I want to get into marijuana

62 Replies

Good evening, I have been looking around at pieces of land in West Tennessee but I am now thinking I should expand into any of the 50 states. I want to buy a parcel of land and lease it out to a company to grow pot/weed. Marijuana has been legalized in a few states and from the looks of it, it appears that 2018 will be a big year for marijuana as it is being considered as ballot items in multiple states. I am looking to see if anyone has any tips or if there is anyone who has done this before I would love to get on the phone or video chat with you. Thank you

Rousner.

This sounds interesting and I think that it's a good idea. 

However, I am not able to help you as I have no experience with this. But good luck!

Can’t really help you other than say that in Colorado those who don’t have access to a TON of CASH, I’m talking millions, won’t even get their foot in the door. Come big and hard because it’s expensive to start and more expensive to keep going. In my opinion you should just invest in real estate, way less drama.

Based on my knowledge of the industry it makes more sense to grow indoors on a large scale. Variables that impact production (lighting, co2, pests) are more easily controlled in an indoor environment. Security is also a concern given the value of the crop. Might make sense to look for a large industrial space versus a bunch of acreage out in the country. I've never done anything along those lines but I have some good friends who are involved in the industry. If you are serious about this I can put you in touch with someone who can answer specifics better than I can.

Edit: Remember that marijuana is still illegal under federal law and state laws vary widely. Make sure to consult a local attorney prior to starting down that path.

@Chris Carson  Yes sir, I am very interested and serious. If you could put me in contact with someone I would really appreciate it. 

This post has been removed.

I live in grow central - near the Platte River in Denver where most of the grows are.  There are over 120 grows less than 5 miles from my house (based on a 2011 Denver Post Article on "medical marijuana" before it became legal for recreational use).

The grows are located in 5,000 - 10,000 sq ft warehouses or in former nursery locations (as is the case of Dardano's Nursery where I used to buy my vegetable plant starts in the Spring).   Good luck finding a place like this as there is very high demand in Denver.

Once you find a location with the correct zoning, if that's the industry you want to target, you're going to have to upgrade electrical to the warehouse.  You might even have to install specialized ventilation systems to keep the smell down (Denver has a Department of Environmental Quality that keeps on top of this...though you can still smell it when you drive by).  Hydroponic systems and grow lights will need to be installed as well.  Security is essential - these places get broken into quite often.

Your tenant, if not already licensed, will have to go through an extensive background check that also requires site visits to ensure compliance before they even get started.  This could lead to higher than usual vacancy rates while things get set up.

Honestly, if you want to go commercial, go commercial and keep yourself open to other industries....in the long run, anyone with a 5,000 - 10,000 sq ft warehouse is going to do well in this area no matter who they lease to. 

@Ed E. Thanks for the info. The plan is to buy about 2 acres or more of land here in Tennessee or one of the neighboring states and hold on to it until it is legalized, even if it’s for medicinal use only. In the meantime I was looking into leasing to a farmer to grow corn or cotton (both are very popular here) or to grow, cut and then sell firewood on, however it’s really hard to find tips or information on how to calculate the cost or manage land and there is not a section for it on BP.

I cant remember who it was produced by, but i listened to a podcast about this one time and its really hard to get financing in the United states for grow ops due to the risk the federal government plays. But canada is huge into medical marijuana and their govt supports multi million dollar plantations almost completely financed if i remember correctly, something to look into

Originally posted by @Rousner Ermonfils :

Ed E. Thanks for the info. The plan is to buy about 2 acres or more of land here in Tennessee or one of the neighboring states and hold on to it until it is legalized, even if it’s for medicinal use only. In the meantime I was looking into leasing to a farmer to grow corn or cotton (both are very popular here) or to grow, cut and then sell firewood on, however it’s really hard to find tips or information on how to calculate the cost or manage land and there is not a section for it on BP.

 I believe Jay Hinrichs has experience with land...

@Rousner Ermonfils - I've spent some time working as a freelance news photographer.  I was able to photograph the inside of one these warehouses.  I'm not sure if you'll be able to cultivate it in a field...it will depend on Tennessee's laws.  Here in Colorado, each plant is banded for regulatory reasons.  There is a limit to the number of plants each operation can have and the facility needs to keep records - plant by plant.  I'm not sure how California and Washington do it - but here, each plant has it's own pot (and it's own band).

