Vacant land can be a truly rewarding investment.
Vacant land can provide opportunities to generate income, such as through agriculture, livestock, forestry or development.
Holding on to vacant land can also cost you; maybe right away, maybe in the long run.
However, failing to make use of the land and keeping it vacant, even if you have plans to make use of it in the future, can mean ongoing expenses.
There are annual taxes and potentially property owner’s association fees to consider, not as many tax benefits, cash flow, and property maintenance issues, and market conditions to consider.

Call NateBuysLand at (269) 222-7711 to discuss the ways holding onto vacant land is costing you.

Annual Cost

Purchasing vacant land might not be as expensive as buying a house, but don’t forget 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.
This is especially true if the land is in an area where property taxes are already high.
If you hold onto your vacant land and don’t do anything with it, you might end up paying double or triple what you did for the land in annual taxes and have nothing to show for it but the same piece of vacant land.

Another potential annual fee is the property owner’s association fees.
Homeowners and property owners associations may also have specific regulations in place that could limit your use of the land or impose additional costs.
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 there might be public utility expansion or other special municipal projects that could be added to your annual tax bill that may or may not improve your land.

Tax Benefits

Owning vacant land is a nice investment asset, but it has fewer tax benefits than owning a single-family home or a commercial property.
For example, you will typically not be able to claim mortgage interest deductions on vacant land unless you have immediate plans to build on it and it’s considered an investment property.
There is no depreciation to claim on your taxes, and vacant land does not usually qualify for any type of homestead exemption on your tax assessment.

Cash Flow

Holding on to vacant land is negative cash flow.
You may have to continue paying out of pocket for things like property taxes while you wait for the value of the land to rise.
You do not have a structure to rent out and collect monthly payments.

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 extra rental space.

You might want to consider purchasing property owner’s insurance if you do anything like this.

If something happens to someone on your property while moving or occupying your vacant land, they might file a lawsuit against you.

That would be a huge cost to you.

Property Maintenance

Holding onto vacant land can also become costly to maintain.
Falling behind on maintenance could mean scaring away potential buyers if you decide to sell later on, resulting in lower offers.
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 it 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.

Market Conditions

Holding onto vacant land can be a big mistake.
Real estate markets can shift quickly, and it can be hard to predict where the demand will be in several years.
If you buy your property while the market value is high and hold onto it for too long, 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.
It is important to weigh the costs of holding onto the vacant land against the value that it can provide.

No matter what your situation, if you own land in Michigan, call NateBuysLand at (269) 222-7711 or send us a message below to discuss the ways holding onto vacant land is costing you and what you can do about it.