Should I Invest in the Legal Marijuana & Cannabis Industry?

So, you’re considering investing in the legal cannabis market?

It’s no surprise. The cannabis industry is still in its early stages, like a promising startup on the brink of breaking into the mainstream. Despite the hurdles—strict regulations, high taxation, and market unpredictability—it’s undeniable that cannabis represents the future. But while the opportunity is exciting, the journey requires caution, strategy, and trusted guidance.

Here’s the truth: navigating the legal cannabis landscape isn’t for the faint of heart, especially if you’re new to the industry. Even seasoned entrepreneurs, analysts, and dealmakers can find themselves overwhelmed by the industry’s unique challenges. From convoluted regulations and federal prohibition to vendor price gouging and criminal enterprises, this space demands more than just ambition—it requires expertise.

The key to success? Don’t go it alone. Surround yourself with knowledgeable advisors who understand the ins and outs of the cannabis industry. Whether you’re looking to break into the game before federal legalization (which could be just around the corner—or far off), or you’re ready to stake your claim now, having the right team on your side is essential.

In this article, we’ll dive into the many ways you can invest in the cannabis industry and, more importantly, how to avoid the common pitfalls. With countless listings on platforms like 420Property.com, CannaMLS, CREXI, or BizBuySell, it’s easy to get lost in the shuffle of opportunities. Some listings are duplicates. Some are wildly overpriced. Others? They’re not even legitimate.

To cut through the noise and make informed decisions, you need a competent professional in your corner—someone to help you evaluate your options, manage risks, and seize the right opportunities at the right time.

What Are Your Options as a Cannabis Investor?

As a cannabis investor, your options depend largely on your risk tolerance, capital, and long-term goals. Here are the main pathways available:

  • Become a cannabis landlord
  • Originate a retail cannabis business permit
  • Purchase a fully operational cannabis business
  • Purchase a pre-operational cannabis license and complete the steps to become operational
  • Invest in operational expenditures (Op-Ex) and/or capital expenditures (Cap-Ex)
  • Purchase distressed assets
  • Explore alternative cannabis concepts

Each of these options comes with its own unique challenges, nuances, and subcategories. Understanding these complexities is critical to making smart investments.

In the sections to follow, we’ll break down these pathways, highlight the pros and cons, and show you how to position yourself for success in the cannabis industry.

Become a Cannabis Landlord

For the risk-averse investor, becoming a cannabis landlord is one of the most attractive ways to enter the cannabis industry. With potential returns that can be 2–3 times higher than standard CAP rates, this investment strategy offers an appealing opportunity—but not without its challenges.

The higher returns for cannabis landlords stem from a range of unique risks, including:

  1. Higher mortgage rates for cannabis-tenanted properties: Federal prohibition prevents FDIC-insured banks from issuing loans on properties occupied by businesses involved with Schedule 1 substances like cannabis.
  2. Limited landlords willing to lease to cannabis businesses: Outdated opinions on cannabis and federal scheduling deter many property owners from working with cannabis operators.
  3. Complex zoning regulations: Finding “green-zone” properties that meet compliance standards can feel as tricky as solving a Rubik’s cube.

These challenges create a supply and demand imbalance, often referred to as the “cannabis premium,” which increases lease and sale values. But becoming a cannabis landlord isn’t just about finding a property—it’s about avoiding pitfalls like overpaying for an asset based solely on cash flow, poor acquisition timing, or tenant failure.


Why Partner with Experts?

This is where Wecann comes in. While real estate might not be our primary service, we understand the importance of cannabis landlords finding reliable tenants and navigating the competitive market. With tailored marketing strategies and expertise in cannabis-related business growth, we can help connect landlords with the right cannabis operators to ensure sustainable partnerships.


