Advantages and Pitfalls of Investing in Vacant Land

In the real estate, the entire buzz is usually all about how to invest in the rental properties, buy & holed properties or commercial properties to start earning right away. But, there is another way, which is often overlooked by the investors who intend to earn money with a peace of mind. This investment option is about purchasing a vacant land. There are a lot of ways you can use this land to earn the money through real estate. However, there are some disadvantages too that are related to this investment.

In this article, we are going to mention both pros and cons of investing in a vacant land.

Pros

Opportunity to get the most out of your investment

The first and foremost advantage of investing in vacant land is that you get freedom to turn your investment into a profit generating property in way you want. You may have to do a bit of research in order to find out the potentials of different properties in the area, but it’s the very opportunity for you to get creative with the type of building you want to construct.

Direct ownership

The purchase of vacant land usually involves cash payment, which means you will direct ownership of the land you purchase. Besides the immediate freedom that you get for building the property of your desired type, you get peace of mind that you are not going to have to rush for making any further payments.

Less maintenance

While you are managing a rental or commercial property, property maintenance would be one of your top concerns. For instance, you may have to hurry for fixing the features like plumbing, heating system, water line and so on. On the other hand, you will not have immediately worry about these issues after buying a vacant land.

Cons

Difficult financing

Traditional financing options don’t work with the purchase of vacant land. So, when you purchase a land and build something on it, you are actually spending your own money that you would raise after a lot of hardships. As a result, you may not be able to quickly earn the profit until you get the property sold out.

Few tax advantages

Although, there are certain improvements that that you depreciate while having a vacant land, there are essentially no structures on your land that you can depreciate. Thus, you would be left with little tax advantage as compared to the advantage that you can get by having a building. Furthermore, you will not be able to enjoy any mortgage interest deduction.

Permits and approvals that you may require

Although, you get a lot of options to build the type of property you want, you would need to get approval from township. The township will then analyze you property to determine whether or not your property is appropriately zoned for the type of construction you want to start. Furthermore, the time elapsed between the time of application and time of approval may also vary.