Vacant land. It seems like an affordable way to get your foot into cottage country real estate. But what many potential buyers of vacant lots in Ontario’s Near North do not understand is that buying vacant land and building a cottage from scratch will require more money than buying land with an existing structure.
If you are absolutely set on purchasing a vacant lot to build your own cottage on, you are going to require substantial capital. Because there is no existing structure on the land, qualifying for a mortgage becomes much more difficult. Most banks will only approve you for 50% of the land value if they approve you at all. The interest rates will always be higher than a home because lenders consider vacant land as higher risk lending.
You will also be required to pay HST, which most buyers of vacant lots in cottage country do not factor in. For more information on costs associated with buying vacant land: http://nearnorthliving.com/quick-tips-for-buying-vacant-land-in-cottage-country/
After you purchase the land you have to actually build your cottage, cabin or lodge. Even if you think most of it will be a DIY job, you still need to put in a septic system and set up a water system in your new home. Putting in a well is probably the most ideal way to get clean drinkable water but you can also put in a water filtration system that will filter the water that you draw directly from the lake. Either way, you are looking at spending between $8000-$18000.
Is there any way buying vacant land in Ontario’s cottage country can be more affordable? Yes! I recommend two different ways to my clients to recuperate their investment.
The first recommendation is for those buyers who have access to liquid capital: buy a bigger lot with a larger shoreline. Buy the property with the option to sever it in the future. Once you do this, you can put it up on the market and wait for someone to buy it. Even if you have to wait a few years (vacant lots can take longer to sell) if you price the new severance correctly, you should be able to get back most of your original investment.
My second recommendation is that you look for a piece of property that has had improvements to the land already made. A reality of life is that people make bad investments. It is not unheard of for someone to buy vacant land in the Near North and the run out of money while developing the property. In these cases, the majority of the hard/expensive work has already been done (driveways, roads, hydro, telephone, SEPTIC, well, plumbing, electrical wiring).
The most beneficial improvement? The septic system. With a septic system and a temporary structure (a trailer) you can qualify for a mortgage as the property is now considered livable by the banks. You can use less capital to purchase the land because you will be spreading out your payments for a longer period of time. With the money you will be saving initially, you can invest the money on building your cottage.
This makes achieving your dream of owning real estate in cottage country more attainable.
If you are thinking about buying or selling vacant land in cottage country feel free to contact me directly for some advice.