Paths to Becoming a Cannabis Landlord

If you’re looking to explore this route, here are some common ways investors are becoming cannabis landlords:

  • Acquire a property pre-application phase and lease it to a cannabis applicant.
  • Purchase a property in a sale-leaseback agreement, allowing the tenant to continue operations while freeing up capital.
  • Purchase a performing cannabis-leased asset, offering immediate cash flow.
  • Acquire and develop vacant land in compliant zones.

The Federal Legalization Windfall

One of the most exciting prospects of becoming a cannabis landlord now is the potential for windfall gains once federal legalization or re-scheduling occurs. These changes would open up FDIC-insured banks to cannabis businesses, making lending and banking services more accessible. As a result, properties leased to cannabis operators would enter high demand, compressing CAP rates and allowing landlords to cash in on their investments.

In addition, federal reforms would strengthen tenants’ profitability, creating more stable and lucrative relationships for landlords.

Here are some examples of cannabis investment property listings:

Originate a Retail Cannabis Business Permit

For canna-investors seeking a foothold in the retail cannabis market, originating a retail cannabis business permit can be a highly lucrative option. However, this path requires strategy, precision, and the right partnerships.

In many municipalities, retail cannabis licenses are awarded through a competitive, merit-based application process. Cities often limit the number of retail permits they issue and establish strict application criteria. It’s not uncommon for a city to receive 50 applications for just 5–10 licenses. Applicants who score the highest based on the municipality’s criteria win a license, immediately unlocking significant value. However, the application process isn’t cheap, with total costs ranging from $50,000 to $150,000, and the risk of not winning a license is very real.


The Competitive Edge

Navigating this process successfully often requires partnering with operators who have a proven track record of securing licenses in such competitive environments. At Wecann, while we don’t manage the application process directly, we specialize in helping cannabis entrepreneurs enhance their market presence and secure investments. From branding and website design to digital marketing and community outreach strategies, we give your application the competitive edge it needs to stand out in a crowded field.


Non-Competitive Jurisdictions

Not all municipalities limit the number of retail licenses issued, nor do they all require a competitive, merit-based process. In these instances, speed is crucial. Securing a compliant “green-zone” property quickly gives your team the best chance of establishing a customer base before the market becomes saturated with competitors. In these scenarios, time-to-market is everything, and a well-thought-out digital strategy can make all the difference.

Wecann can help your business hit the ground running by building an effective online presence, connecting with local consumers, and positioning your brand for early success.


Investment Opportunities

As a canna-investor, you have the option to seed capital for proven operators, gaining equity, debt returns, or a combination of both. This investment not only helps fund the licensing process but can also provide opportunities to acquire property for the operator, creating a dual-layered investment strategy.

Once a license is secured, investors have several options:

  • Sell the license (if local regulations allow).
  • Complete the application to Certificate of Occupancy (COO) and operate the business.
  • Sell the business after achieving operational success, often at a multiple of EBITDA earnings.

The choice between these strategies depends on various factors, and each win will require a case-by-case evaluation.


Non-Retail Cannabis Licenses

While retail licenses remain the primary focus for cannabis investors in California and other mature markets, non-retail license origination—such as cultivation, manufacturing, distribution, and lab testing—also presents viable opportunities. If you’re interested in exploring these options, we can help connect you with experts in the field to discuss your specific goals.

Here are some examples of green-zone property listings:

 

Purchase a Fully Operational Cannabis Business

One of the most direct paths into the cannabis industry is purchasing an existing operational cannabis business. For many investors, this approach feels like a smart move—especially given the current market conditions. With compressed prices at historical lows, the opportunity to acquire a cannabis business for less than the cost of originating a license and becoming operational has never been more appealing.


Why Invest in an Established Cannabis Business?

Acquiring a fully operational cannabis business offers several key benefits for investors:

  1. Skip the Startup Phase: Avoid the 1–3 years of struggle, expenses, and regulatory hurdles required to establish a business and achieve operational status.
  2. Cost Advantage: Current market prices allow you to purchase businesses at a discount, often below the cost of starting one from scratch.
  3. Experience Gains: Operating an existing business helps investors gain valuable insights and experience, positioning them to excel in emerging markets and future licensing opportunities.

