Helping You Do Business Right

The drawbacks of buying virgin land for businesses

On Behalf of | Jul 21, 2018 | Uncategorized

Owning raw land to establish an upcoming business has its benefits. Owners do not have to worry about any rent payments, the land itself does not cost as much as established properties and there is significantly more flexibility with how owners want everything built and positioned on the new property.

Unfortunately, many people who buy raw land for business ventures overlook several consequences that can come with the purchase. Before potential owners consider looking for undeveloped land, it is crucial that they know what this decision can cost them if they are not careful.

Owners spend more money and time with utilities on the property.

Even though virgin land can be far less expensive to purchase than developed property, owners will have to develop it themselves. They will have to pay expenses for new construction, plus utilities while adhering to Connecticut’s state specific laws. If the site does not have a sufficient water or sewage system in place, it means more money coming out of the owner’s pocket.

They will also need to build additional infrastructure from the ground-up. This means roads for employees or customers to access the facility, potential signs to alert incoming drivers and more. The time needed to build every necessary asset will be much longer than using established land. This means it will also take longer to make back the money spent in construction.

The location can be a massive risk.

Maybe the land purchased was vacant for a reason. One mistake purchasers make is that they do not visit the land before they buy it and start building. Then during construction, they realize an oversight when it is too late to go back on the deal. The land could be too hilly, have a weird shape or be too far from the customers. It is also important to check the zoning regulations to avoid potential controversy.

Owners also must maintain the property if they plan on selling it for a profit in the future. The construction will help improve the property’s worth, but owners also have to pay property taxes without a mortgage interest deduction and keep up with all of the utilities they made. Will the business be sufficient enough to pay for all of that?

Is it the right option?

There is so much to consider when deciding where to establish a business. Choosing to put it on a raw, virgin land will come with a fair share of pros and cons. If one chooses to do so, it is important to see the land before purchasing the property and realizing it was a mistake halfway through production. Even if they do get a chance to see the area, owners must consider all the hidden costs that come with building new property on vacant land to determine if it is the best option.