Vacant land can be a truly rewarding investment. Vacant land can also have hidden costs; maybe right away, maybe in the long run.
What is one hidden cost of owning vacant land that not everybody knows about?
Here are 11 hidden costs these leaders bear from owning vacant land:
- Annual Costs
- There is No Tax Benefit for Vacant Land
- Cash Flow
- The Cost of Clearing the Land
- The Cost of Getting the Land Secured from Potential Vandalism and Other Crimes
- Market Conditions
- Losing on the Value of the Land
- Cost of Keeping the Land Clean and Tidy
- The Cost of Land Survey and Utilities
- Road Repair Costs for Land in Rural Areas
- Cost of Extending Utilities to the Land
Annual Cost
Purchasing vacant land might not be as expensive as buying a house, but don’t forget about the annual taxes! Depending on the location and zoning of your land, the taxes might be a few hundred dollars or a few thousand dollars. When you sell your land it is different than selling a house.
If you hold onto your vacant land and don’t do anything with it, you might end up paying double or triple what you did for the land in annual taxes and have nothing to show for it but the same piece of vacant land.
Another potential annual fee is the property owner’s association fees. If you purchased land in a community with an association, these fees might also be a few hundred or a few thousand dollars a year, depending on the type of community and the services they provide and what amenities are available.
Also, keep in mind that there might be public utility expansion or other special municipal projects that could be added to your annual tax bill that may or may not improve your land directly.
Tax Benefits
Owning vacant land is a nice investment asset, but it has fewer tax benefits than owning a single-family home or a commercial property.
There is no depreciation to claim on your taxes, and vacant land does not usually qualify for any type of homestead exemption on your tax assessment. Something people may not realize about the cost of vacant land is that you don’t get a tax benefit from it. You are paying taxes but can’t claim it as a homestead or even as an investment because no money is being made from it. The loss, although it isn’t money going out, is a couple of thousand a year at minimum. Also, land that goes down in value doesn’t offer any tax breaks either when you could claim a loss on other investments that decline. Baruch Labunski, CEO, Rank Secure
Cash Flow
Another hidden cost of owning vacant land is negative cash flow. You do not have a structure to rent out and collect monthly payments.
Depending on the zoning of your vacant land, you might be able to recoup some of those annual tax fees by using your vacant lot as an extra rental space. You might want to consider purchasing property owner’s insurance if you do anything like this.
If something happens to someone on your property while moving or occupying your vacant land, they might file a lawsuit against you. That would be a huge cost for you.
Property Maintenance
Owning vacant land can also become costly to maintain. If your property is in a municipality, they may require you to keep your property mowed. If you have a lot of trees, they may require you to clean up the brush to guard against fires.
If your vacant land isn’t in the best of areas, some dumping might occur on the property, turning it into a miniature landfill! This trash and garbage might cause you to have code violations and can be costly to have it removed.
There may also be unknown contaminants or toxic issues on this land that you are unaware of, but once discovered, this might also be costly to clean up.
Posting signs may help reduce a waste pileup, but they are unlikely to stop it entirely. Unless you live very close odds are you won’t be able to watch over your property or respond to dumping in a timely fashion. Keeping things clean and orderly can end up costing you time and money. Soji James, 1AND1 Life Expert Certified Personal Trainer, 1AND1 Life
Empty land can still require upkeep. Depending on where your property is, you may be legally obligated to keep your land in proper condition.
The Cost of Getting the Land Secured from Potential Vandalism and Other Crimes
One hidden cost of owning vacant land is the potential for vandalism and other crime. Owners may have to invest in security measures to protect their property, which can be costly. Additionally, owners may have difficulty finding buyers or renters willing to take on the risk if the land is located in a high-crime area. Aviad Faruz, CEO, FARUZO New York
Market Conditions
Owning vacant land in Huntsville for too long can be a big mistake. If you buy your property while the market value is high and hold onto it for a long time, the value might decrease more than you expect.
Depending on your purchase price, it might cost even more than your annual taxes to hold onto it year after year. You might also be losing hundreds of dollars of market value.
Losing on the Value of the Land
It’s a gamble holding onto vacant land for too long. Market values are not guaranteed to be the same from one day to the next. It’s quite possible that a plot of land could lose a larger part of its value, and never fully recover. The longer you hold onto vacant land the bigger the risk you’ll be running. Keep in mind that you’ll be paying taxes on your property each year as well. If the land’s value shifts so much that you can’t recoup the loss from a sale, then you’ve effectively wasted hundreds, if not thousands of dollars by idly holding onto it. Max Schwartzapfel, CMO, Schwartzapfel Lawyers
The Cost of Clearing the Land
If your vacant land happens to be in a wild state, it can be costly to get it into sales-worthy condition. This can be especially true if your property is forested or contains a lot of brush.On average clearing an acre of lightly wooded, flatland can cost anywhere from $700 to $2,300 while a heavily wooded area of the same size can reach around $5,000 or more at the high end.You may be able to recoup a bit of your money if you’re able to sell the lumber off from the clearing, but you’ll still be paying out of pocket to get your land cleared and ready to be sold for building purposes.You’ll want to keep this cost in mind if you have wooded land. It may be better to sell it as is in some cases rather than dealing with the costs of clearing your property.Boye Fajinmi, Co-Founder and President, TheFutureParty
The Cost of Clearing the Land Road Repair Costs for Land in Rural Areas
I recently purchased a parcel of vacant land in a rural area, and I quickly learned that there can be hidden costs associated with owning property that is not connected to the grid. One of the biggest expenses has been maintaining the roads. Because my land is not connected to the municipal road system, I am responsible for keeping the roads in good repair. This includes regularly grading the roads and filling in potholes. In addition, I have had to purchase a snowplow to clear the roads during winter storms. The up-front cost of purchasing and maintaining the equipment has been significant, but it is necessary to keep the roads safe and passable. Ludovic Chung-Sao, Lead Engineer & Founder, Zen Soundproof
The Cost of Clearing the Land Costs of Extending Utilities to the Land
You have to research any parcel of vacant land before you purchase it. Sometimes, the land is vacant because people realize it’s in a flood zone, and not worth developing. Worse, it could be zoned as wetlands where you are not permitted to build on it. You can usually find these things out on a map if you know what to look for, but there’s one more thing. Often, vacant land is missing utilities like water and electricity. This means you may need to get the proper permits, and then pay a licensed contractor to tap into whatever might be available in the area. Depending on what’s available in the locality, this could also have the added cost of installing a septic system or digging a well. Ruadhan O, CEO, Founder, Developer, and Trader, Seasonal Tokens
If you have read this article and are wondering who to sell your land to then rest assured because you can sell your land without a realtor and sell the land by yourself. We buy land in Hunstville and the surrounding areas!
Developers buy land and you can also sell your land online. In fact, there are many land buyers in Hunstville and the surrounding areas. To sell your land the first step is knowing what your land is worth. Or you can just sell your land straight to us! What will you do with the extra money after selling your land? The possibilities are endless!