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How Do I Get Funding to Buy Cannabis Real Estate?

How Do I Get Funding to Buy Cannabis Real Estate?

One of the key questions facing the cannabis industry in 2020 is available credit.  Many small banks and credit unions aren't willing to dive into mountains of paperwork to be able to hand out loans, while the question of cannabis' legality and availability remains very much up in the air.  Nevertheless, it is possible for a cannabis business to get a commercial loan, and it is possible for an investor to see their risk be rewarded by providing the funds for real estate.

Great Industry Potential 

The growth of the cannabis industry may be blunted by the COVID-19 pandemic, but it should still be strong: projected growth forecasts say that the entire industry may be worth as much as $100 billion by 2025.  This influx of cash has many investors and speculators seeing green.  The Denver-based developer Apto reported that as many as three in four cannabis real estate deals saw the property selling for above its market valuation.  That may be a more optimistic scenario than many investors face, but nevertheless the potential for a strong investment is quite real.

Worth The Difficulty 

With greater return on investment, however, comes greater complexity.  The same survey found that those whocannabis real estate had completed cannabis real estate deals ranked the difficulty of the process as an average of 8 on a scale of 1 to 10.  Investors, brokers, and financiers must make certain that all parties are properly licensed by the city and the state, as an error in paperwork or an overlooked regulation can bring the deal crashing down.  Nevertheless, 85% of those surveyed said that they'd be willing to do another cannabis real estate deal.

Prepare, Prepare, Prepare

How do business owners, investors, speculators, and brokers get the actual funding?  The first step is to put together a rock-solid business plan that focuses on the specifics of what brokers want to see.  Namely, a cannabis business in search of a real estate loan will need to show why they can compete in an over-saturated market, taking on both mom-and-pop dispensaries as well as the larger entities that can afford to advertise on billboards and radio.  Next, it's key to identify the exact floor space needed for your operation, to demonstrate that you're not overestimating the number of customers you expect to have on the floor.

The jurisdiction of your real estate matters, too.  Zoning laws are particularly strict about what can be built and where, and it is not uncommon for states that have legalized cannabis businesses to zone them exclusively in industrial development sites.  This may make finding the perfect spot a bit harder—who wants to buy marijuana when it's sold right next to a factory?—but it may also be better than nothing.  Finally, cannabis real estate typically has to have much higher security measures in place than other types of commercial real estate, because cannabis is subject to greater theft attempts as well as presenting a greater fire hazard.  All this makes it hard for investors to give money when there's uncertainty behind the site itself: in California it's actually easier to get the state license to sell cannabis than the local license, because the local licenses are often restricted while the state licenses are unrestricted.

Finally, it may be necessary to get a site owner's approval, since some land owners specifically write master leases so as to prohibit the sale of cannabis on their property.  In this case, a business may simply be unable to get a loan altogether, and force the business owner to go back to the drawing board.

Get Help Securing Your Real Estate Funding Today 

Our team has deep industry relationships and a network of enthusiastic cannabis lenders that are interested in helping your cannabis real estate plans become a reality. You can get pre-approved within 48 hours so you don't have to put your dreams on hold. 

 

Related:

Top 5 Reasons to Invest in Cannabis Real Estate

Regulations in Cannabis Real Estate

How Marijuana Legalization May Influence Cannabis Real Estate Funding



Posted by Canna Business Team


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In an industry that is constantly evolving, Canna Business Financing provides business owners with a reliable source to gather the most up-to-date information. From resources to fund the growth of your business to insights on best practices to scale, look no further!

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