Sometimes it’s worth investing in a vacant lot. However, land without buildings often comes with its share of hidden costs, sometimes immediately, sometimes later. There are, for example, the taxes you have to pay every year and the problems associated with property maintenance. A vacant lot also brings fewer tax benefits than a lot with a building, and causes negative cash flow. Not to mention the market, which is completely different. Contact the Vendre Maison Vite team at 514-320-1000 to discuss the hidden costs of owning a vacant lot.
Annual fees
Buying a vacant lot may not be as expensive as buying a building, but don’t forget that you’ll still have to pay taxes! Their cost can vary according to the location and zoning of your land, but we’re generally talking in the hundreds to thousands of dollars. If you keep your land for a long time without doing anything with it, you may end up paying double or triple the purchase price in taxes, and then you’ll have acquired nothing more since you’ll still have the same piece of land you had years ago.
Tax benefits
Owning land is an excellent financial asset. However, the tax advantages of land without buildings are less attractive than those of residential or commercial property. You won’t be able to claim all the deductions available to building owners. In other words, owners of vacant lots usually don’t qualify for a principal residence exemption.
Cash flow
Another hidden cost of owning vacant land is negative cash flow. You don’t have a place to rent, so you can’t receive monthly payments. If your land has the appropriate zoning, you may be able to cover some of the annual taxes by using the space on your lot to rent it out. If you decide to rent out your land in any way, we advise you to take out insurance. If an accident were to occur on your property, he would be entitled to take you to court. Such a lawsuit could result in colossal costs. Fortunately, they can be avoided with a simple insurance contract.
Property maintenance
Soil can also be expensive to maintain. If your property is located within a city, the municipality may require you to mow your lawn regularly. If there are a lot of trees on your property, she may also ask you to do a little tidying up to prevent fires. If your land isn’t in the best possible location, your neighbors may dump their rubbish on it, turning it into a mini-landfill! Littering on your property could constitute a violation that will be difficult to remove from your record. There may also be contaminants on your property of which you are unaware. If such problems were to be discovered, clean-up could prove costly.
The state of the market
Keeping a vacant lot in Montreal too long is a mistake sometimes made by local homeowners. If you buy when property values on the market are high and hold onto the land for a long time, it could lose more value than you imagined. If you didn’t pay much for it, your taxes may cost you even more than the purchase price. What’s more, you could lose several hundred dollars if its market value drops.
