Prospective buyers of vacant land for commercial or industrial property development often underestimate the true time and capital requirements involved.
This is according to Lloyd Nussey from Baker Street Properties, who identifies three main aspects for prospective buyers to consider:
Cash is King
To be eligible to buy vacant land, major banks and financial institutions typically require that the entire property be paid cash, and if not, a significant portion thereof.
The reality is that banks are generally quite reluctant to grant 100% bonds on vacant land, and furthermore considering the cash flow dynamic involved, Nussey says the prospective investor needs to be reasonably “financially sound” before considering buying land for further development.
The time and costs involved
The process of buying vacant land takes some careful cash flow planning. Depending on your intended plans for the development of the vacant land, banks typically offer finance systemically as a particular building project progresses.
Nussey says costs associated with the purchase and development of vacant land include land survey costs, maintaining the land to an acceptable standard and obtaining a building permit, above and beyond regular rates and municipal charges.
Furthermore, he says if your building plans do not comply with zoning restrictions or you want to apply to have the land rezoned from, say residential to commercial, there are further costs and valuable time involved in getting approval from local council – time which costs money and needs to be budgeted for.
Location, location, location
The well-known importance of location applies more to vacant land than any other type of property, says Nussey.
Before investigating any vacant land for sale, it is important to clearly stipulate your business objectives and goals you want to achieve with the vacant land.
A logistics operation typically requires secure, central access to main arterial routes, whereas a retail operation needs to be closer to its customers with ample parking.
Furthermore, it is important to know what is going on in and around the area as new or adjacent developments may influence resale value of the property and business, he says.
This article “3 Things You Need To Know Before Buying Vacant Land” was issued by Baker Street Properties – http://www.baker-street.co.za