Buying Land as an Investment: Is it Worth it?

Buying land as an investment can offer long-term growth potential, but financing and other factors can affect whether it pays off. Here’s what to know about financing, zoning, costs, appreciation potential and the risks of investing in vacant land.

By Emma Caplan-Fisher | 8 minute read

Unlike a house or condo, a vacant lot doesn’t come with a roof to replace, a furnace to service or tenants to manage. That simplicity is part of the appeal of buying land as an investment: the potential for long-term appreciation without the day-to-day upkeep of a traditional property.

But land also comes with real downsides, including limited cash flow, trickier financing and carrying costs that add up even when nothing is happening on the property. So is buying land a good investment? The answer depends heavily on the type of land, the buyer’s timeline and how, exactly, that land is expected to eventually pay off.

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Is Buying Land a Good Investment?

Land can appreciate meaningfully, particularly in regions where population growth and development pressure are pushing outward. Immigration-driven population growth has long been one of the biggest forces behind Canadian housing demand, and that same pressure tends to ripple out into the land surrounding fast-growing cities, according to federal research.

The catch is that vacant land typically doesn’t generate income while an owner waits for that appreciation to materialize. There’s no rent cheque coming in to offset property taxes or financing costs, which means the investment has to be justified entirely by a future sale, a future build or a future change in how the land can be used.

Whether that’s a good trade-off depends on location, purchase price, current zoning and the strength of future demand in the area, all of which vary enormously from one parcel to the next. Buyers weighing land against other options need a clear strategy for how a property will eventually generate a return.

What Types of Land You Can Invest In?

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Not all land investments carry the same risks, costs or opportunities, so it’s important to consider what each type can offer:

Residential lots in zoned, serviced subdivisions have utility lines already connected, and buyers pay for that convenience: serviced land carries the lowest development costs but the highest purchase price among Ontario land types.

Raw or undeveloped land sits at the opposite end, with the lowest purchase price but the highest development costs, since it’s typically remote and lacks road access, utilities or confirmed zoning that a buyer would otherwise have to add themselves. 

Agricultural land has been one of the steadier performers in the Canadian market. The average value of cultivated farmland across the country rose 9.3 per cent in 2025, extending a climb that Farm Credit Canada says has continued for more than three decades, though gains vary widely by province and were far more modest in Ontario and Quebec than on the Prairies.

Recreational land, such as waterfront or cottage-country lots, tends to be driven more by lifestyle demand than by development potential. Ontario’s Muskoka region, roughly 215 km north of Toronto, illustrates the pull: second homes now make up about 47 per cent of all households in the district, adding a seasonal population of more than 84,000 people on top of a year-round population of about 66,700. 

Commercial or industrial land carries higher entry costs but can offer income potential once leased or developed, along with a more complex process, since some municipalities require formal site plan approval before commercial or industrial construction can begin.

What Makes Land Increase in Value?

Location matters, but future location often matters more. For example, a parcel on the edge of a growing city can be worth relatively little until population growth, new transit lines or a highway extension bring it within commuting distance of jobs and services. Nearby commercial development, such as a new retail plaza or business park, can lift surrounding land values simply by making the area more convenient to live near.

Zoning changes are one of the single biggest value drivers, since land zoned for higher-density housing or commercial use is almost always worth more than the same parcel zoned for a single detached home or left as agricultural. And the effect can be dramatic: after Edmonton eliminated single-family-only zoning, allowing up to eight units on lots that were previously one-home only, land values reportedly rose by 15 to 30 per cent.

Access to municipal services like water, sewer and natural gas also plays a major role: land that requires a buyer to drill a well and install a septic system is a fundamentally different investment than a fully serviced lot, even if the two properties sit side by side.

What to Look for Before Buying Land

Owning a piece of land doesn’t automatically mean a buyer can build whatever they want on it. Before making an offer, it’s worth confirming several things to avoid future surprises, stresses and costs:

✔ Zoning and permitted uses. Ontario’s Planning Act gives municipalities the authority to set zoning bylaws that spell out exactly what can be built on a property and where. These rules are worth reviewing directly with the municipality rather than assuming.

✔ Legal road access. Some rural parcels only have access across a neighbour’s property or an unmaintained road allowance, and municipalities hold power over whether and how those allowances can be developed or assumed for maintenance, which can complicate financing and future development.

✔ Water, sewer and utilities. Land without municipal services may require a well, septic system or hydro extension, all of which can add high upfront costs.

✔ Environmental restrictions. Land near things like a river, wetland or shoreline may fall under a conservation authority’s jurisdiction, meaning a permit is required before any development, interference with a wetland or alteration to a watercourse can happen.

✔ Easements and property boundaries. A registered easement can give a utility company, neighbour or municipality the right to use part of the land, which may limit where a structure can be placed. Having a recent land survey helps to confirm that lot lines match what’s in the listing, particularly on older rural parcels.

