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Is Land A Good Investment? Expert Buying Advice in Canada

When it comes to investing your money, land has always been a valuable commodity to consider.

Some investors purchase a vacant lot for immediate development. However, others buy lots with the intention of letting the value grow over time. It’s also possible to purchase land close to your own home to increase its overall value too.

Like with any investment, there are some key strategies to help you make the best purchase decision. While no investment can be 100% guaranteed, land remains a safe one so long as you take into consideration some key pointers.

Here are Precondo’s top tips to help you make the best purchase decisions if you looking to invest in some land.

Land Has Flexible UsageReal estate for sale. Raw land investment.

When you invest in a piece of land, the opportunities are endless.

Perhaps you’ve always dreamed of building your own home. Or, you could hold onto it until the value appreciates and sell it to a developer. Some people even purchase a plot of land to raise cattle on, knowing that at some point they can sell it on if they wish.

Land has so much potential, that it makes for a very flexible investment.

It’s A Great Retirement Plan

If you’re currently working, thinking about what you do when you retire can seem tedious at best.

In reality, you are going to need something to occupy your time. The potential to earn extra money while you do so isn’t bad either!

If you own land, you can sell it at a reasonable sale price later. Alternatively, similar to real estate you can rent it for a fixed monthly price. So, owning a parcel of land can really help your personal finance grow during retirement.

It Steadily Appreciates, Especially In Good Locations.

The great thing about land is there will always be a use for it. So, if you put some research into the area your land is based in, along with the types of usage it would suit – it could generate some future income.

For example, say you find a piece of land in an up and coming area. There are some developments close by, and the area is desirable. Buying a piece of land near such an area would be fantastic, especially if your main goal is seeing that land appreciate over time.

A good location also comes down to your intended usage. It’s always worth checking out the types of businesses that operate in the area, along with typical asking prices before you buy. Buying the right piece of land at the right time is also key.

There are land investors who bought plots many years ago, who are now able to retire from the value, so it’s definitely worth researching.

Land Can Be A Great Source Of Passive Income

Passive income is money earned in the background of your other revenue streams. For example, a job would be considered an active income because you are paid to show up each day. However, passive income requires either a one-time or very little effort. Think of how bloggers or YouTubers created their content years ago, yet continue to earn money from it to this day…even while they sleep!

Land is also a great source of passive income. There are many ways you can go about it too. Traditionally, you can buy land and let it appreciate to earn money without having to do anything.

Alternatively, land could be used for something else that will generate you money. Whether you rent it to other businesses or create a tourist attraction on your land – the opportunities are plentiful.

If you then go to sell the land at a later date, this in itself is passive income.

More Freedom With Your Investment

Some investment methods can be quite restrictive. For example, with the stock market you have the option to buy or sell. However, with land so long as you are following any local government policies – it’s yours to use as you wish.

If you are using it for one purpose but find another would generate more income, so long as you seek the relevant permission (if required) you can change its usage. Equally, if you want to sell some of it off and keep the rest it’s yours to do so.

It Diversifies Your Net Worth.

Investing in land is one of the best methods to diversify your net worth. You can build anything on the land you purchased. This can be a personal property or any commercial real estate. It can be owned or rented depending on your preference.

Having a diverse investment portfolio is better for your overall financial security. After all, we are only just over a decade out of the last financial crash. Having different sources of income is a great way to help secure your future, regardless of what the markets are doing.

Is There A Guarantee Of A Good Return On Investment?

investment returns

On the whole, investing in land (especially if it’s in a desirable location) is a solid investment.

However, it’s important to stress that no investment strategy can be completely guaranteed.

Timing plays a huge part in this. Right now, your land might not be worth a lot. But, in a few years if the area begins to pick up that could change. The opposite scenario could also happen, whereby your land isn’t as valuable as it once was.

The return on investment for real estate can be tricky.[1] As with any investment, you must do your research and keep your eye on the changing variables.

Be Aware of All Tax Implications

As with any purchase, you must fully clue yourself up on any tax implications. Avoiding property taxes would lead to serious criminal and financial implications, so taking the time to research this in advance is essential.

For example, imagine that you have purchased a piece of land that has a house on it. You renovated it and sold it at a higher profit. The Canada Revenue Agency will then step in. Unless more than 90% of the house’s interiors were altered (such as walls, ceiling, and floors), then the profit will be taxed as business income.

Property flipping is not as easy as others make it look either. You must seek professional advice regarding the process.

In case your property is across the border, then it is recommended that you consult professional cross-border tax experts and advisors. They know the law of the land like the back of their hands. With this proper guidance, you can invest in any piece of land hassle-free.

How To Be Sure of Overseas Investment?

Investing in real estate in Canada

Many of us dream of owning a property overseas. While purchasing land abroad can make for an excellent investment, you must be mindful of fraud.

For example, there are instances whereby people have been promised that an investment is going to bear fruits, but eventually, nothing materialized. The deposit money is gone,  and all that’s left is a feeling of embarrassment and frustration.

If you are considering buying vacant land overseas, you must seek legal advice. It’s also a good idea to visit the site and inspect it yourself. Also, be sure to brush up on the local laws and business practices of the country. These will all help you decide on a reasonable price, making sure that your vacant land investment is a smart one.

Finally, keep an eye on leases, especially any hidden expenses. It’s only once you’ve covered all bases that you can go ahead with your overseas investment.

Study What Is Possible

Some residents of Northern Canada have invested in multiple properties. While there are no rules in how much land or indeed how many properties one can invest in – it’s a good idea to make sure a financial return is possible. [2]

Here’s an excellent video to help you understand your investment in further detail.

Always remember that you must treat every real estate investment as a business. One factor that should never slip your mind is positive cash flow. High-priced market assets of Ontario and Vancouver may make it difficult to maintain positive and eternal cash flow.

However, it is not impossible to get the balance right and make money from your investment. Many areas throughout these Provinces are developing rapidly. The team here at Precondo has seen an increasing number of people looking for new condo developments that they can put their money into. These condominiums have several features that attract the masses and will improve your lifestyle quality.

Final Thoughts

There are many risks in investing in real estate. These include taking on additional debts, spending on costly repairs, dealing with bad tenants, and getting hit with a lawsuit. So, you must be able to manage these risks well by exercising due diligence. However, once you’ve taken the time to understand this guide properly, you will realize that investing in Ontario land is an excellent investment.

The sooner you invest in land, the sooner you’ll be able to start making a profit on it. Whether you intend to sell it to a developer or hold onto it, any land you purchase will slowly appreciate in value over time. For further information, please drop us a line with any queries you have. Don’t forget, you can also browse our stunning array of condos available across Ontario over on our website.


References:

1 https://www.fool.com/millionacres/real-estate-investing/

2 https://www.biggerpockets.com/blog/pros-cons-vacant-land

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