Could cannabis real estate be the next hot investment property?

| Feb 20, 2020 | News |

Marijuana acceptance and legalization is quickly creating a lot of investment opportunities,  including many in commercial real estate. Everywhere marijuana has been legalized, “cannabis real estate” has been booming, including Florida. Warehouses, storage facilities, open land and storefronts alike are in demand.

But should you invest in cannabis property? It depends. Here are a few things you need to consider:

  1. State laws and federal laws are still clashing.

One of the biggest problems for the cannabis industry in any state is the disparity between state and federal laws. Some states have made marijuana available widely for medicinal use (with a prescription). Others have legalized it for recreational usage. Individual jurisdictions in many urban areas have decriminalized possession of small amounts of the drug entirely.

But marijuana is still illegal under federal laws just as it has been for decades. Until that changes, there’s always the potential (even if it’s a small one) that the federal government will come crashing down on the industry.

That also forces many sectors of the industry to engage in all-cash transactions, since banks are reluctant to get involved (even for financing). That can also be a consideration if you’re thinking of investing. Deals are typically more complicated than other commercial investments.

  1. Zoning and insurance can be a problem for some cannabis businesses.

Zoning can always be complicated when it comes time to develop an area. With cannabis, however, local jurisdictions tend to scrutinize every business closely. They may push for pretty severe safety and security requirements because of the industry’s (real or perceived) risks. Getting past the state’s requirements can be easier than hurdling over a local jurisidiction’s demands.

Insurance is another bugbear for cannabis properties. Many title companies and insurers shy away from dealing with these businesses both because of the ongoing conflicts with federal laws. They may worry about hazards like fires, chemical use, water damage and mold.

Is investing in cannabis real estate wise? Well, it’s not without its difficulties — but it’s also potentially very lucrative. Just make certain that you go into the process with your eyes wide open and with an experienced advocate by your side.

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