As we all navigate through this exciting, yet world of many unknowns, it can be overwhelming to make decisions regarding properties and what’s being charged vs. what it’s worth.
You identify a potential property and of course the seller is charging a premium for the property because he knows that there is a demand, because it can be used for a Cannabis related business. For this example, we will use a cultivation warehouse. Can you go out at this point and order an appraisal? Yes, you can. However, that appraisal will not reflect the premium that this seller can demand. Then it becomes, well, what are you willing to pay?
That number should really reflect the potential the building has. In this example, for a warehouse approved for a cultivation business. How many square feet of usable space do you have? How many lights? How many pounds per light? Price per pound? Your price per pound should really be based on a conservative price to allow for market changes. That way you have a well built in cushion for pricing fluctuations. Are you able to add in extractions to build in even more profit, even if the extraction process occurs off site? Is the permit in place or in process for this property? This also adds huge value.
Then factor your cost to run your operation, such as supplies, employees, building maintenance, etc… Does your ending number justify the price of the premium you are being asked to pay for the building? If it does, then these numbers are how you base value on the deal your are considering entering into.