If you are considering purchasing raw land in British Columbia, Canada, for the purpose of building a home, recreational property or for investment, there are many factors and costs to consider. The cost of servicing the land for building and construction can be quite significant. Additionally, if you are holding the land as an investment, you should be aware that this is a risky and speculative type of business. Those who buy raw land and make money from it tend to be savvy real estate experts who understand the mechanics and potential circumstances of the industry. The buyer must have a clear and objective vision in terms of objectives and inherent risk. Due to the many risks associated with virgin lands, the potential rate of return on your investment can be extraordinary.
Let’s review some of the pros and cons of purchasing raw land and how a private mortgage in British Columbia can help you achieve your investment goals.
Cost
- Raw land is generally inexpensive to purchase.
Appreciation of value
- Purchasing raw land has the potential to generate a good rate of return on investment. Raw land may increase in value over time as neighboring populations increase and demand for neighboring land increases.
Diversification
- Raw Lands allows you to learn, understand, and then diversify your real estate experience for personal gain and investment purposes.
Disadvantages of purchasing raw land:
Funding
- Financing for raw land, whether you are located in Surrey, Langley, Abbotsford, Kelowna or other areas of British Columbia, is not so easy to obtain. Banks and other lenders may see the lack of income and the speculative nature of the property, which may deter them from lending. As a result, this would make it very difficult to use virgin land as collateral to raise funds for other investment purposes.
Initial investment and risk
- Purchasing raw land may require a larger initial investment and may be considered a higher risk because no cash flow is generated from raw land. All financial services of the property would be paid by you.
Zoning restrictions
- The municipality in which your raw land is located may restrict the zoning and use of the land. Be sure to research local zoning laws before making a purchase.
- Your development projects may simply not come to fruition due to changes made to the municipality’s official community plan.
- The municipality may expropriate property for its own purposes and uses. For things like green spaces, highway expansion…​
Other
- Revenue Canada may treat the profit from the sale of raw land as speculative income or perhaps a capital gain. Either will result in a significant income tax liability for the landowner.
Private Mortgages for Raw Land Purchases in British Columbia
If you currently own a home in British Columbia and are considering purchasing raw land, it is important to understand the pros and cons of this type of investment. If you have any questions or concerns about purchasing or financing raw land, please contact a mortgage specialist to better understand your options. Whether you live in Surrey, Langley, Abbotsford, Kelowna or elsewhere in British Columbia, contact us today to learn more about how Silver Hill can help you achieve your goals with a private mortgage loan.