I think most real estate investors would agree; you just never know what is going to happen in this business on any given day. Or another way of putting it would be “there’s never a dull moment”.

It doesn’t matter if you invest in single family homes, commercial properties or really even if you are big or small as real estate investing companies go. You know how important it is to educate yourself and become a master problem solver. Even then, there are just some things you can’t predict or prevent.

The Whole Story of Cabbages, Onions and …. Pot

I know someone very well that got a big surprise a while back. This gal works for one of the larger real estate investors in my city who owns 200+ houses, apartment buildings, various commercial buildings as well as office space and office warehouse combination types of buildings.

She had an appointment that morning to meet with someone to rent some commercial space which was located in the same complex where her office is located. So she picked up the keys to the unit, and walked the short distance to wait for the perspective tenant.

Once she arrived in the area, she saw two things; a number of men with big letters on their jackets AKA the “DEA”, and one of her current tenants. She heard the fellow from the DEA ask the tenant if he was the property owner to which he pointed to my friend and said, “No; she’s the one you want”. OK; that’s not exactly how you want to start your day off is it?

My friend introduced herself and said “I’m the property manager. How can I help”? (You can tell this isn’t the first time she has encountered “men in jackets with big letters on them” in her career).

He said. “Do you have the keys to this unit” and she replied, “Yes; they are in my office”. He told her that he had a search warrant and would need to get in the unit. She went to get the keys and when she came back shortly, she told the DEA officer she had just rented this unit 10 days ago. Also about this time she saw a whole bunch of workers sitting on the curb that had been handcuffed and were waiting for transport. She did note that they were not the actual people she had rented the space to.

What’s In the Boxes?

You will see from the picture that it really doesn’t look like that much produce (at least to me). But the short version is, there was just under 5000 pounds or about 2 ½ tons of marijuana hidden in those boxes of cabbage and onions. The fellows from the DEA said it had a street value of about $5,000,000. They had tracked this shipment all the way from it point of origin.

The agents from the DEA asked her what story the tenants had told her when renting the space. What type of business did they plan to operate?

She was able to tell them in great detail what they had said, because this landlord has strict policies in place for businesses that have anything to do with cars or car repairs. The tenant’s story had been that they would be doing some restoration of expensive automobiles so there would never be any cars sitting outside (which wasn’t allowed) or any onsite painting which also wasn’t allowed. They had also told her that they would be using it for storage for items used in their other business which was construction.

That sounds reasonable doesn’t it?

Is There A Way to Prevent This From Happening to You?

Not really. It is not that unusual for commercial landlords in an industrial or mixed office/industrial area to rent to “start-up businesses” especially for warehouse space. The criteria for screening these folks can also be a little different too. The landlord does the standard credit report and background check of course. Even though they get a security deposit, there is nothing really to tear up in a concrete block building.

According to my friend the biggest problem with these folks is that they have no business credit history. So if their personal credit history is OK, then they will usually rent to them.

Are There Any Lessons To Be Learned?

According to the DEA agent’s onsite, there was really nothing that the landlord could have done differently to avoid this outcome. They said that the landlord’s role was simply “to do their job and screen the best they could”. Beyond that there was no way they could have known or predicted this would happen.

*One point to note is that these agents told her that these folks are renting just as many single family homes as commercial spaces for their drug activity.

What Do You Do With a Warehouse Full of Cabbage and Onions?

Donate it to a local food bank quickly before it begins to spoil. This stuff starts to smell really bad pretty quickly. I might point out that it was the DEA that mentioned this first. I guess that was the voice of experience speaking.

Has anyone had a problem like this in their business?

The post Cabbage, Onions and ….What’s In That Crate?! A Story of Drugs, the DEA, and Real Estate Investing is property of The BiggerPockets Blog. and is Copyright © 2012 BiggerPockets, Inc. All Rights Reserved.