Most people say that investing in real estate is the best type of investment because when the real estate market is booming, properties’ value increases rather than depreciates over time. However, people often forget that investing in a piece of land is different than investing in a brick-and-mortar building.
It has become especially concerning over the past few years due to all the economic surges and fluctuations that have made real estate land specifically volatile. If you know how to play your cards right, investing in real estate land can be a wise and rewarding decision. All you need to do is to proceed while being fully informed and create a detailed and structured plan. To guarantee more rewards than losses, read through this article for the seven things that you need to know before you buy a piece of land.
1. Know What to Look For
It’s imperative to know what to look for in a piece of land before buying it. It helps you avoid purchasing an area that has concealed flaws. Most people believe that purchasing a piece of land is all about hunting down cheap land and saving it until the timing is right. However, investing in real estate is not that easy. Deals are often put together in a way that makes them seem awesome. However, always get reports of soil, drainage, and topography of the land to know what you are getting into. Land Surveyors can be an additional resource! It’s also important to never settle for satellite images and make sure to visit the land yourself before making the purchase.
The first thing that you should examine is how strong the land is. You must identify whether the land is strong enough to maintain future buildings, whether for you or future landowners. Research the land’s water supply; is it available through the city’s pump or a well? Learning about the condition of surrounding buildings and any possible agreements with them and your seller is also quite important. Hire an expert to assess the land for zoning issues that may hinder your future plans regarding the land.
2. Land Loans
Receiving a land loan is often quite tricky because the land will not be the buyer’s primary residence, making it possible for them to just abandon it when finances become too much. Most lenders usually require a 20% to 50% down payment with high-interest rates. Consider searching for local lenders who are willing to compromise if you don’t have many liquid assets.
3. Easements
Always be aware of the laws pertaining to your property. Check for property easement, as in some areas like Calgary, others may be allowed to use your property. To identify property boundaries, obtain an rpr Calgary to help you identify encroachments and easements. Local utility companies, your neighbors, and the public will all be eligible to use your land, so do a title search to determine if your land has an easement on it.
4. Turnaround
How rewarding your investment mainly depends on how long you plan to hold your land off. There are generally 3 options that guarantee high rewards. The quickest option, though it depends on how much the land value has increased, is dividing and selling it to resellers. If you have enough funds, another option is to develop and build the land yourself, either for personal or future sales. The last option, which is the most popular one, requires a lot of patience and time. You can hold onto your land, leave it untouched, and wait until its value rises to sell it.
5. Additional Expenses
Even if you decide to keep your land and not use it, you still must maintain it. Maintaining your land is important to ensure that it remains in good shape and that its value doesn’t depreciate; this will require effort and additional expenses.
6. Taxes
If you want to make buying and selling land your full-time business, you may be entitled to small business and self-employment tax credits. Otherwise, you have to pay property taxes even if you are not using your land.
Taxes will be factored into your monthly mortgage payment, which is something to always keep in mind. Besides, when you decide to sell your land, you’ll be required to give the IRS a portion of your profit.
7. Liability
In some areas, you may be at risk of a lawsuit if anyone gets injured on your land. To reduce such risks, you can install “no trespassing” signs. Be aware of any injury and repair risks, consider vacant land insurance to protect yourself.
Many people think that purchasing land is an easy way to make a profit but fail to consider many things, often leaving them in trouble. Therefore, keep a few things like easement policies, additional expenses, and tax policies in mind. If you have read through this article, you can determine if buying land is right for you.
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