Are you considering buying raw land for sale? Buying raw land comes with its perk. Mainly, you can start from scratch and build whatever you want within reason. But before you sign on the dotted line, you want to do your homework.
- Can I purchase land to buy a home on?
- What can I build on raw land?
- How can I find raw land for sale?
- Serviced vs. un-serviced lots
- What else should I consider when buying raw land?
Can I purchase land to buy a home on?
Of course, you can buy land for sale in Canada. As the second biggest country in the world and a relatively sparsely populated country, there’s so much land available that it’s sometimes given away for free.
That’s right, as you long as you promise to build on it and make good use of it, you can get land for free. Of course, we’re not talking about urban areas like Toronto and Vancouver. We’re talking about rural and desolate areas, far away from civilization.
What can I build on raw land?
That’s a good question. You don’t want to just buy land and do nothing with it. Of course, you can hold onto it, but you want to build something eventually of value.
There are two main ways to build a home with raw land in Canada. You could hire a builder and his team, or you could buy a home from a builder.
The benefit of building your own custom home is that you get it exactly the way you want it. You can specify everything right down to the finishes.
If you’re buying a home from a builder, you get a lot more choices than buying a resale home, but not as many as having someone build a home for you from scratch. If you’re looking for something more turnkey that involves less planning, this could be the right option for you.
How can I find raw land for sale?
When you have narrowed down to the province or territory where you wan to buy the raw land, next you’ll have to go about finding raw land for sale.
A good place is start is with local real estate brokerages. Your local real estate agent should be familiar with the area you want to buy land in and should know any lots currently for sale. Besides your local realtor, you can try searching on the MLS or even websites like Kijiji and Land Sale Listings.
It also doesn’t hurt to contact builders or developers. If you’re fortunate, a developer could have an extra lot of land for sale The developer may offer to sell it to you at a discount and offer to a build a home on there for you as well.
If you see a lot of raw land that you want to buy, you don’t just want to set up shop there. It’s important to verify with your provinces land registry, as someone may already own the land, despite Canada already having lots of land.
Serviced vs. un-serviced lots
When it comes to raw land, it typically comes in two types: serviced and un-serviced. Distinguishing between the two types is important. It can mean a big difference in terms of mortgage financing for the lot and the costs to get utilities hooked up to your home.
A serviced lot is one that already has the necessities. We’re talking about water that’s safe to drink and use to make food without first boiling it. Finding this type of land for sale is a good idea.
It also means a lot that is connected to the local sewer system or septic field. It also has access to and from roads and is connected to the power grid. And has some sort of heating, such as natural gas.
If a lot meets all the criteria to be considered serviced, you may only need to put 25% to 35% down to purchase it and obtain mortgage financing.
An un-serviced lot on the other hand is raw land that lacks the necessities that a serviced lot has. That means that it’s lacking septic or sewer services.
Your lot may not have water access. Make sure to have some sort of potable water at a minimum, but beyond that it lacks other essentials.
The lot won’t typically have hydro service, meaning that it’s “off the grid.” It also typically lacks natural gas for heating.
With a raw piece of land like this, you’re usually look at putting down between 35% and 50%. The heftier down payment is due to the higher level of risk.
You may say that you plan to build a home, but until you have, technically there’s no home. If you buy the raw land and fail to make the payments as agreed upon, the lender will have a more difficult time reselling it than a serviced lot.
What else should I consider when buying raw land?
Are you ready to go out and buy a lot of raw land? Buying raw land isn’t like buying a single-family home in the city. Here are some things to consider when doing so.
You have heard the old cliché. The three most important rules in buying real estate are location, location, location. Well, the same holds true when buying raw land.
Once you have narrowed it down to the province or territory where you’d like to buy, you’ll need to choose the specific location of the lot. Here are some things to consider when you’re choosing a lot.
- What are the amenities nearby? Do you have to drive for miles for the basics like gas and groceries, are they within walking distance?
- Do you have a beautiful view of a lake or the local garbage dump? I don’t know about you, but I’d much rather have a view of the former than the later.
- It’s worth taking the time to investigate your potential neighbours. You’ll be spending a lot of time living beside them. You’ll want to make sure they are neighbours you’ll get along with, not disagree with. If you’ll be living on your own, you don’t need to immediately worry about this, although you could have neighbours one day, so find out who has purchased land around you or is likely to.
- How will you access the property? Don’t make the mistake of needing to pay the neighbour an arm and a leg to use their land to access to your place.
- Be sure to factor into your budget the cost of shipping building materials to your location. It could be quite costly if it’s in a very remote location.
These are just a few of the many factors to consider. The bottom line is to do your homework and make sure you know what you’re getting yourself into before buying raw land.
