Renting to MMJ dispensary?
I live in a state where medical marijuana is legal. We've got an 1100 ft^2 commercial property and we've been approached by a potential tenant who wants to open an MMJ dispensary.

I'm on the fence about the deal. Our typical deal is first month plus a security deposit of one month's rent. I feel like if they go under, it's going to take a lot more than one month's rent to mitigate the odors and get it rentable again. Is it reasonable and legal to set a higher deposit for this tenant?

I'm also a little concerned about the cash-only aspect that's typical of the industry, wondering if our bank will give us a hard time about our tenant. (Then again, how would they know who our tenant is?)

Another concern is that our town of 35k already has 10-12 dispensaries, and I wonder if the market is saturated. I don't want to take in a tenant like this only to have them close in a few months and have to mitigate the place.

So I'm on the fence about this deal, but my two partners are somewhat more open. Give me some more pros and cons that I might not have thought of.

Edit: We own the building free and clear.
[{"id": "f18l61b", "text": "Your concerns of odor can be met by requiring an odor control system, even just a couple carbon filters. As long as you do not allow any cultivation, you'll have no long lasting odor.\n\nYour bank can take cash, you just report it as rent. \n\nYour concerns are valid, just the risk is way lower than you think. \nTake a 2 month deposit. Legality depends on your state. If they leave it spotless, they'll just get it back \nYour the type of landlord that is super hesitant, then raises the rent once they prove your worries wrong", "replies": [{"id": "f18mt8p", "text": "&gt; Your concerns of odor can be met by requiring an odor control system, even just a couple carbon filters. As long as you do not allow any cultivation, you'll have no long lasting odor.\n\nCity code requires that odor be controlled such that it can't be smelled outside the building. I was thinking more of the carpet that's inside and so forth.", "replies": [{"id": "f19clss", "text": "your just being an al.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "f18m4eb", "text": "Look up police statistics on your local dispensary. Like you wrote, cash businesses may have much higher crime rate.", "replies": [], "depth": 1}, {"id": "f18n819", "text": "Check with bank and insurance if you have a mortgage on the property. Make sure you're not in violations of any clauses through then. And maybe even get approval in writing from them just to protect yourself later in case they decide to change their minds. \n\nJust because it's legal with the city/state doesn't mean you won't violate federal laws. They might not act on that, but there's always the risk that they do.", "replies": [{"id": "f1927gt", "text": "I updated the post; we own the building F&amp;C. Good thought about insurance though.", "replies": [], "depth": 2}], "depth": 1}, {"id": "f18oy09", "text": "Deposits are negotiable, so yes you can set it higher if you\u2019d like (and think they\u2019ll accept).", "replies": [], "depth": 1}, {"id": "f18u1xn", "text": "The smell of marijuana doesn\u2019t really stick in furniture and carpets \n\nYour fears are unfounded even if reasonable.", "replies": [], "depth": 1}, {"id": "f191rje", "text": "You need to have an open conversation with your bank if there's a loan on the property.  This could put you in default depending on what the loan docs say.   Many, if not most, banks will not allow this sort of thing since marijuana is still illegal under federal law and a legal grey area.", "replies": [], "depth": 1}, {"id": "f1a65fi", "text": "If the deal makes sense, I see no reason NOT to do it.  There's some possibility Feds fully ban it and fuck with State law, but that seems like a very unlikely possibility compared to ten years ago when I started doing these deals.  I'm less worried about the legalities and more about the market.  As such I'd focus on the deal itself and do whatever I can to mitigate that risk by minimizing TI and getting personal guarantees from the folks involved in the business.  Charging a premium in rent is also not out of the question.\n\nEdit: stupid confusing writing", "replies": [], "depth": 1}, {"id": "f1aq43k", "text": "I leased to a dispensary. They used it as retail space. They paid a shit ton of money. Like, $15,000/mo for ~4800 SF. \n\nWith that said, you should absolutely not lease to then.\n\n1. Zero banks will allow it. We had a mortgage, but did not disclose to the bank. Fortunately we were never found out. They could have pulled the loan. \n\n2. This is likely 100% an illegal dispensary. If your building was in the \u2018green zone\u2019 you would know already, as buyers would be lining it up offering 2x market value. That means it\u2019s a municipal violation (but not criminal). Expect code violations every day. Most tenants will eat the cost. \n\n3. At some point, the city will ramp up efforts to get the tenant out. This includes police raids, red taping the building, etc. \n\nIf the business does need to shut down, expect zero compensation from the tenant. Yes, you can keep the security deposit usually, but if the city resorts to more extreme measures, they\u2019ll leave your building with liens or code violations so it kills your cash flow or exit plan. They come down HARD on landlords too. Don\u2019t expect the tenant to help. \n\n4. Finally, if you want the tenant out, they have dozens of ways to make your life hell and occupy your space as you prepare the UD. They can string it out for over a year without any rent. You may lose your building. Seriously. This is their business. NOT yours. You are not knowledgeable enough of the legal gray area to really be in control. \n\nSource: leased 4 spaces to retail MJ guys. Won\u2019t do it again.", "replies": [{"id": "f1bj3y3", "text": "I've looked at city zoning regs; they're pretty lenient. The only restriction other than being in a C1/2/3 area is no closer than 1000 feet to a school. Nearest school is over 3000 feet away. If this one is illegal, then so are the other dozen or so in town.", "replies": [], "depth": 2}], "depth": 1}, {"id": "f1b12gz", "text": "Keep in mind they can cause trouble if you ever do want to finance it. Not hard anymore, there are specialty lenders for this now, but you can't get a loan from The traditional bank", "replies": [], "depth": 1}, {"id": "f1zictd", "text": "The smell of marijuana is the most pleasant smell ever. \n\nYour bank if you ever want to use it as collateral won\u2019t know who your tenant is unless you force them to find out. \n\nAny business will face competition. That is your tenants problem. \n\nThe basic gist is that this is quickly becoming just another legal industry.  It is growing and will be so normal in a few years that no one will think twice about it. But it is your property.  You have every right to discriminate against businesses you do not approve of. I don\u2019t think there are any real issues beyond that.  Don\u2019t do it if you don\u2019t want to.", "replies": [], "depth": 1}]