First-Time Investors: A Smart Approach

For first-time cannabis investors, the acquisition of a majority ownership position or joint venture (JV) in an existing business can be a highly strategic entry point. This allows you to buy into an experienced team that already has established:

  • Industry connections
  • Proven operations
  • Reliable vendors
  • Consultants and advisors

These factors are critical in the cannabis industry, which relies heavily on staying ahead of evolving trends, navigating complex regulations, and managing ever-changing taxation requirements. By partnering with an established team, you can “learn on the job” while minimizing risks.


Challenges to Watch For

While purchasing an operational cannabis business comes with clear advantages, the industry is not without its pitfalls. Cannabis businesses are unique, and missteps can be costly. Before finalizing an acquisition, investors need to thoroughly evaluate:

  • State and local taxes/regulations: Understand their current requirements and historical changes.
  • Economic performance: Assess the profitability and revenue trends of the business.
  • Debt and liabilities: Check for unpaid taxes, outstanding debt, or accounts payable issues (e.g., lagging more than six months).
  • Industry reputation: Investigate the business’s standing within the cannabis community.
  • Hidden risks: Look for red flags that could impact future operations or profitability.

Due diligence is vital. Rushing into a deal without a full understanding of the business’s financial health and regulatory compliance could lead to significant challenges down the road.

Here are a few examples of listings of operational and profitable cannabis businesses which you can take advantage of now:

Purchase a Pre-Operational Cannabis License

Another option is to purchase a cannabis license that has not yet been brought to full operational status but has received preliminary approvals from local or state authorities.

There are various reasons why a cannabis operator may not move forward with a license: budget constraints due to long approval processes, unexpected costs, the intent to flip the license, or failed partnerships, among others. Regardless of the reason, these situations create opportunities to step in and complete the build-out of a pre-operational license.

While it may require you to run the business to bring it to operational standards (since the resale value of an operational cannabis business often doesn’t cover the full build-out costs), purchasing a pre-operational license can save you time and money. For example, if the originator invested $400,000–$500,000 to get the license and you purchase it for $250,000, you’re essentially saving on both time and cost. The most likely scenario is that you’ll enter the business at a favorable price, though flipping the license for a profit is less common.

To succeed in this strategy, having the right consultant is essential. If you’re not careful, as we’ve seen with some of our clients, poor decisions can lead to costly mistakes, such as license revocation for failing to meet local regulations (e.g., Corona, CA). Be sure to work with vendors experienced in the cannabis industry to avoid pitfalls and ensure a smooth process.

While this strategy may not be the most attractive option, it can lead to success with careful negotiation and due diligence. The key is understanding the full story behind the license and using that knowledge to negotiate creative terms that work in your favor.

Here are some good examples of listings you can consider:

Cap-Ex and Op-Ex Investments

For canna-investors looking for a less traditional yet highly strategic opportunity, lending for capital expenditures (Cap-Ex) or operational expenditures (Op-Ex) offers a unique chance to generate returns while fueling the growth of cannabis businesses. These investments can provide significant upside, especially for operators who have weathered the recent downturn and are now poised for expansion.

Why Consider Cap-Ex and Op-Ex Investments?

Cannabis operators, particularly those looking to scale up, often require large capital infusions to support their growth. However, the tightening of the financial markets has made traditional funding sources scarce. Many successful cannabis businesses, having already navigated the toughest challenges, are seeking capital to fill the gaps left by new market demands and growth opportunities. This creates a prime scenario for canna-investors to step in and offer the funding needed to kickstart operations or expansion.

