Timber land as an investment?

[unregistered168043]

Wondering if any of you have experience with timber land from an investment standpoint. Ive been toying with the idea for a little while but dont really know much about timber. There are several people I know who are in the business, and if I get serious I could probably convince one of them to come out and take a look at a perspective lot. Right now I'm just in the 'tossing the idea around' stage.

My thoughts are that it could be something that I just buy and hold, and hopefully someday pass on to my son ( he's only a couple months old). I figure if its a plot with good future potential, it might be worth something in 30 years or so. ( plus I get to hunt it and my wife gets a place to trail ride )

I've been looking at a plot for sale nearby, it boasts " well-managed red oak, superb timber asset appreciation potential over the coming decade, long-term timberland investment. Hardwood and pine forests, composition dominated by red oak, white pine, w also includes some maples, hemlock, aspen, beech, white oak. "

Just wondering how an investment like this might stack up against more conventional investments..stocks, bonds, precious metals, deposit accounts,etc

[LoonyK]

Well if you are using it for recreation, then worth buying. But I wouldn't worry about the timber value unless you take an active role in pruning and taking out low quality trees and whatever else that needs to be done. But a forest would typically be managed differently for hunting versus solely for investment. I wonder if one should have insurance too if it is as an investment, one major storm could wipe out a lot, i had a storm last fall take out a lot of trees, but my forest is more for wildlife since in reality, wood don't bring much money per tree selling to log companies unless you have veneer quality or you can utilize some niches, which becomes more a job rather than the passive income investments you listed above.

[Hoopjohn]

Horrible investment if you don't buy it right. And even if you buy it right, there is no way of knowing what timber markets will be in the future.

Big lumber companies in Wisconsin (and I suspect elsewhere) are logging off big plots of timber faster than you can say "Show me the money".

Simply put, land has gone up in price astronomically. If you were an absolute expert at determining a good stand of timber, you have no idea what type of pricing will be in play 30 years from now in regards to the timber markets. Then of course is the issue of property taxes. As costs for everything (labor, energy, food, housing, health care) continues to escalate, one can safely assume property taxes will escalate in the future as well.
If one puts timbered property in some state plan that reduces taxes, you also lose control over your property.

There also is the issue of storms and forest fires. Diseases/insects/bugs that effect certain species of trees. Minimal risk. But still an issue of risk that can totally destroy your investment.

Investing in timberland is high risk. The risk is simple. One doesn't know if the value of timber/pulp will increase or decrease relative to inflation in the future.

If you are purchasing a tract of timbered land for recreational usage that has some timber value on it, go for it. Don't make the mistake of thinking its an investment.

[unregistered168043]

Yeah it would be for an investment, using it recreationally would be a secondary concern. I've been reading up just in the past hour or so and it appears everything I have read suggests that timberland has out performed the stock market, bond markets, and inflation by a considerable amount;

http://www.nasdaq.com/article/timber...w-now-cm264315

[DaleK]

If you're going to manage it constantly, should be a decent investment. Timberland isn't something you can buy and put away for twenty or thirty years, the trees can and will lose value if not managed and harvested as needed

[Alice In TX/MO]

I have 100 acres of timber in Missouri that I paid $1000/acre for. I had the forest service look at it and mark the first trees to take out to help out the marketable trees. Made a about three thousand from the trash trees. Five years later, about five thousand from carefully selected mature trees. Now, we will wait at least five more years.

It's a LONG slow process.

You *must* have a logger that you trust.

[chestnut]

For me it was a good investment. I can use it every day for fuel, food, money, entertainment and I also live on it. It's a comfort to know the timber value is there but I don't have to cut it.

[unregistered168043]

Hm. I dont have the time to manage it, I was hoping for something I could just buy and leave alone. Might not be the right investment for me then.

[TnAndy]

Originally Posted by chestnut

For me it was a good investment. I can use it every day for fuel, food, money, entertainment and I also live on it. It's a comfort to know the timber value is there but I don't have to cut it.

Me too, for the same reasons. I paid 1000/ac for our 70ac in 1982, and I figured the timber on it at that time was worth more than I paid, and given I've built the house, 3 rental houses, dozen or so sheds/barns/etc, and still haven't put a dent in the original timber, I figure I've come out pretty good.
The BEST way to buy timber land is to live on it, and get the value for yourself out of the timber. Tax free income ! The old guy I bought my place off was a smart fellow. He bought land all over 3 counties around here ( like mine....he paid 300/ac 30 years before....I looked it up at the courthouse), and from humble beginnings, he was a wealthy fellow at old age.

In the mid 90's, I bought the adjoining 27ac, 24 of which was in timber, and paid maybe 1000-1200/ac for the land (paid 55k total, but I figured the improvements to the place were worth the extra...barn, well, septic system, driveway, power in, etc). I sold it in 2011 for 190k...so in 15 years, it went up by a factor of 4. Outpaced inflation for sure. And since the guy is paying me 6% over 15yrs, it provides some interest income at a better rate than I can make on any CD at this time.

So, as has been pointed out above, it really depends on what you have to give for it, and the quality of the timber, if you're buying it for timber value.

IF you can buy it right, and hold it for 20-25 years as a gift to your son, I think you'd be making him one heck of an inheritance !

[maddy]

You need to have a timber cruise done, which will tell you exactly how much "merchantable" timber you have of each species. You also need to find out what the approximate cost of harvesting the timber would be. Logging a parcel is not cheap, and unless you have sufficient volume, the proceeds may not be sufficient to cover your costs.

[texican]

My father and I bought 100 acres, back in 95. Bought it for $500/acre. Trees were five years old. In 2005, we thinned the pine plantation, and got ~250/acre (prices for pulp were high). My sisters have both sold their shares, one getting $3K/acre in 2007, the other got $5K/acre in 2010. I've been offered even more for mine... I could thin mine right now, but won't, as pulp and chip/saw prices are low. "Could" get ~500/acre just for the thinning.

