Marijuana is now legal in 32 states for medical purposes and 10 states for recreational usage. What does this mean for real estate? How can you tell if there is a grow? How does marijuana growing impact residential and commercial properties? What are the two most important items to look for in any real estate used for a grow?
First, how can you tell if there is a grow? 4 tips to easily determine if a property is currently a grow or if it has been used in the past for growing
- Smell: The number one indicator of a grow is smell. It is difficult if not impossible to conceal the smell of a growing operation. It is very noticeable and distinct
- Electrical: All indoor grows have power hungry demands. This is due to the lighting and cooling. Most grows use HID (high intensity discharge) bulbs which consume lots of power and emit lots of heat.
- HVAC: As hundreds of lights (or thousands depending on the size of the grow) are utilized, extensive cooling/ventilation systems are also needed to get rid of all the heat generated from the grow lights.
- Moisture: Like any plant marijuana requires moisture. It grows best in moist environments. This moisture can create issues if not handled appropriately (mold, rot, etc…)
What are the impacts on commercial properties of housing a grow?
In a large scale grow power, water, and HVAC are heavily upgraded. Although substantial money is put into these items, there is little if any payback as a result. For example a typical industrial user does not need nearly the amount of power as required by a grow, nor do they need the heating, ventilation, cooling, etc… Hundreds of thousands of dollars are spent on tenant improvements for marijuana growing that will never be recouped by the owner or another property user.
Along with the substantial upgrades mentioned above, many buildings are reconfigured to accommodate grow operations. Growers don’t need 30 foot ceilings with drive in and dock doors. Many times, the warehouses are split into numerous smaller windowless rooms to accommodate the grow cycles of Marijuana. What would a general warehouse tenant do with this configuration? They would likely demo everything and turn it back into a “vanilla shell”. Having a marijuana tenant, if they move out, decreases the value of a property due to the improvements that are unusable to the average tenant.
What are the Residential impacts of a grow?
If it is a small quantity, 5 or 10 plants the impact is typically minimal. If larger scale operations are done in a residential environment the impacts can substantially greater. I’ve been in several rental homes where the property owners find out that their tenant is growing and are left with substantial costs. The primary issues growing in a residential environment are moisture and electrical issues.
First, moisture is a big issue in a residential property. Unlike commercial properties with concrete floors throughout, most residential properties are constructed with wood joists and subfloors. As we all know water and wood over a long term do not mix. This leads to mold and ultimately rotting of the wood surfaces. Fortunately Colorado is an arid climate so once the moisture issue is resolved, it is typically easy to remediate mold If it is not too severe.
Second, electrical is also a very large issue in a residential property. Residential circuits are not meant to carry the wattage required of most grow lights. Often, to increase the wattage, growers will bypass circuit breakers that keep tripping creating immense fire hazards. As a result, I’ve seen where all the residential wiring in a house burned up and where a house caught on fire from overloaded circuits.
Growing in a residential location can create a dangerous situation if it is not done correctly.
I’ve taken a few pictures of some of the more “interesting” issues I’ve seen when looking at properties.
This is a picture of an outside power box that they have a bungee cord holding open with a fan to try to cool the circuits
I guess there is an alternative to a pool table: A marijuana growing stand
In a residential property, this is quite a bit of power for various lights. This no doubt will lead to electrical issues
Although marijuana is legal in some shape in 32 states, there are huge implications for real estate. As a property owner (or prospective buyer) it is critical to identify if a property has been used as a grow. If done correctly most growing has minimal long term impacts on a property. Although growing marijuana is not a dangerous process and very similar to growing any other vegetable or fruit, if done improperly indoors, Improper growing can have substantial impacts to a property. Make sure if you own a property or are going to buy a property, if growing is occurring or has occurred that it is done properly. Nobody wants to end up with a “cooled” electrical system held together with a bungee cord as demonstrated above 😊
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Written by Glen Weinberg, COO/ VP Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in the Colorado Real Estate Journal, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
Fairview is the recognized leader in Colorado Hard Money and Colorado private lending focusing on residential investment properties and commercial properties both in Denver and throughout the state. We are the Colorado experts having closed thousands of loans throughout the state.
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