Why clients should be encouraged to buy marijuana grow ops

by Neil Sharma16 Mar 2018

Former marijuana grow operations are among the hardest properties to sell, but that also makes them among the easiest to buy.

According to Alex Balikoev, a Core Assets Real Estate sales agent based in Toronto, identifying problem houses, like grow ops, is a sound strategy for putting clients into new homes.

“These houses do come at a 10-12% discount when the market is stable, so it represents a really good opportunity for someone to get into a certain neighbourhood but can’t afford a house there,” he said. “There’s no database of grow ops in the market—you have to go through the listings—but in this market you can use it as a strategy. You go through the house descriptions and if you see disclosure of a previous grow op, you can align your offer strategy accordingly. It will likely sell at a lower price point.”

Balikoev is speaks from experience. Five years ago, he helped a client buy a former grow op well below its real value.

“We bought a property from a guy who was in jail at the time,” continued Balikoev. “At the time, it was a 10-12% discount off the market price, and the buyer didn’t care. They had to fix up the house and repair it because it had a lot of holes, probably for ventilation, but they were cool with that as long as they were getting a discount.

“Something like a grow operation has to be disclosed 100%. Some buyers are worried about this because they think people will randomly show up at their house, but these houses go for up to 12% when the market is stable and 5-7% when the market is active.”

Although grow ops present a unique buying strategy, they’re a nightmare to offload. Brett Starke, president of Starke Realty Team, has encountered a couple of grow ops, one of which he sold. However, the property wasn’t without its problems.

“It was totally head-to-toe covered in mould,” said Starke. “When I say head-to-toe, even the ceramic bathtub was covered in mould. This particular property was a power of sale, meaning that the owner could no longer pay the mortgage or no longer chose to pay the mortgage, so the bank took it over, and when they sent us there to take a look at it, it was so bad with mould that you had to wear PPE gear [personal protective equipment] during showings.”

The rural property’s septic and well systems were both badly damaged, and after Starke concluded it needed to be torn down and was only worth the plot of land upon which it stood, it sold for $35,000.

Starke was also involved in a condo grow op, but because condos are largely uniform, he wasn’t able to sell it and the owner ultimately decided to hold onto it and continue renting it out.

The reason grow ops are difficult to sell, according to Starke, is because the spectre of the law looms large.

“It totally changes the job. Instead of just trying to sell the property, instantly we’re worried about making sure we’re doing our job legally because, at that point, if we fail to disclose, or somebody feels we’ve failed to disclose, we’re at risk of losing our license. For me, it makes it less about selling the property and more about making sure I follow the letter of the law, which, on merit, makes it harder because I’m not able to concentrate on what I was hired to do.”

 

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