Cannabis hard money loans
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Cannabis loans and marijuana related hard money loans are our fastest growing segment and is projected to grow even faster in the future. With more states legalizing and decriminalizing cannabis, and changing social acceptance of the drug – we believe marijuana tenants will be a major force in retail real estate in the years to come. Washington State, Colorado, and California allow recreational use of marijuana products with some limitations. Those states have seen tremendous results in tax revenue and falling drug related crimes – and real estate investors have been cashing in as well. The impact of the marijuana industry is also seen in warehouse properties and industrial real estate – where cultivation and distribution takes place.
Hard money loans for properties with marijuana tenants is the perfect marriage of of two unlikely industries. Both appeal to investors with an entrepreneurial spirit who are willing to be the initial trailblazers who will forge the road for future real estate professionals. Even before decriminalizing marijuana, many states allowed medical-use cannabis for patients with a prescription. Federally insured banks almost universally refused to loan on properties with medical marijuana tenants and most refused cash deposits or opening bank accounts. That lead to the giant growth in private cannabis loans- investors who wanted to secure deals or pull equity from their property had nowhere to go but private hard money lenders.
Private Financing for Cannabis Properties
Cannabis loans and private financing is the perfect match – they both sit at the intersection of risk, reward, and innovation. Private funders stepped in to this field in a big way – funding all those deals that big finance institutions refused prior. A perfect case study is the city of Desert Hot Spring, California – in 2014 the city council decide to issue licenses to grow cannabis locally as an attempt to revitalize the local economy. In 2014 the city was forced to declare a fiscal emergency, with high unemployment numbers and very low household income. Investors were hesitant to purchase or renovate properties because there was no upside – especially due to the much more favorable location nearby – Palm Springs and Indio
By issuing licenses to grow, the city achieved to solve two major problems for growers – security of the facility and institutional recognition that will ensure investors that their funds are secure. Cannabis growers until then were forced to grow product out of plain sight – in old warehouses or basements, or in an alternate locations distant from the retail operation. While medical marijuana exist in some forms in many California locations since the mid-90s, growing the product was never really normalized in mass scale.
Local authorities saw marijuana growers as a security concern – they would often be robbed and required additional security. By issuing licenses, growers of cannabis could safely grow marijuana in high quantitates, if they are robbed they can call the police safely, not worrying that they will be prosecuted instead.
The licenses to grow by the city also gave investors and creditors assurances that operators are protected – which in turn encourage private hard money lenders to step in and fund those projects – the real estate and operations (both capital intensive and require sophisticated hydroponic equipment). Cannabis loans skyrocketed in the area, materializing the city’s vision of growth by taking a risk. This grand experiment proved to be a success, so far. Real estate prices surged shortly after, driving growers into the spaces and out of the shadows. Increasing demand for high quality product and mainstream acceptance of cannabis lead investors to the town, hoping to cash in on the new trend.
States Laws for Cannabis Laws
North Carolina – NC does not have any exemption for marijuana use, even for medical patients who can benefit (source). However, possession of marijuana is not treated as seriously as other drugs.
California – marijuana use is legalized in California for adults over 21, to a limited extend. Cannabis can be purchased in cities that allow retail sales, even for residents without a medical exemptions. Until 2016, California allowed marijuana use for medical patients with a subscription after 1996 initiative that legalized medical cannabis.
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