Real Estate

Land purchase - good investment?

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[OP]
Deal Addict
Jan 13, 2014
2432 posts
1484 upvotes
Calgary

Land purchase - good investment?

Hi, we are looking at buying land (small parcel 3-10 acres) in rural Alberta. Goal is to hold it for next 35 years until my retirement and then sell it or build it on and hopefully there will be value in it. Any advice on this? i know apart from taxes and municipality dues (if any) are there any other issues we need to check out? any advice on areas to look into? we are aiming toward southern alberta.
12 replies
Sr. Member
User avatar
Jan 14, 2007
648 posts
261 upvotes
GTA North
Well Southern Alta is a big place but I will give you my view based on growing up in Calgary in the 70's and 80's, so 40 years ago.

South is boring. In my time 22x was a 2 lane Hwy out in the middle of nowhere. Okotoks was far and nobody commuted from there. We had friends out in Black Diamond and they built a nice place on an old farm with nice views. Think it's still out in the middle of nowhere.

North of city - Airdrie was also far, not a bedroom community like now.

East of city - not for me

Go west! All the money around Calgary is west of town. Northwest, Southwest and specifically West! Mountain views is what you want

Do you expect another oil boom? This is what caused the expansion in the past and will determine future growth, unless something changes.
Deal Expert
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Jun 12, 2007
18617 posts
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London
masarwar wrote: Hi, we are looking at buying land (small parcel 3-10 acres) in rural Alberta. Goal is to hold it for next 35 years until my retirement and then sell it or build it on and hopefully there will be value in it. Any advice on this? i know apart from taxes and municipality dues (if any) are there any other issues we need to check out? any advice on areas to look into? we are aiming toward southern alberta.
If you are getting a mortgage, isn't the down payment and interest rate a lot higher for vacant land vs. one with a house?
Also, the mortgage interest isn't tax deductible on vacant land?
[OP]
Deal Addict
Jan 13, 2014
2432 posts
1484 upvotes
Calgary
IMHIP2 wrote: Well Southern Alta is a big place but I will give you my view based on growing up in Calgary in the 70's and 80's, so 40 years ago.

South is boring. In my time 22x was a 2 lane Hwy out in the middle of nowhere. Okotoks was far and nobody commuted from there. We had friends out in Black Diamond and they built a nice place on an old farm with nice views. Think it's still out in the middle of nowhere.

North of city - Airdrie was also far, not a bedroom community like now.

East of city - not for me

Go west! All the money around Calgary is west of town. Northwest, Southwest and specifically West! Mountain views is what you want

Do you expect another oil boom? This is what caused the expansion in the past and will determine future growth, unless something changes.
Good idea. But everything west is pretty expensive lol. we are looking at black diamond as well. It is still pretty expensive there tbh. I like south for nearness to area like waterton and pincher creek.

Btw you should come and visit and we wiil take you to sheep river across black diamond and turner valley. beautiful road trip with beautiful sights!
[OP]
Deal Addict
Jan 13, 2014
2432 posts
1484 upvotes
Calgary
l69norm wrote: If you are getting a mortgage, isn't the down payment and interest rate a lot higher for vacant land vs. one with a house?
Also, the mortgage interest isn't tax deductible on vacant land?
Not necessarily. I can get the land at Prime + 1%. we are hoping for less than $50,000 so we can just simply pay it in cash.
Deal Fanatic
Dec 20, 2018
7226 posts
6406 upvotes
masarwar wrote: Hi, we are looking at buying land (small parcel 3-10 acres) in rural Alberta. Goal is to hold it for next 35 years until my retirement and then sell it or build it on and hopefully there will be value in it. Any advice on this? i know apart from taxes and municipality dues (if any) are there any other issues we need to check out? any advice on areas to look into? we are aiming toward southern alberta.
I wouldn't count on any appreciation unless you know for sure it'll be developable by that time .

That and with decline of fossil fuel, in 30+ years, Alberta could become like the maritimes and I doubt land appreciation after discounting carrying cost (property taxes, mortgage and/or opportunity cost) etc... Will be worth it
Sr. Member
User avatar
Jan 14, 2007
648 posts
261 upvotes
GTA North
masarwar wrote: Good idea. But everything west is pretty expensive lol. we are looking at black diamond as well. It is still pretty expensive there tbh. I like south for nearness to area like waterton and pincher creek.

Btw you should come and visit and we wiil take you to sheep river across black diamond and turner valley. beautiful road trip with beautiful sights!
Thanks for the offer! I've been tubing down the sheep river with those friends from Black Diamond. Think I've also been down an old cow path (short cut) which went over a very large hill from Black Diamond to Turner Valley, in my buddies mother's Granada!

I agree, Turner Valley is a nice place.

All of our family still lives around Calgary so we visit 2 to 3 times a year normally. Parents and sister both west of city in Pinebrook and Escarpment Park, In-laws in Lake McKenzie, SIL in Fish Creek and BIL in Cranston.
[OP]
Deal Addict
Jan 13, 2014
2432 posts
1484 upvotes
Calgary
IMHIP2 wrote: Thanks for the offer! I've been tubing down the sheep river with those friends from Black Diamond. Think I've also been down an old cow path (short cut) which went over a very large hill from Black Diamond to Turner Valley, in my buddies mother's Granada!

