the Vancouver market, perhaps you’re in the Toronto or Ontario market where they’re not used to dealing with these things, this can serve as a guide for how best to proceed to get the best financing rates for you and your clients.
So, a former marijuana grow operation. It doesn’t just have to have been currently a grow off of the prior owner; it could have been the owner before then or the owner before that. When you buy a property, if you’re using a realtor, there’s usually a disclosure statement or something where they ask, “Has the property ever been used as a former marijuana grow op?”
If it has, and it’s in B.C. anyway, that person has to declare that it has been used as such. And why? Because a lot of times that could compromise the value of the security, which is the home, for the bank.
A lot of banks, Scotia Bank for example, simply will not do a former marijuana grow op. It doesn’t matter if you have 50 percent or 65 percent down. They’re not interested in that business, they’ll get it elsewhere, and they’ll leave it for somebody else.
The more common credit unions are the ones that are doing them. There are a couple of the big banks that will, but they require different things such as environmentals. So if you’re looking to finance a former marijuana grow, here are the things you’re going to have to understand.
You will be required to get an appraisal of that property, guaranteed. Every bank’s going to ask for it. Number two, you’re going to have to provide some sort of environmental study confirming that the property is still fit for human habitation. Now, what that means is there are two types.
There are many types of environmentals, but the most common are a phase one, or it’s the level one, and that’s an air quality test. What they are looking for is mold. Make sure there’s no toxic mold in the property, because people can bleach walls and paint them white and Killz and other stuff to get rid and hide the fact that there was a grow up on the property.
So what they do is they take an air test where the grow op was in the house, they take an air test where they grow op was not in the house, and they do another test outside as a control. They look and make sure that there’s not a massive variance between levels of mold within the property and if it’s within the tolerable limits.
The second thing is some banks are going to want a phase two, where they actually take drywall samples and samples of materials to make sure that not only is the air clean, but there isn’t chemical leeching or other possible environmental problems. Banks have to keep an eye on the fact that the property that they’re financing could represent a future environmental liability to you, the buyer…