Here are photos from the inside of one of the warehouses I mentioned.  I don't have a more pulled back image but it gives you an idea of what it looks like

Note the yellow bands with the purple ties at the base of the plants

@Rousner Ermonfils so owning farm/ag land is a completely different world. Typically farm land is in larger tracts than 2 acres. In fact the larger the tract the better as there is less lost cultivated acres around the edges of the parcels. I am quite certain that real cotton and corn farmers wouldn't be interested in renting 2 acres. Farming is typically done by share cropping. This means you provide the land the farmer farms it and you share in the crop with him. Unless the farmer has a very large operation both parties starve to death over time. There is very little money in agriculture in a small scale. Most ag land is priced above what you can farm it for make money. You really have to know what you are doing to get a good price on ag land.

I know it can be grown outside but as understand it, the controlled climate of a green house produces a superior product. It allows for year around production vs a one and done of an area with a bit of winter. I think the regulatory restrictions and cost benefit basically rule out growing outside. I have heard of some hemp products being grown outside.

@Rousner Ermonfils While we all wait for it to be legalized, you can legally grow industrial hemp (for use in CBD oils, etc) in TN. I've only recently started looking into it, but that might be something to get you started and some experience 'growing'. Good luck

I think we are one embarrassing question to the President from a huge group of Federal Civil Asset Forfeitures.  The President and the AG both said they would do it.  As President he has said he was in favor of it for drug enforcement.  It could raise billions of dollars that could be used for a border wall.

These kinds of investments are RISKY.

I have a property in Southern CA where we are planning to do just this. We're not growing or selling cannabis, we're buying and selling/leasing property that would be suitable to the cannabis industry. Like any investment there are risks, but done property it's an opportunity that we may never see again. We are actively looking to bring on other investors and have found there to be a strong interest, so it can certainly be done.

@Mark S. What are you guys doing to prepare it for a lease? Or make it suitable for a growth farm?

I've been learning the industry for the last year, I think there is more money to be made in technology that allows CBD to be applied or ingested than in growing. Less competition and a chance at a buyout from big pharma once it goes federally legal. 

If you're looking to get rich, 2018 is the year for a marketing business. Elections are pricey, folks could clean house. 

This is a very interesting business to be involved in, but there is a TON of money flowing into it so you need to really be ready for it or you'll get wiped out before you even get started.  I watched an interesting show on it recently, figured I would share it:

https://www.youtube.com/watch?v=j-QPQSGfld0&t=2282...

If I recall, an outdoor harvest can be done a few times per year but an indoor harvest can be done every 2 weeks.  Indoor is much easier to control for pests, more efficient water usage (on the west coast, this is a HUGE deal because if you can have permits to do business, but if the state says you don't get any water, then you're done), higher quality product, etc.

My biggest concern would be that large funds (hedge funds, pharma companies, etc.) are not involved in the industry yet because of the political climate around it.  Once it is deregulated on a large scale, you are up to the mercy of these behemoth companies and their infinite pocket books.  For example, let's say you pick X city to set up shop.  You buy land, lease it out to some small business owner and life couldn't be easier.  Pfizer decides to get into the business and build a vertically integrated business around this industry and picks X city to develop as well.  They buy hundreds of acres in your area and within a year they have 40,000+ sqft warehouses with $100M in infrastructure with the latest in technology, manufacturing next door and a retail location in the city center selling their product lower than anyone else.  Your tenant will be out in a matter of months and you'll have to repurpose the area.

As with any industry, there will always be room for the little guys if they can find some niche that serves a market segment not covered by the big boys.  As someone had stated above, make sure when you do purchase that you have a backup plan for that investment in case something like this does come about.

Oh, I totally forgot to mention that these businesses are really difficult for most people to start because banks do NOT lend on them.  Anyone in this space currently is either self-funded or syndicated.  There are no SBA loans for grow operations (at least from what I have read from industry experts).

Originally posted by @Rousner Ermonfils :

Michael Biggs can you expand by what you mean by this?

Because it is illegal to grow Marijuana in the United States the federal government can simply give you notice that they have taken any assets related to the manufacture of it.  This includes money, real property, cars, homes, aircraft...

You do have the right to go to federal court to and try to get your property back.  That does increase the likelihood of a federal criminal prosecution.  They will let you know you will be arrested at the hearing.

The proceeds go to crime fighting efforts. 

Your original post is enough evidence for them to get a court order to take properties you buy in the future.

Originally posted by @Michael Biggs :
Originally posted by @Rousner Ermonfils:

Michael Biggs can you expand by what you mean by this?

