The legalization of cannabis in various states has created a niche in the real estate industry where the value of properly zoned lands and properties have been increasing at an astounding rate. For investors and entrepreneurs who are willing to navigate through the complexities of this emerging market, the returns can be tremendous. One thing is undeniable. PROFITS! The saturation of licenses in particular areas of California has led to skyrocketing real estate prices as businesses seek out specific areas for there facilities. Over the past three years my business partner and I have fully immersed ourselves into this burgeoning market, finding various trends and ultimately opportunities along the way.
Eight years ago, Me and my partner went all-in on real estate investing while the market was just beginning to turn back around. Over these years, we have received huge profit margins on investments in SFR and multi-unit properties, by utilizing my general contracting background and our ever-evolving understanding of the California real estate market. Over the past three years this market has seemed to peak out in a lot of the areas that we have previously conducted business. The margins that we became accustomed to receiving became increasingly more difficult to discover. Ultimately motivating us to find other areas where we could once again find very high returns without having to leave to state of California.
In 2016 my partner and I invested in a property in Monterey County which we locked under contract for $1.2M. We cleaned up the land and the structures, added some basic infrastructure, and waited for the opportune time to decide on what to do with the parcel. This entire additional investment was just under $150K. During this basic cleanup and buildout stage we received various offers which quickly revealed to us the high potential that this cannabis real estate market may provide. Surrounding properties were being sold for prices far above reasonable market rates and we were receiving multiple offers for high priced, long-term leases on a weekly basis. 18 months after purchase, while many of these lease offers were quite enticing we ultimately decided to let go of the property; taking our deeper understanding of the market and $2.6M sale price with us onto our next project!!
This next project brought us into Lake County, CA. Where we dedicated all our time on learning about the marijuana county ordinances, zoning, and other applicable regulatory decisions. After months of painstaking research I found a beautiful 340-acre parcel which satisfied all our criteria. We made an aggressive offer and secured the land. Once we took all the proper steps to ensure compliance with the county ordinance we took a deeper look into state and county laws to utilize the full potential of this property. To our delight we found that by splitting the parcel into four separate lots and attaching these already established enrollments to the new parcels, we could quadruple the total allotted area to cultivate. Which in turn substantially increased the land’s value even further! Unfortunately, we figured out this enormous scalability after we liquidated our capital for development of what is now phase 1 (80 acres) where we thought the sole cultivation site on this property would be. Meeting all county requirements and deadlines, This is now the ONLY ELIGIBLE parcel in the county large enough to scale to a massive 700,000 sq.’ of cannabis canopy space, instantly providing an opportunity to become the industry leader in the county. I am confident that we will find the right developer, investment group or cultivation company to fully benefit from the uniquely advantageous position this land holds. Yes, we will have to sell at a huge discounted rate, but the margins should be similar if not higher than our first project.
Whether it was in an already established county or an emerging one, my partner and I have seemed to find a new avenue to create high returns in the cannabis real estate market. A strong vision and an unwavering dedication to the process has allowed for these amazing opportunities to come to fruition.
With our concentration in California, I was curious if anybody has had similar experiences in other states? This is an exciting time in the states where these cannabis laws are passing, and we intend to continue to navigate through the surrounding regulatory red-tape to find quality properties with high potential future values. I have not posted for quite some time and I thought that I would share with the bigger pockets community what I have been doing over the past couple years. I look forward to hearing about others’ thoughts and stories surrounding this flourishing niche in the real estate market!
