The legalization of marijuana around the world has changed a lot of things. Besides having a variety of societal and economical effects, marijuana has become a part of key economic markets, including the real estate market. Growing operations, or grow-ops as they are more commonly known, are being created in existing buildings or buildings are being constructed with the purpose of growing marijuana in mind. Either way, like most things, there are pros and cons to buying marijuana grow-op real estate.
The effects grow-ops have on the real estate market
Overall, most experts believe that marijuana has had relatively positive effects on the real estate market, especially on commercial properties. Retail and industrial rental needs have shown signs of weakness over the past few years, with online sales becoming more popular than standard brick-and-mortar outlets. With growing operations now being legal in many countries around world (many countries allow marijuana to be grown for medical purposes but not for recreational use) the need for space to have these operations has helped fill empty or newly built properties. In some areas, the demand for warehouse space for grow-ops has become quite strong.
Before you buy grow-op real estate
Whether you’re planning on starting your own grow-operation or are looking to lease out the space for someone else to do so, there are a few things you need to know. For example, in Canada you need to apply and then obtain cultivation and processing licences from Health Canada. You also need security clearance from the RCMP, as well as development permits from the city you reside in. If you obtain all proper licensing, you also need to meet certain criteria. For example, you must:
- Be 18-years-old or older
- Possess a valid business address
- Have sufficient financial resources to conduct business in a responsible way
- Provide a business plan or model
Check all legal requirements in your city or country before buying a property with the intention of having a grow-op.
Pros and cons of buying marijuana grow-op real estate
Like any business venture that involves buying real estate, there are pros and cons associated with it. Knowing what the benefits and drawbacks are can help you make the right decisions before you jump into something that can have a major impact on your livelihood.
A great time to buy
Now couldn’t be a better time to purchase grow-op real estate. The demand for high-quality marijuana has never been greater. According to Statistics Canada, Canadians spent 43.1 million dollars on marijuana in just the month of October in 2018! The supply is having a hard time keeping up with the demand.
You can partner with the government
Governments are looking to team up with licenced growers to help keep marijuana supplies high. This means having the strong hand of the government on your side to help sell your product once you get up and going. Depending on where you live, there are even some assistance programs to help with purchasing a potential grow-op location.
Help others as well as yourself
The benefits of owning a grow-op property go far beyond being an excellent investment for yourself. You can help your local economy by offering jobs, purchasing supplies from other local vendors and potentially growing medical marijuana that can be used for a wide array of ailments.
Start up costs
You may be able to get a good deal on the property, but initial start up costs can be extreme. Start up considerations may include converting the building to suit your set up, making sure there is adequate power, that the building meets code and safety requirements, and that proper security measures are in place.
Stigmas still exist
Although the overall opinion of marijuana has shifted, there are still a lot of people who are against it. You may have other business or property owners near your site that may not want you there. Some vendors who sell products you need may not want to deal with you. You may also have problems getting lenders to loan you the money you need, a real estate agent that will want to work with you or a broker to help you with your mortgage. You can also check this website to get an idea on how much your monthly mortgage payments can be. Be prepared to overcome other people’s biases.
Other financial issues
Once you get the building, you will still have to deal with possible high insurance rates, potential low-resale value and long-term losses. This is a venture that will require a real passion and drive for it to succeed. It will need to be more of a labour of love project, but it can be done, and this is the right time to do it!