Here’s where the opportunity lies:

  • Equity or Debt Structure: Depending on the investor’s preference, they can structure deals to secure either an equity stake or debt repayment, or even a combination of both.
  • Real Estate Deals: Another avenue for Cap-Ex investment is through a sale-leaseback arrangement. This allows the investor to acquire the business’s real estate while providing operational capital. Alternatively, investors can adopt the tenant-in-tow model, where a cannabis operator is already secured as the tenant in the real estate deal.

These investment structures are especially appealing for investors who want to be more involved with the operator’s long-term success while also minimizing risk by ensuring the cannabis business has a clear path to profitability.

Strategizing the Investment Relationship

For successful Cap-Ex and Op-Ex investments, communication and alignment between the investor and operator are key. Here are some essential points to consider when structuring these deals:

  1. Clear Understanding of Roles and Goals: Both parties need to be on the same page about their roles, the business’s objectives, and the expected outcomes.
  2. Fair Financial Terms: Striking a balance between a fair return on investment and supporting the operator’s growth is essential. Overly aggressive terms can put undue pressure on the operator, potentially compromising the long-term profitability of the deal.
  3. Initial Debt Financing: Many canna-investors start with simple debt financing to help fund an operator’s initial operational needs—whether that’s for marketing, facility construction, or inventory buildup. This can help build trust and allow the investor to gain insight into the operator’s performance before moving into equity.
  4. Expansion Capital: Once the business is stable and performing well, the investor may consider offering expansion capital in exchange for a small equity stake. This allows both the investor and the operator to scale at a profitable pace.

The Tenant-in-Tow Model

A tenant-in-tow strategy is another avenue for Cap-Ex investment. In this model:

  • The operator identifies potential properties that suit their needs for expansion or operation.
  • The investor and operator collaborate to acquire the property.
  • The investor may hold ownership of the real estate and lease it back to the cannabis operator at a mutually agreed CAP return rate.

Before starting this process, it’s important to have a solid understanding of:

  • Target CAP returns
  • Lease terms
  • Geographic location
  • Target acquisition prices
  • Purpose of acquisition

With proper planning and an agreed financial strategy, the tenant-in-tow model can provide both parties with a steady stream of income while ensuring that the operator has a secure base to build from. We are building a pipeline of cap-ex/op-ex investment opportunities, so stay tuned and get on our email list today.


Current Investment Opportunity

Here’s an example of a current off-market, At WeCann. We’re always seeking to bridge the gap between investors and cannabis operators. Currently, we’re working with a client in Las Vegas who is seeking a Joint Venture (JV) partner to:

  • Purchase their existing facility through an assignment of a purchase option,
  • Finance the business’s construction costs, which are centered around cannabis broadcast marketing and media-related ventures.

This opportunity would involve the investor:

  • Purchasing the building,
  • Leasing it to the operator at a 10-12% CAP rate,
  • Triggering a purchase option after 3 years at a 25% markup over the investor’s acquisition point.

Additionally, further capital would be required for the construction of the facility. This capital could come from a combination of debt, equity, or a mix of both.

This opportunity offers the investor a chance to gain equity in a growing cannabis business while providing essential operational support to the business in its expansion phase.

Purchase Distressed Assets

As the cannabis industry matures, it’s facing some growing pains, leading to a rise in court-ordered sales and foreclosures. These distressed assets can represent unique investment opportunities, but knowing where to find them is key. At WeCann, we are deeply connected to the world of cannabis-related court-ordered sales, where court-appointed receivers are tasked with liquidating assets like real estate, equipment, licenses, inventory, intellectual property, and more.

These sales often present some of the best value for canna-investors. With the cannabis industry still in its early stages, many of these businesses are underperforming, but savvy investors can step in and help clean up the aftermath.

A crucial benefit of purchasing through court-ordered sales is that the businesses and assets are sold free of any debt obligations, which is a requirement of the court. While creditors and investors may be left with losses, it opens up opportunities for buyers to acquire valuable assets during the call-to-offer phase.

Here’s an example of a court-ordered sale which the WeCann team has listed exclusively, and which is perhaps the largest court-ordered sale in the industry to date.

