Vacant land can be a very profitable investment. Vacant land can also have hidden costs; may be right away or in the long run. There are annual taxes and potentially property owner’s association fees to consider, not as many tax benefits, cash flow, property maintenance issues, and market conditions to consider. Call Present Day Properties at 984-689-9785 to learn more about the hidden costs of owning vacant land.
Buying vacant land may be less expensive than buying a house, but what 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 keep your vacant land and do nothing with it, you may end up paying double or triple what you paid for it in annual taxes and having 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 public utility expansion or other special municipal projects may be added to your annual tax bill, which may or may not directly improve your land.
Owning vacant land is a nice investment asset, but it has fewer tax benefits than owning a single-family home or a commercial property. In most cases, unoccupied land does not qualify for any form of a homestead exemption on your tax assessment, and there is no depreciation to claim on your taxes.
Another hidden cost of owning vacant land is negative cash flow. You don’t have a building or property to rent out and collect monthly payments from. 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. They might file a lawsuit against you if something happens to them on your property while they are moving or occupying your vacant land. That would be a huge cost for you.
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 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.
Owning vacant land in Raleigh 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.