Everything You Should Know About Buying Vacant Land in Canada

When buying a home in the Canadian real estate market, many commonly assume that the bulk of the cost is for the home, but in reality, it is the land on which the house is built that is of the most value.

The housing market is all about the land since it is ostensibly finite, especially in hyper-dense cities. While Canada is one of the largest countries in the world by land mass, and there are still plenty of development opportunities for buying vacant land from coast to coast, it is also one of the most expensive markets on the planet.

Still, using vacant land to construct a new home can be a worthwhile pursuit. However, whether you are buying vacant land in Ontario or buying vacant land on the outskirts of Saskatchewan, the process is entirely different from purchasing a conventional home.

So, what do you need to know?

Everything You Should Know About Buying Vacant Land in Canada

First, it is important to note that there are two types of land:

• Raw: Raw land is the type of land that has not been developed before, meaning the conventional components of a property, like utilities and infrastructure, are absent.
• Vacant: Vacant land is a category of land that might have been developed in the past or maintains current vacant buildings on the property.

Here’s what you should know when purchasing vacant land in the Canadian real estate market:

An Investment Opportunity

Buying vacant land can be a tremendous investment opportunity to generate steady income or save for retirement. Depending on where you live, there are many ways to utilize this land, from operating it as a rental property to using it for commercial purposes. Indeed, one of the key advantages of buying vacant land is that you can decide what you want to do with it.

Conduct or Review Recent Surveys

Land surveys are critical for land buyers. The purpose is to determine the property’s legal boundaries and easements. Unless the survey was done within the last year or two, it is essential that you conduct a survey with your name attached to the endeavour. You can hire a professional firm to help you begin the rigorous process. Costs will vary on the size of the land survey.

Here are a few other things you can incorporate into your vacant land-buying affair:

• Conduct a Topographical Study: By studying the topography of the land, builders, architects, and engineers can determine the best materials and designs for foundations, basements, and other critical components for homebuilding.
• Perform a Soil Test: How good is the soil? If your land fails a soil test, goodbye to your dream of building on your land. This is a critical test to complete before you buy vacant land.
• Determine Environmental Protections: Be sure to figure out if your vacant land is not situated in an environmentally protected location.
• Ask for a List of Restrictions: In the end, once you buy the vacant land, you must be sure to request a list of restrictions, like the number of vehicles allowed, fencing requirements, and building height.

Know the Costs of Developing the Vacant Land

So, without existing infrastructure on the vacant property, you will need to develop it yourself. Indeed, this goes beyond just putting together lumber and building kitchens. Instead, you will need to clean and level the land, access power lines, and identify water and sewage solutions. Suffice it to say, there is much to do when buying vacant land, which can be pretty expensive.

Where Are the Roads and Utilities?

Be it residential or industrial property, you need to ensure that your land is near utilities, such as power lines, phone lines, a water main, water, and gas. This can be difficult to secure in a remote area. If the property is very remote, you may need to plan to go off-grid with solar power, which will depend on local law. Investigate the rules associated with incorporated versus unincorporated townships – some will allow greater flexibility than others. In addition, when you are exploring vacant lands, it would be prudent to locate well-maintained roads, enabling easy access to essential services.

Understand Zoning Laws

Zoning laws aim to differentiate the property between commercial, industrial, and residential. Therefore, with the help of your real estate agent, it is your job to discover which zoning laws apply to the area you want to buy. Of course, you can always apply for rezoning the property, which requires research and due diligence.

Request a List of Restrictions

While you’re researching the zoning laws, request a list of restrictions, such as constructing a fence, parking a certain number of automobiles, or the height of any building built on the land. While you can always negotiate changes to the list, especially if they are outdated, it is always best to develop within the confines of these restrictions.

Natural Disasters

Canada’s remote areas are more prone to natural disasters than jurisdictions closer to city centres. Some of these regions will see flooding, tornados, and severe snowstorms. This can be harder to handle when you live in an unpopulated part of the country. Therefore, it is imperative not to have vacant land that is more vulnerable to these devastating events since it could threaten life, and the property might not be insured.

Financing

The last thing you need to determine is the type of mortgage that you will be applying for as you develop the vacant land. Here are some of your options:

• Land Mortgage: This is similar to a residential mortgage, except the chief difference is that you will need to put down a more significant down payment and pay higher interest rates.
• Construction Mortgage: This is the type of loan utilized to acquire vacant land so you can build on top.
• Agricultural Loan: If the sole purpose of this vacant land is to develop agriculture, you can apply for agriculture-related loans, such as the Canadian Agricultural Loans Act (CALA) offered by the federal government.

How the Vacant Land Is Valued

Industry experts note that there are several mechanisms to determine how the vacant land is valued:

• Access to roads and other public infrastructure.
• Size of the lot. Indeed, whether you buy land in Ontario with utilities or cheap land on a large lot with no utilities, the valuations will differ.
• Proximity to the utilities. How will you develop the land without enough electricity?
• The designation of your property: Is it raw or vacant?

What About the Tax?

Several provinces nationwide slap HST on sales of vacant lands by individuals, ranging between seven and 15 per cent. However, no tax on vacant land sales is applicable in the Ontario real estate market. Therefore, contacting the Canada Revenue Agency or researching different provincial tax codes would be prudent.

Exceptional Investment Opportunities

Ultimately, purchasing vacant land is an exceptional investment opportunity. You do not need to worry about crumbling homes, deteriorating infrastructure, or rotting wood. That said, buying vacant land in Ontario, for example, is an affordable real estate investment that does demand enough due diligence, research, and time. Once you buy cheap land and have it in your name, it is your choice of what to do with it. Do you want to develop it? Do you want to build on it? Are you speculating?

Building a home, farm, or commercial property from scratch can offer immense opportunities. Everything is new, and you can design it the way you want. It is truly an incredible feeling.