Marijuana and real estate in Colorado

Marijuana and real estate in Colorado

Ever since Colorado became the first state in the country to legalize recreational use of marijuana, the state's real estate industry has been scratching its head on how to proceed with cannabis clients. It doesn’t matter what side of the line your opinion lands, if you’re in Colorado and you buy and sell real estate, your'e eventually going to come across a deal that in some way, shape, or form, involves marijuana. So now is the time to educate yourself before you run into any issues.

Property value and pot shops?

Recreational sales and property values can now add proximity to pot shops as another factor when comparing comparable properties. Many homeowners are concerned about marijuana shops opening up for business next door. Although amendment 64 allows pot shops to open up their doors, the impact may not be as impactful as one might expect. The state law allows local government authorities to monitor and regulate all commercial endeavors for recreational marijuana.

Counties throughout Colorado have already passed laws banning or regulating recreational marijuana shops. Many of the counties that haven’t placed a ban on sales have setup a moratorium on marijuana shops in order to more closely see how other parts of the state are handling pot shops. So if marijuana shops will largely be absent from the majority of Colorado’s counties then the passing of Amendment 64 shouldn’t have a huge impact on home sales.

The investors and homeowners that will be effected by Amendment 64 will be those in Denver and Denver County. These real estate agents will need to start keeping and eye on areas zoned industrial 6 which has been approved for cannabis-related businesses. If a home buyer asks a real estate agent to find them a home that’s far away from all those pot shops they’ll need to keep an eye on areas zoned industrial 6.

Grow houses coming up

The passing of Amendment 64 allows for in-home cultivation of marijuana of up to 6 plants in total. The only problem is for folks renting their home or apartment wanting to grow their own plants are finding that their landlord says otherwise. This has created demand within the real estate space for a new business called a grow house, which sells themselves as indoor gardens but they’re really for renters with a cannabis green thumb.

Though not everyone is willing to follow the rules. Many ignore the landlords and the 6 plant limit—Investors and real estate agents should know the tell-tale signs. Most homes that are converted into grow houses end up having large mold issues because the plants need adequate irrigation and water. Larger residential grow house conversions have wide holes cut out of the ceiling for ventilation, and to add water lines.  You’ll also find extra ductwork and rewiring throughout the house in order to power the high powered grow lights. Illegal grow operations also tend to steal power by having additional wires running up to the power lines in order to skip the meter.

Illegal Grow House Identification Checklist:

  • Odd Electrical Wiring Setups
  • Unsafe Fusing
  • Electrical Fixtures Damaged
  • Ventilation Holes Cut in Roof
  • Wood Rot
  • Odd access to electrical features
  • Damaged and rusted gas appliances and vents
  • Mold throughout the house (attic to venting)
  • Damaged chimney used for venting

What investors need to know

Though Colorado has passed recreational marijuana use, it’s still illegal in the eyes of the federal government. This fact has many landlords, homeowners, and property managers actively preventing marijuana from being grown on their property. One of the reasons property owners are so scared of allowing pot on their property is because it could violate their loan agreements. Many of these property owners have loans or owner insurance that highlights “illegal activities” as an escape clause and that would leave the owner high and dry. Since landlords control who inhabit their homes, apartments, and properties, they can bar marijuana use. So if you plan on investing in marijuana real estate you’ll need to read the fine print on your loans and insurance paperwork.

*Updated June 2020.