My 500/acre investments already paid back half, and I could've already cleared 10x my investment.

Any other financial instruments pay back 10X in 20 years, with complete security?

My CD renewal was this week.... the interest rate is .30%..... SMH. I'd buy land in a heartbeat... the banks are worthless... and with inflation, a loss...

[bellcow]

Timber could be the reason for investing in land but remember the 3 more important consideration, location, location, location. Around here in the past fair money was made on timber but location has really paid big. If the price was good the location would be a consideration as much or more than the return on timber. Just thinking 30 plus years out.

Bellcow

[unregistered168043]

Originally Posted by texican

My father and I bought 100 acres, back in 95. Bought it for $500/acre. Trees were five years old. In 2005, we thinned the pine plantation, and got ~250/acre (prices for pulp were high). My sisters have both sold their shares, one getting $3K/acre in 2007, the other got $5K/acre in 2010. I've been offered even more for mine... I could thin mine right now, but won't, as pulp and chip/saw prices are low. "Could" get ~500/acre just for the thinning.

My 500/acre investments already paid back half, and I could've already cleared 10x my investment.

Any other financial instruments pay back 10X in 20 years, with complete security?

My CD renewal was this week.... the interest rate is .30%..... SMH. I'd buy land in a heartbeat... the banks are worthless... and with inflation, a loss...

Thats kind of what I was thinking, land is one thing they can't print and the price of timber must always go up over time due to falling value of the dollar. But tell me, is there much managing in maintaining your plot? Is it something that I could more or less allow to grow?

[Alice In TX/MO]

There's really not much hands on management if you have a someone you trust doing your cutting every five to ten years.

Talk to the forest service in your area. But..... keep in mind..... they move as fast as trees go. I had trouble getting them to return phone calls.

Another factor is whether you want a very NON liquid asset.

[Highground]

We bought our land in 1986. In the early 90's we sold some pine for more than the land cost us. Mid 90's we sold some hardwood and bought the adjoining land.
This land has given us seclusion, beautiful scenery, a great place to hunt, the family loves it......and it was free. Wish we could find more parcels like it.

[Michael W. Smith]

Originally Posted by Darntootin

I've been looking at a plot for sale nearby, it boasts " well-managed red oak, superb timber asset appreciation potential over the coming decade, long-term timberland investment. Hardwood and pine forests, composition dominated by red oak, white pine, w also includes some maples, hemlock, aspen, beech, white oak. "

Just wondering how an investment like this might stack up against more conventional investments..

If they are selling it as "timberland" - which it sounds like they are - then you aren't going to be getting a deal. The price of the timber and the land will have already been included in the price - and while the timber will continue to grow and mature - as has been said - all you need is for a tornado to come through the area - and all of your "timber" will be twisted, broke, piles of wood that aren't usable for much other than firewood (if you can even harvest it safely).

The scenarios of texican and TnAndy is they lucked into property that somebody wanted to sell and the seller didn't realize the potential profit in the timber - they were selling land that had trees on it - the value was in the land.

You also have to remember that land is taxed every single year - so you will be paying property taxes on it and won't receive income until the timber is sold - again, you are taking the risk that you are able to timber it before something happens to the trees - tornado, fire, disease.

On the other hand, they aren't making anymore land. And property values usually go up - quite a bit if you look back over the years. But then again, as has been said, if you have to sell quick for whatever reason - land isn't a liquid investment.

With their description of the potential of timber - I would pass on this property. Look around for property for sale that the person is selling for the property value.

[agmantoo]

I invest in timberland. I also do 1031 exchanges. Both of these tools have benefited me. I do not understand the reluctance to invest in timber. The return is somewhere around 14% per year. Most states have deferred taxes on timber production the same as for agriculture. Typically leasing land for hunting will more than pay the deferred taxes. I agree with the above poster that stated to buy land that the seller is not promoting the timber value. However I also buy land from timber companies such as Weyerhauser. Having timber land is a slow but steady means of growing income. Somewhat like eating an elephant...you just do it a bite at a time! Forced sales at the courthouse steps are a good place to locate a bargain. I have bought land there that generated a profit the same year as the purchase. Understanding the reason for the sale gives a big advantage. Few people realize that many Wall Street companies hold vast parcels of timberland. In a bad stock market year these timber holders will market their holdings to bring in a profit to pacify their investors. The stock market investors could care less where the returns originate as long as they make money and the broker keeps the investor so he is happy, at least for another year! Occasionally I am able to do a 1031 exchange on a holding and I just turn that into a larger timber holding. It is IMO a good way to boost acreage along with greater opportunity for future profits from timber. I consider these holdings as passive investments.

[BlackFeather]

I have been thinking of planting one of my fields to black walnut, in about 40 years it should be ready to harvest, long straight trunks are worth a lot of money, I doubt that will change. It won't be for me but my kids, they will be in their 60's by then.

[Miss Kay]

We bought a couple hundred acres in the Ozarks in 2000, paid 25% down and financed the rest. We wanted a "farm" but could not afford cleared land so settled for cheap hills with mixed forest. We hired a retired forest service guy to inventory it and set the value. A few years later we were ready to clear the valleys and hill tops so had him come out again and market it for us. Even after his fee, we recouped a third of our purchase price (more than our down payment). We then rented a dozer and cleaned it up on weekends and planted grass and turned it into a cattle ranch. nearly 10 years after purchase my husband became sick and we had to sell and move. We got nearly 3 times what we paid originally. It turned out to be a very good investment for us!

[Forcast]

neighbor just got $2000.00 for 4 acres of pine. eastern wva