Whether you buy or lease a property for your cannabis business, it is essential to find one that is green-zoned and suitable for your current and future needs. Unfortunately, finding the right property for a cannabis business is not always easy. Most real estate agents do not have the information or experience to help you navigate the process, and many of the best properties and locations are not on the major real estate listings.
Successfully finding the right property for your new cannabis business can be challenging. This guide will provide some of the most important considerations to ensure that the property you choose meets your business’s requirements and stays compliant with legal restrictions.
Determine which properties in your selected market are green zoned for cannabis use.
While the number of states legalizing cannabis for medical and recreational use is growing, locating appropriate real estate is one of the most challenging parts of entering the business. Ultimately, the local municipality determines if and where a cannabis business can set up shop in their county, city, town, or village.
The local government plays a prominent role in determining if and how your cannabis business operates, and the rules vary. Hence, it’s critical to get to know and develop relationships with city managers, town council members, and the zoning commission. Ultimately, local officials and authorities must feel confident that your business will be an asset to the community. Zoning restrictions and fierce competition can make it challenging to find a compliant space that meets your needs.
Understand what property characteristics you should be looking for.
In addition to ensuring that the property you choose meets local restrictions, there are several other factors to consider.
- Understand the space requirements you need
When analyzing your space requirements, it’s essential to consider the space you need to open your business and account for business growth and future needs.
You need to consider how much space you will need for storage and how you will ensure your storage space preserves the integrity and quality of your products.
Determine if the property has the basic physical and organizational structures and facilities needed to operate your enterprise successfully.
Whether a retail or wholesale business, it’s essential to choose a property that provides easy access for distributors and customers.
Decide if you want to purchase or lease
When choosing the right property, one of the more difficult questions is whether to purchase or lease property. Since each situation is unique, there is no right or wrong answer to this question, with each option offering pros and cons.
Buying property enables you to build equity, which has proven to be one of the most effective ways of creating wealth. If you purchase a property and your business flounders or fails, you won’t be out your entire investment because you will still own the property. Additionally, there may be tax benefits to owning the property where your business operates.
At the same time, purchasing property can be expensive, and starting a cannabis business can be a front-loaded capital-intensive period. In addition, the cannabis industry is still on shaky ground with traditional financial institutions, and it’s not uncommon for sellers to want 20%-30% down to purchase on land contracts. So, if you are searching for a green-zoned property with a great location, you could be looking at a sizable investment before you begin doing business.
Finding the ideal property in your desired location may be simple if money is no object, but if you are like most business owners, you have a budget. If you decide to purchase a property, you may have to consider property in a less desirable location, which could mean less visibility and foot traffic. Buying a property can also affect the timeline of your startup plans if your purchase eats into other areas of your budget.
Leasing a property enables you to avoid the high initial down payment associated with purchasing a property. With no substantial down payment on the books, you have more capital to use to make your business operational and start generating a return.
Especially for retail cannabis businesses, finding a suitable location with the right demographics, visibility, foot traffic, and access is critical to the success of your business. Leasing may enable you to afford a more desirable location that helps your business grow. Additionally, building maintenance can be costly, and you may be able to include much of that in your lease, enabling you to focus on your business and making it profitable.
One of the primary risks with leasing is that if your business fails, you will most likely be responsible for fulfilling the financial obligation of the long-term lease you signed. If you decide to lease green-zoned property, your choices may be limited as owners seek to capitalize, knowing their property is desirable.
Additionally, unlike buying where you have a regular and consistent long-term payment through a financial institution or seller financing, when leasing you are, to some extent, at the mercy of your landlord. Depending on the type of lease you sign, you might be subject to a rent increase when your lease expires.
Understand the licensing process and costs once you acquire the right property
Suitable green-zoned real estate is very limited. As a result, sellers and landlords alike charge a premium for space, knowing that every other cannabis venture is in competition for space and willing to pay. In addition, each local municipality has its own set of rules, regulations, licensing procedures, and fees, in addition to traditional business licenses. Therefore, you need to have a firm grasp of the different permits, licenses, and regulations required in the area you wish to operate your cannabis business.
Take the Next Step With BeGreenLegal
At BeGreenLegal, our team of consultants, real estate agents, marketers, state law analysts, GIS planners, manufacturing and testing experts are committed to helping you grow every phase of your cannabis business. Our team of experts can help you navigate the maze of local government, business, and property permit requirements and help with qualified cannabis-experienced real estate agents and lenders. Our experienced team can help you navigate the complexities of searching for and acquiring property and then lead you through the licensing process. Contact us today to learn more about how we can help you successfully find the right property for your cannabis business.