Thinking of investing in cannabis real estate? We put together a guide of what you should know about investing in marijuana real estate.
Ask around to all the major marijuana businesses that have popped up in the last decade and you’ll see that most of them look at real estate seriously. When you own your own property, you can do what you want on it while holding an investment that’s bound for growth. Marijuana real estate is one of the most overlooked and lucrative aspects of the cannabis industry.
Here is everything you need to know about investing in this type of real estate.
Location Matters in a Major Way
The location you choose makes a massive biggest impact on your return. Location impacts everything including who you sell to, what you can produce, and who you work with. You need to think about more than earnings from a typical real estate transaction.
You’ll need to learn about zoning laws and all the regulations that govern the community’s relationship to marijuana. You should also look at what community leaders have come out to say about the crop. If you face strong opposition from local government and elected officials, you’re going to have a tough time making money from your investment.
Cannabis use and decriminalization don’t go hand in hand with excitement regarding the future of cannabis-related business. Just because a region has decided to relax its criminal laws around it, the door might be closed to cannabis businesses. Having real estate devoted to growing or producing cannabis-related products might not be allowed within the local laws.
Before you buy real estate for a marijuana-related business, you need to think about whether or not the environment is appropriate. If the real estate is for a retail venture, consider whether or not there’s the right kind of foot traffic to support your business. If it’s for growing, you need to consider whether the outdoor environment is appropriate or whether there are adequate space and resources for an indoor facility.
How to Treat it Like Other Real Estate
Treat it like regular real estate when you’re looking at the history of a site. You’ll want to know what’s been at the site before. Check out what the growth potential has been.
Look around at the region and see what kinds of growth the area has seen. An increase in young people moving to the area is a good thing. College towns and related business are also good places to invest.
While you have to think long and hard about legality, you need to think about practical things as well.
Legality Makes a Difference
When you’re renting or buying, you need to think about the legal ramifications of your choice. Leasing property for a cannabis-related business can put you into unstable territory. Traditional lenders aren’t all knowledgeable and comfortable in the world of marijuana.
They know it’s lucrative but they’re not ready to take the leap. You have to overcome the knowledge barrier before you begin.
Renting or leasing property puts you under the thumb of the person who still owns it. Instead, consider buying it outright.
If your community lending institutions are open to funding the kind of business that you’re pursuing, you might be able to start your business without issues. However, many lenders see too many legal loopholes without enough of a potential return for the cost of investing in marijuana-related businesses.
Your smartest move could be to keep an LLC or a legal entity to own the property separately from the business. This can mean that your investment is protected from legal changes but also provides tax benefits from changes in real estate separate from laws connected to a business.
Construction Could Be a Pain
If you’re thinking about constructing on the property that you’ve invested in, you shouldn’t walk into this project lightly.
There are a lot of potential snags that you could face when trying to manage the potential zoning and permit issues.
You’ll have to go through adequate inspections when jumping into a construction or rehabilitation project.
You’re required to meet with local officials or representatives. Local offices related to construction and building will guide your project.
As the cannabis boom happens, the growth is happening in places that don’t have the experience they need with this industry. There are newly passed zoning laws that are changing the way that local governments deal with cannabis-related business.
You’ll be facing a steep learning curve hand in hand with local officials and people who are working in zoning and regulatory offices. This all precedes the painful work of actually planning and building the project that you’re trying to create.
Safety and security of your site need to be your top priority. You are handling valuable and sensitive materials while working in a new industry. Knowing how the laws have changed is a way to help protect your site and the people on it.
Local Laws Can Impact How You Operate
You need to take a careful look at the local ordinances governing the cannabis-related business. A careful look must happen before you start investing. Your location impacts or hinders your ability to operate and you need to be up on the laws.
Your best bet in assuring that your project grows without hassle is to meet with local officials so that you can have the foresight you need. Don’t get anchored with real estate in a small town where you’re required to only hire local workers. Instead, make sure you can run your business your way.
There’s a chance that the local region you’re investing in doesn’t have all the skills that you need for your business to grow.
Also, consider the tax laws that might impact your business. If you’re producing products for consumers, then you might want to think about the local sales tax. If one region has a higher sales tax than another, you could end up negatively impacting how much money you can make on your investment.
Make sure you talk to local business owners to learn about what you should expect not only as a real estate investor but as a business owner if this is your aim.
Marijuana Real Estate is a Powerful Investment
When you invest in marijuana real estate, you’re planting a seed that’s bound for growth. The amount of growth depends powerfully on where you invest, but soon enough, there will be no limit to where you could see the cannabis industry go.
For some tips on how investing in commercial real estate could help your business, check out our latest guide.
Pete Asmus is not one to let life idly pass him by. GreenZone 360’s CEO gets things done. From motivational speaking and meeting with new business partners to building ninja courses for his kids and advocating for public education on Alopecia. Whether it’s business or family, you’ll find Pete going to MAKE SOMETHING HAPPEN.