Author Topic: Timber Land as an Investment?  (Read 1566 times)

Fishindude

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Timber Land as an Investment?
« on: April 10, 2017, 09:06:21 AM »
Does anyone own some?   Know anything about this?
Have a chance to purchase a solid 85 acre block of mature hardwoods at what I think is a pretty reasonable price.  Big blocks like this are getting rarer and rarer in the midwest.
From experience on existing properties, you can log about every 20-25 years.

Thinking of this from the perspective of a long term investment.
« Last Edit: April 10, 2017, 09:09:00 AM by Fishindude »

Car Jack

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Re: Timber Land as an Investment?
« Reply #1 on: April 10, 2017, 01:32:14 PM »
Find local timber buyers and ask.  This is very local.  I have land that I forest manage and went to our local sawmill to ask about selling.  At that point in time, they were overfull with logs.  They don't cut until they age them.  If I wanted to cut, and deliver them to the sawmill, they would take them but would pay $0 and if I needed their truck to transport, I'd have to pay $100 a day for that.

You really need to know first where your market is.  I sell a small portion of the firewood I cut (I use mostly for my own heating) and I don't clear cut....I thin to increase growth of other trees.

Mr. Green

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Re: Timber Land as an Investment?
« Reply #2 on: April 10, 2017, 02:05:08 PM »
I've looked into this fairly extensively in the past because we likely have a seven-figure windfall coming at some point and I was looking for ways to reduce my taxes.

Timber isn't going to give you great returns. I would consider timber to be a wealth preserver more than a wealth generator.

First you have to decide between hardwoods or soft woods. Pine brings less money but it grows faster and is harvested more frequently. However, when you cut pine an area is typically clear cut. So the land cycles from bare to forest and back again. Hard woods bring more money but it's typically best to select cut a stand of hard wood, meaning you only take the trees that are larger than a certain diameter. This leaves your land always looking like a forest.

The rates you'll get for timber vary by region and you can typically find mills or other lumber websites that will give you rough ideas of income per board foot. You can also find info online that will tell you roughly how many board feet of lumber you can expect to get from an acre of the various types of hardwoods. The rates are not necessarily similar as you move from region to region. Some places Cherry might be high because it's not as common and other places Oak might provide better rates. In the end, you typically select cut what you can from a whole tract regardless of species so you end up with a mix of income.

Soft woods may not be measured by the board foot, but I'm not sure. I know there's a pulp rate since a lot of pine is milled down for pulp. I haven't looked too much at soft woods because I didn't want to be clear cutting the land every 20 years.

Obviously the cost of the land determines how attractive the return is. However, you will not get so much income from a piece of land over your life time that it will actually pay for the property. This is why I say it's more of an income preserver. If you go with hard woods you'll select cut every 25-30 years. If you're young you'll probably get two cuts in while you're alive. So you'll get to take income from the property on two occasions and then in old age you'll still own the land, which will appreciate along the lines of inflation. If you go with soft woods you'll clear cut every 20 years but the income will be a little smaller.

Unless you have some serious investments in other places generating better returns I probably would not look at Timber very heavily.

Mr. Green

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Re: Timber Land as an Investment?
« Reply #3 on: April 10, 2017, 04:44:17 PM »
I forgot to mention maybe the most important part. If you're seriously considering the purchase it's well worth the money to hire a certified Forester and have them walk the property. They will be able to tell you with pretty good accuracy what is on the property in terms of board feet per species. Should cost a grand or less. This, coupled with local timber rates, will give you a rough valuation of all the timber on the property. That same forester can put together a forest management plan for you that will give you a good idea of when you can cut, etc. Well managed forests tend to produce the best timber yields, as opposed to tracts that just run wild for decades.

Does the sale include the mineral rights? That's even better. If it doesn't you may want to try to find out who owns them and what could be done to the property by the mineral rights holders without your consent.
« Last Edit: April 10, 2017, 04:46:19 PM by Mr. Green »

Mr. Green

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Re: Timber Land as an Investment?
« Reply #4 on: April 10, 2017, 04:53:00 PM »
Check out https://forestry.ces.ncsu.edu/forestry-selling-timber/

I downloaded a Timber Sales guide from there a while back. Looks like the site is way more sophisticated now with a ton more info if you want to familiarize yourself with the terminology and process in more detail. It's a decent starting point. Despite it being a site run be the North Carolina Agricultural Extension Service, there's a lot there that applies no matter where you are.


Fishindude

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Re: Timber Land as an Investment?
« Reply #5 on: April 11, 2017, 09:20:19 AM »
Timber isn't going to give you great returns. I would consider timber to be a wealth preserver more than a wealth generator.

Yep, this is pretty much what I'm thinking.
Won't get significant returns, but a pretty safe way to stash some money, plus recreation opportunities on the land.
If you can get enrolled in a classified Forest program, they the reduce taxes to peanuts.

MaikoTsumi

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Re: Timber Land as an Investment?
« Reply #6 on: April 11, 2017, 11:04:00 AM »
I buy some of my houses at auction.  One of the auctioneers and I got into a discussion about land sales and he mentioned they just sold about 40+ acres for $300,000.  Before the auction, the landowner (inherited land) had harvested and sold the timber for $800,000.

Fishindude

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Re: Timber Land as an Investment?
« Reply #7 on: April 11, 2017, 11:44:59 AM »
I buy some of my houses at auction.  One of the auctioneers and I got into a discussion about land sales and he mentioned they just sold about 40+ acres for $300,000.  Before the auction, the landowner (inherited land) had harvested and sold the timber for $800,000.

Where is this at?
Both numbers sound crazy high.  $7500 per acre for land that has had all the harvestable timber removed?   $800,000 worth of timber off of only 40 acres?
Average hardwood tree (oak, hickory, walnut, cherry, ash, etc.) we harvest around here only nets about $100 / each.   Occasional high grade veneer walnut tree might get you $700.

MaikoTsumi

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Re: Timber Land as an Investment?
« Reply #8 on: April 12, 2017, 08:14:13 AM »
I'm just relating what he said, so he may have been inaccurate.  Maybe he meant $80,000.  The reason it interested me was because I am to inherit around 40 acres with about 25-30 acres with timber.

NeonPegasus

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Re: Timber Land as an Investment?
« Reply #9 on: April 12, 2017, 08:51:47 AM »
Interesting question. My dad used to be a forest banker at a bank, putting together multi-million dollar deals for large institutional customers. Apparently, he became one when the career was first starting to exist in the 80s. He had a forestry degree from UGA and as he likes to joke, it's easier to teach a forester how to bank than to teach a banker how to forest.

I think you need to have some decent knowledge of trees/timber to get into this. A lot of his job was traveling to various tracts, some as near as Louisiana or Wisconsin, and some as far as Brazil and Uruguay. Yes, you'd need to have a fairly long investment horizon. So many things can impact your investment. A fire bug can torch your land. Drought and pests can hammer you. I would suspect it's a better investment for banks because they can put together a lot of deals to spread risk around.

I wouldn't even consider a deal like that without a forester involved. Search for a local timber consultant.