What can you build on the land?
Before buying raw land, it’s important to speak with several builders and find out what you can build on it.
It may surprise you to hear that there are some lots out there that can be very costly to build on or that you might not be able to build on at all. If you buy a lot like this, you are stuck with it, with nobody to sell it to. Don’t make this mistake.
Factors you want to consider when buying the land is the slope, as well as the soil type. The soil is key, as without good soil, you may not be able to build a stable foundation.
You also want to check its proximity to water. Even if it’s not close to the water, it could have issues with the water table, so make sure you do all your research necessary.
Are you legally allowed to build on the land?
Before you buy a lot of land, you want to have a pretty good idea about what you want to build on it. However, your local municipality or city decides if you can build on that land. They also decide what you build.
It may not be the most exciting work, but you want to review the local rules and see if you’re going to be able to obtain the building permit you want to build what you want to build. If you’re not going to be able to, why buy the raw land in the first place?
You need a building permit
Once you own the land, before you even start putting shovels in the ground, you need to get a building permit. A building permit is like a driver’s license. While a driver’s license allows you to legally drive, a building permit allows you to legally build.
Issued by the local municipality where you’re building, the building permit is a document with a unique number on it. When building you’re required to post it for everyone to see, otherwise, you could get in trouble with the local government.
If you are hiring a builder, it’s your responsibility to make sure they get a building permit before the builder starts building. The builder should take care of it for you, but you want to make sure they have it, otherwise, you could be the one in hot water if the municipality finds out that you’re building without a permit.
To obtain a building permit, you must provide the plans of what you want to build there. If it’s straight forward, you can expect an almost immediate approval. If it’s complicated, an approval could take weeks or even months.
And just because you apply doesn’t mean that approval is guaranteed. You may need to make changes to your proposal for it to be approved. You may have to reduce the height of the home you want to build if it doesn’t fit in with the existing homes in the neighbourhood.
The cost of a building permit
The cost of obtaining a building permit tends to vary from municipality to municipality. You’re usually looking at a couple hundred bucks to a few thousand bucks.
Usually, you can pay for things with a cedit card. If you want to maximize the opportunity, use a credit card that either has a low interest rate or offers high rewards earnings on non-essentials like food or gas.
- Annual fee: $29 (exempt the first year)
- Interest rate on purchase: 12.99%
- Interest rate on cash advances: 12.99%
- Offer valid until April 30, 2023
Again, even if the builder is handling everything, it’s important to make sure that they are following the local rules. If an inspectors stop by and sees that the rules aren’t being followed, it might be you footing the bill for the fines.
Who regulated the lot you’re buying?
Find out who regulates the land that you’re buying. For example, if it’s the Conservation Authority, it’s important to be aware that it could be quite costly and time consuming to get a permit to build.
Even if you are fortunate to get a permit, you could be limited in what you can build. You may be forced to follow narrow guidelines on what you’re able to build.
If you were planning to build a home, you might not even be allowed, so make sure you know all of this in advance. I’m not saying you shouldn’t buy land regulated by the Conservation Authority, but what I am saying is to know what you’re getting yourself into ahead of time.
One of the first questions when buying the lot is, is it regulated by the Conservation Authority? It’s a good idea to double check with the realtor tells you, as it’s possible they could always make an honest mistake. It’s better to find out before you buy the land than later when you go to build.
What is the zoning of the land?
If you’ve ever lived in the city, you should be familiar with zoning. Zoning dictates what you can build and can’t build. It’s all about fitting in and conforming with the existing homes and neighbourhood. Zoning is what can stop a builder from building a 50-storey apartment building right next door to a bungalow.
It’s important to be aware that when buying raw land, the land can sometimes be zoned. Before buying a lot, you want to know if it’s zoned and if so, what’s it’s zoned for. This will determine what you can build on it.
If it’s zoned, make sure it’s residentially zoned. If it’s commercially zoned, it could be difficult to resell later. Mortgage lenders may be hesitant to lend on the property on the residential side.
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About The Author: Arthur Dubois
Passionate about personal finance and financial technology, Arthur Dubois is a writer and SEO specialist at Hardbacon. Since his arrival in Canada, he’s built his credit score from nothing.
Arthur invests in the stock market but doesn’t pay any fees because he uses National Bank Direct Brokerage online broker and Wealthsimple’s robo-advisor. He pays for his subscriptions online with his KOHO prepaid card, and uses his Tangerine credit card for most of his in-store purchases. When he buys bitcoins, it’s with the BitBuy online platform. Of course it goes without saying that he uses the Hardbacon app so that he can manage all of his finances from one convenient place.
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