Because it is illegal to grow Marijuana in the United States the federal government can simply give you notice that they have taken any assets related to the manufacture of it.  This includes money, real property, cars, homes, aircraft...

You do have the right to go to federal court to and try to get your property back.  That does increase the likelihood of a federal criminal prosecution.  They will let you know you will be arrested at the hearing.

The proceeds go to crime fighting efforts. 

Your original post is enough evidence for them to get a court order to take properties you buy in the future.

It sure took a while but somebody finally raised an important issue.

Months ago, all national title insurance underwriters issued bulletins regarding the marijuana issue.

Long story short, nobody is insuring any transactions where the subject property will be used, or will potentially be used, as a dispensary, growing facility, etc.  We've actually had to turn away several transactions in PA because the PSAs had contingencies regarding licensing approval! Doh!

Further, title agents have been warned that handling funds in connection with any such transaction could subject the agent to federal RICO and money laundering claims, etc.

Factor this information into your plans.

@Rousner Ermonfils  are you looking at properties for a dispensary where the medicine is sold or a grow facility? I don't know about other states but here in Michigan you can't just put one in anywhere it's highly regulated and each city will have different requirements one grow facility that I'm working on needs to be 1000 feet away from a residence, school, daycare, etc. so there are only a few areas we can build. I would recommend talking with the city attorney of the area you are looking into if they have one otherwise it would probably be the zoning official and ask them how many licenses will be issued and where the facility or dispensary can be located. Some cities will let you combine them & others won't, we looked into one city that required a 1000 foot separation between the two.

If you're looking into building a grow facility to rent out it can get very involved and expensive especially if they are going to separate the THC then your looking at ballistic walls, generators, 5 tons of cooling for each grow room. I know the client that I'm working with doesn't want to rent because it's too much risk. If you want to buy and re-sell properties that could be used for a dispensary or grow facility keep in mind that there will most likely be more properties available that qualify than there are licenses issued so you may be holding on to that property. Again this is in Michigan & you should check the laws in whatever state you look into.

@Rousner Ermonfils , there is definitely a lot of money being made in the industry and I'm sure  a lot more will be made once more markets open up to recreational. In CA it will be recreational next year, but last I heard they are still working on the rules. 

In Colorado and several other states it's already recreational , but CA will be a very big one just because it's a very big state and gets a ton of tourism. 

One thing is in Colorado you have to be a resident in order to get a license...but perhaps if you just own property and are leasing it out this might not be necessary. 

The fact that marijuana is still illegal federally I could definitely see being an issue. This is likely one of the main reasons why really big players haven't invested in the industry yet. 

Jeff Sessions the Attorney General has spoken up repeatedly against marijuana legalization. 

https://www.forbes.com/sites/tomangell/2017/09/20/jeff-sessions-slams-marijuana-legalization-again/#73b04bff27d1

Ive been involved in this.  Find the correct zoning and plan to build greenhouses w supplemental lighting.  Then you need a grower like me to run the greenhouse. Ive managed greenhouses on various levels and growing diff crops.  In the 90s I very briefly worked for Ben Dronkers of Sensi seeds in Amsterdam. Its a great time to get into the MMJ market. I personally know half a dozen people running dispensaries and leasing land to growers.  Leasing is good money. Without some experience in hort you can loose your shirt to spider mites or power failure in a grow. Growing is a risky business and a lot of work around the clock. The dispensary bus is pretty fool proof though. Even the worst weed gets purchased and the market is quickly moving towards edibles and vape products.

I see the civil asset thing to only be an issue if you are contemplating illegal behavior.  There are a lot of high rollers in the MMJ game and its not going anywhere anytime soon.  I know of three dispensaries wholly owned by retired federal judges and a retired govt attorney.  They are the owners of a large mngt company run by one of the judges daughters. They all feel mary jane is here to stay and they dont worry about their investments being repossessed or busted. Its a safe bet if you watch your ars.     Last thing.  The biggest downfall I repeatedly see is taking on business partners you dont know and not having decent docs to back up the agreements.  Man that kills a lot of deals in this bus.

I wouldn't consider it while it federally illegal.  Tennessee governor Harlem recently passed a law recriminalizing marijuana possession, because it was decriminalized in Nashville and Memphis.  Further more this kind of business adds a dynamic that attracts violent or criminal activity.  Purely from an investment perspective I would be concerned with the almost infinite amount of competition that exist.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here