✔ Future municipal development plans. A municipality’s official plan lays out its long-term vision for how land in the area should be used, and it’s worth checking whether nearby land is slated for things like rezoning, new infrastructure or protected green space.

How to Finance Vacant Land

Financing a vacant lot works differently than financing a house, and buyers shouldn’t assume their existing mortgage pre-approval applies. Because raw land produces no income and can be harder for a lender to resell if a borrower defaults, land loans are considered riskier than conventional mortgages and typically come with higher interest rates and steeper down payment requirements.

Down payments on land in Canada commonly range from 20 to 50 per cent, with raw or rural land often landing at the higher end of that range and serviced lots requiring less. Whether land is serviced or undeveloped significantly affects the terms a lender will offer. 

And buyers who plan to build will typically need a separate construction mortgage once they’re ready to break ground, since a land loan on its own usually doesn’t cover the cost of construction.

What it Costs to Own Land

Vacant land is lower-maintenance than a house, but it isn’t necessarily cheap to hold — there may be more regular expenses than you think. Buyers should also budget for land transfer tax at closing, since it applies to vacant land the same way it applies to a finished home. 

Ongoing costs include:

• Property taxes, which apply even when the land is generating no income.
• Financing costs, which tend to run higher than a residential mortgage given the interest rates on land loans.
• Insurance, which may still be worth carrying for liability purposes even on an undeveloped lot.
• Basic maintenance, such as brush clearing or fencing, especially on agricultural or recreational land.
• Legal and surveying fees, particularly when boundaries, easements or right-of-way issues need to be confirmed before closing.
• Servicing and development costs, if the eventual plan is to bring in utilities or subdivide the property.

Pros and Cons of Buying Land as an Investment

Before making a land purchase decision, there are some pros and cons to consider:

Pros:

• Appreciation potential, particularly in growth corridors and strong agricultural markets
• Lower maintenance than a house or rental unit
• No tenants, tenant screening or maintenance calls to manage
• Future development opportunities if zoning or municipal plans shift in the owner’s favour

Cons: 

• Limited or no immediate income while the land is held
• Financing that’s harder to secure and more expensive than a residential mortgage
• Zoning and development risk that’s largely outside the owner’s control
• Financing that’s harder to secure and more expensive than a residential mortgage
• Potentially long holding period before appreciation is realized
• Smaller pool of buyers when it’s time to sell, which can stretch out the selling process

Buying Land vs. a Rental Property

For investors comparing the two, the decision to buy land or a rental property often comes down to prioritizing cash flow or long-term growth.

A rental property, even a modest one, can start generating monthly income right away, which can help cover the mortgage and offset carrying costs from day one. Land, by contrast, usually requires the owner to absorb those costs out of pocket while waiting for the property to appreciate or for a future use to materialize.

Land has the advantage of lower ongoing maintenance, with no tenants, appliances or leaky roofs to manage. But financing tends to be easier and cheaper for a traditional residential property than for a vacant lot, which is worth weighing seriously for investors who don’t have significant cash reserves to carry an asset that isn’t paying for itself.

Questions to Ask Before Buying Investment Land

A short list of questions can help clarify whether a specific parcel makes sense:

• What is the property currently zoned for, and can that zoning realistically change?
• Can I build on it, and if so, what approvals would that require?
• Is the land serviced, or would I need to bring in water, sewer or hydro?
• Is there confirmed legal road access?
• Are there environmental restrictions, such as wetlands or a conservation authority regulation, that limit development?
• What are the total annual carrying costs, including taxes, insurance and financing?
• What development is planned nearby that could affect future value?
• What is my exit strategy, and how long am I prepared to hold the property if that plan takes longer than expected? 

How a REALTOR® Can Help

Land deals often move differently than home sales, with fewer comparable listings and more due diligence involved before an offer makes sense. 

A Wahi Realtor with experience in a specific region can help buyers find suitable properties, compare land values against recent sales and make sense of local zoning and development trends, which all help in navigating a purchase. Our neighbourhood finder tool is another way to get a feel for an area’s growth trajectory before narrowing down a shortlist.

This local expertise and knowledge also comes in handy at the negotiating table, where understanding why a seller is pricing a lot a certain way can make a real difference in the final deal.

Final Thoughts: Is Investing in Land Worth It?

Land can be a worthwhile long-term investment, but it rewards patience and planning far more than it does a quick flip. Location, zoning, carrying costs and realistic development potential all matter more than they might for a conventional home purchase, and buyers should have a clear sense of how they expect to eventually generate a return, whether that’s a future sale, a rezoning or a build of their own,  before signing anything.

Remember, thorough due diligence isn’t optional here; it makes the difference between land that slowly builds wealth and land that eventually drains it.

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