Investing in vacant land can be a truly rewarding venture, but maintaining ownership of it may also incur costs, whether immediate or over time. Factors such as annual taxes, potential property owner’s association fees, fewer tax benefits, considerations regarding cash flow and property maintenance, as well as the impact of market conditions, all contribute to the overall cost of holding onto vacant land. Reach out to the United States Land Buyer at (877) 289-3799. to delve into a discussion on the various ways retaining vacant land is costing you.
Property Maintenance
Holding onto 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.
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. 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 possible yearly expense is the property owner’s association fees. If you bought land in a community with an association, these fees could range from a few hundred to a few thousand dollars annually. The amount depends on the type of community, the services they offer, and the available amenities. Additionally, it’s essential to consider the potential inclusion of public utility expansion or other special municipal projects in your annual tax bill, which may or may not directly enhance the value of your land. Like taxes, if these go unpaid the bill will only increase as will your chance of losing the property to foreclosure.
Market Conditions
Keeping ownership of vacant land could be a significant error. If you purchase the property when market values are high and hold onto it for an extended period, there’s a risk that the value may decrease more than anticipated. Depending on your initial purchase price, the cost of holding onto the land year after year might surpass even the annual taxes. Additionally, you may experience a decline in market value, potentially losing thousands of dollars.
Tax Benefits
While owning vacant land can be a valuable investment asset, it offers fewer tax advantages compared to owning a single-family home or commercial property. Notably, there is no opportunity to claim depreciation on your taxes, and vacant land typically does not meet the criteria for any form of homestead exemption in your tax assessment. The future potential for the land may or may not offset the lack of tax benefits when compared to homes or commercial buildings.
Cash Flow
Holding onto vacant land typically results in negative cash flow since there’s no structure to lease for regular monthly income. Depending on the zoning regulations applicable to your vacant land, you could potentially offset some of the annual tax fees by utilizing it as additional rental space like a parking lot or a campground/RV Park. However, it’s advisable to explore the option of purchasing property owner’s insurance if you decide to proceed with this. In the event of an accident or injury on your property, individuals involved may pursue legal action against you, incurring significant costs. This may require hiring someone to help manage it or you might have to manage yourself.