I agree, Turner Valley is a nice place.

All of our family still lives around Calgary so we visit 2 to 3 times a year normally. Parents and sister both west of city in Pinebrook and Escarpment Park, In-laws in Lake McKenzie, SIL in Fish Creek and BIL in Cranston.
Wow youre all over! we are beside the airport in the new development so we can jet off if we need to run haha. Hopefully we are going to sheep river again this weekend
Sr. Member
Jan 31, 2007
505 posts
330 upvotes
If this is not your primary reisdence, it is considered an investment. So capital gains will apply between purchase price and value when you either move in or selling price (if you never move in and just sell). Only death and taxes are certain.
Deal Addict
Nov 13, 2013
3798 posts
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Ottawa
Temujin1 wrote: If this is not your primary reisdence, it is considered an investment. So capital gains will apply between purchase price and value when you either move in or selling price (if you never move in and just sell). Only death and taxes are certain.
Yeah but at half your marginal rate and if you sell during retirement the taxes are the least of your concern. Profit expectation is a different story. Canada might grow to 100 million people and then your land 100km from Calgary becomes very valuable as they put 50 houses on it. If it's 300km never going to happen unless they discover oil. Oil obsolescence also a risk for Alberta as a whole. I personally doubt this will happen in next 50 years but if it does Alberta will have to raise taxes substantially. They are unlikely to do this until the last possible moment so will run up a lot of debt and probably cut education and health care to the bone. Then a death spiral begins and retirees and new families abandon the province further exacerbating the problem.
Deal Addict
Mar 2, 2017
3233 posts
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Toronto/Markham
masarwar wrote: Hi, we are looking at buying land (small parcel 3-10 acres) in rural Alberta. Goal is to hold it for next 35 years until my retirement and then sell it or build it on and hopefully there will be value in it. Any advice on this? i know apart from taxes and municipality dues (if any) are there any other issues we need to check out? any advice on areas to look into? we are aiming toward southern alberta.
From my experience vacant land is not a very good investment (for majority of people) and this is coming from someone who is working in a hot market. I have a client right now who bought vacant land in the GTA a few years back with the intention to hold for a decade or two as developments around him move on. He has had decent appreciation, but due to life circumstances he has to sell. The difficult part is here in Ontario a bank will not give a regular Joe a mortgage on vacant land (excluding high net worth individuals, etc). So with that you eliminate a significant amount of potential buyers, mind you it's not cheap land either. Private mortgage for vacant land run at about 50% loan to value with 8% interest. Other offers want to do seller take back mortgages. It becomes a little messy and the seller takes on risk, has little leverage - especially early on in the appreciation curve and land that's typically not very interesting to proper developers.

In the end, vacant land can be a great investment if you can truly park the cash indefinitely (set it and forget it), otherwise I'd look at something more liquid. The tough part here is that all the "good" land with low downside risk and high development potential is already spoken for and out of reach for most which leaves the more speculative buy and hold parcels out there.
RE Broker
[OP]
Deal Addict
Jan 13, 2014
2432 posts
1484 upvotes
Calgary
RichmondCA wrote: From my experience vacant land is not a very good investment (for majority of people) and this is coming from someone who is working in a hot market. I have a client right now who bought vacant land in the GTA a few years back with the intention to hold for a decade or two as developments around him move on. He has had decent appreciation, but due to life circumstances he has to sell. The difficult part is here in Ontario a bank will not give a regular Joe a mortgage on vacant land (excluding high net worth individuals, etc). So with that you eliminate a significant amount of potential buyers, mind you it's not cheap land either. Private mortgage for vacant land run at about 50% loan to value with 8% interest. Other offers want to do seller take back mortgages. It becomes a little messy and the seller takes on risk, has little leverage - especially early on in the appreciation curve and land that's typically not very interesting to proper developers.

In the end, vacant land can be a great investment if you can truly park the cash indefinitely (set it and forget it), otherwise I'd look at something more liquid. The tough part here is that all the "good" land with low downside risk and high development potential is already spoken for and out of reach for most which leaves the more speculative buy and hold parcels out there.
Thank you for the insight. this helps alot. Have you considered credit union as an option? here they generally finance land at 25% down and prime+2%. we are still considering but right now we are doing a leverage trade for a significant amount and will continue looking for land to buy. our goal is to eventually build on it when we retire or sell (considering we can divide it and sell it).
[OP]
Deal Addict
Jan 13, 2014
2432 posts
1484 upvotes
Calgary
fogetmylogin wrote: Yeah but at half your marginal rate and if you sell during retirement the taxes are the least of your concern. Profit expectation is a different story. Canada might grow to 100 million people and then your land 100km from Calgary becomes very valuable as they put 50 houses on it. If it's 300km never going to happen unless they discover oil. Oil obsolescence also a risk for Alberta as a whole. I personally doubt this will happen in next 50 years but if it does Alberta will have to raise taxes substantially. They are unlikely to do this until the last possible moment so will run up a lot of debt and probably cut education and health care to the bone. Then a death spiral begins and retirees and new families abandon the province further exacerbating the problem.
unfortunately what youre saying is very true for us!

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