Alternative Concepts

The cannabis industry, still navigating the growing pains of federal regulation, presents investors with a host of unconventional, outside-the-box opportunities. Beyond the traditional paths to investment, there are several creative avenues available for those looking to capitalize on this rapidly developing market. Here are a few of the most intriguing options:

PowerPlant Park: A Unique Cannabis Campus Opportunity

One of the most exciting and profitable concepts available is the opportunity to invest in PowerPlant Park on the San Francisco Bay—a creative, seed-to-sale cannabis campus on the San Francisco Bay. Investors can acquire a 3,456 SF mixed-light greenhouse for just $700,000 within an 18.8-acre facility designed specifically for cannabis cultivation. This plug-and-play greenhouse is a prime example of a cannabis-focused campus where investors can earn more than 50% annual ROI.

This opportunity is perfect for those looking to diversify their portfolio and gain direct exposure to cultivation without the challenges of starting from scratch. The PowerPlant Park model allows for scalability while tapping into an established network of growers and cannabis operators, making it a turnkey solution with substantial growth potential.

Seller Carry-Back Loans: Financing Cannabis Acquisitions

Another innovative option for canna-investors is to leverage seller carry-back loans to finance up to 50% Loan-to-Value (LTV) on real estate or business acquisitions. This structure is common in cannabis real estate and business brokerage, allowing the seller to receive the full purchase price while offering the investor the opportunity to finance the transaction.

In these deals, the investor typically earns interest on the loan with the potential for a claw-back on the business and licenses in the event of default. Given the fluctuating valuations in the cannabis industry, this investment structure can offer significant upside, especially if the terms are negotiated carefully and with a clear understanding of the risks involved.

Cannabis Stocks on Wall Street: Capitalizing on Publicly Traded Cannabis

While not as commonly discussed, investing in cannabis stocks is another viable way for investors to gain exposure to the sector. Similar to early-stage investments in the tech industry, cannabis stocks and mutual funds offer opportunities for investors of all sizes to tap into this burgeoning market. With a wide variety of publicly traded cannabis companies available, investors can gain equity exposure without the challenges of direct operation ownership.

Wecann does not offer stock brokerage services, but we recognize the value in exploring cannabis-related stocks and funds. For those looking to dive deeper into this space, New Cannabis Ventures is an excellent resource for up-to-date information on publicly traded cannabis companies.

Why Consider Alternative Concepts?

  • High Return Potential: Creative opportunities like PowerPlant Park offer exceptional ROI, especially for investors who can act quickly in a growing market.
  • Diversification: These alternatives allow investors to diversify their portfolio and explore different aspects of the cannabis industry—from cultivation to business acquisition.
  • Flexibility: Seller carry-back loans and cannabis stocks provide more flexible, lower-risk opportunities for those looking to enter the industry without the full operational burden.

The cannabis industry, still early in its federal legalization journey, offers plenty of creative opportunities for investors willing to think outside the box. Where there’s a will, there’s a way—so if you’re ready to explore unique paths to canna-investment, Wecann can help guide you in navigating these exciting prospects.

Investing in Marijuana and Cannabis Companies

If you’re looking to invest in the cannabis industry, now is the time. Waiting for federal reform could put you at a disadvantage, as it may become a seller’s market with large global players.

To succeed, you must educate yourself on regulations at all levels of government and seek expert advice. Don’t just hire a business broker—you need a team that understands the industry’s nuances and can guide you through the legal and financial complexities.

At Wecann, we offer full-service cannabis advisory services. We help investors like you:

  • Identify compliant properties
  • Negotiate real estate deals
  • License and entitle businesses
  • Ensure ongoing compliance
  • Buy and sell licenses and businesses

With our expertise, you can make informed decisions and capitalize on the cannabis industry’s potential.

Contact Meilad at WeCann today to start your cannabis investment journey and unlock the full potential of this growing industry.