Buying timberland can be a smart and sustainable investment opportunity. With proper considerations, it can provide provide a lifetime of satisfaction in the form of healthy financial and recreational opportunities. While timberland is forested land primarily used for growing trees for timber production, income can also be derived from leasing opportunities and more, creating a robust asset. However, before making an investment in timberland, there are several key considerations that must be taken into account. These considerations can greatly affect the viability of an investment, so it is important to familiarize yourself. In this article, we will discuss some of the most important considerations when buying a parcel of timberland.
Species Composition
The first consideration when buying timberland is the species composition of the property. Different tree species are valued differently, with some species being worth more than others. For example, black walnut, cherry, and white oak are considered high-value species in the United States. It is important to note that the value of a species can vary depending on the regional market demand, so it is important to research the local forest economy before making a purchase. get an idea of differential species values in your area, we have a list of stumpage prices by state and province here.
Of course, forests are incredibly diverse ecosystems, so a property will inevitably have both high and low value species. Its best to conduct a timber cruise to get a thorough idea of species compositions.
Quality and Quantity
When it comes to the quantity and quality of the timber, it is important to note that even high-value species must have quality to be considered high value. Timber quality is determined by the characteristics of the wood, including its size, straightness, and lack of defects such as knots, cracks, and rot. Taller timber also tends to be higher quality, as it has a larger height of the stem that is free of such defects.
In addition to quality, the quantity of timber on the property is also important to consider. The higher the quantity of high-quality timber and valuable species, the more valuable the property will be.
Quality and quantity can be nuanced and confusing considerations to balance when buying a timberland property, so if you want to learn more, we go through both of these attributes in detail in our free E-book about forest management, which you can get by clicking the link below.
Site Productivity
Site productivity is another important consideration when investing in timberland. The quality and productivity of the soil can greatly affect forest growth and the potential for a profitable harvest. Soil quality can be determined by the type of soil and the degree of drainage. Trees require certain nutrients and water to grow, so a site with the right balance of nutrients and drainage is crucial for forest productivity. This particular balance will vary depending on the species.
The aspect of the property also plays a role in productivity. Southern-facing slopes are generally more productive because they receive more sunlight and heat. In contrast, northern-facing slopes receive less sunlight and are therefore less productive.
A productive site can possibly be harvested twice as often as an unproductive site, which will make a major impact on overall returns on your investment. Thus, it is crucial to understand this nuance. While nothing can beat a solid understanding of soil science and boots-on-the-ground investigation, the USDA has an online soil survey that can provide valuable insights and provide a good starting point for any research.
Terrain
In addition to soil quality, the terrain of the property can also play a role in the viability of timberland as an investment. Steep slopes and rocky terrain can dramatically increase harvest costs, which will ultimately be taken out of profit. Overly wet and boggy ground can have the same effect. Generally, gently-sloped, smooth terrain uphill from the road provide the cheapest harvests. This is because the gentle slope allows the machine to work with gravity when carrying their heaviest loads.
Road Access
Speaking of roads, road access is another crucial factor to consider when investing in timberland. Access to functioning roads is necessary for harvesting and transporting timber. It is also important to ensure that a new owner would retain deeded access to any existing roads. The farther machines would have to drag harvested timber to roads, the higher the harvest costs will be and the lower the return. Roads can be built to fix any issues, but this will be an increased cost to consider. Generally speaking, minimize skid distance (the distance wood must travel to the road) to 1800′ maximum.
Survey and Boundary Lines
Having clear boundary lines is a further consideration when investing in timberland. A lack of clear boundaries can add extra survey costs before a timber harvest can be conducted. Surveying costs can be expensive and add additional time to the investment process. Investing in a property with clear boundaries can help mitigate these costs and help ensure that the investment is sound. However, jurisdictions differ in their regulations surrounding boundary lines and timber harvest, so familiarize yourself with the law.
Zoning and Regulatory Restrictions
Zoning designations and timber harvest regulations can also affect the potential uses of the property. It is important to familiarize oneself with the laws in the area before making a purchase. Zoning laws can dictate what can and cannot be built on the property, as well as what activities can take place on the land. Timber harvest regulations can also vary depending on the state and can impact the timing and amount of timber that can be harvested. For example, the state of Maine has various zones around lakes, rivers, and other areas of ecological interest that are subject to special regulations. In some situations, harvest requires approval from state biologists, though this is rare.
Location
Location is a crucial aspect of a property’s return on investment. Timberland parcels located closer to sawmills are more valuable because of reduced transportation costs. An understanding of the geographic properties of the local forest industry prior to investing can help ensure a profitable return on investment. It is also wise to investigate trucking costs in your area and comparing them to the distance of the parcel from the mills.
Price
Perhaps the most important of all considerations when buying timberland is of course the price of the property. The price of timberland can vary widely based on all aforementioned factors as well as non-timber attributes such as the potential for development. It is important to analyze the price in making the decision to invest. Even a great parcel may become a poor investment simply due to the asking price and vice versa. One should also keep in mind that the purchase price is just one aspect of the cost of owning timberland. Other costs may include property taxes, management fees, and the cost of any necessary improvements such as roads, as mentioned previously.
Try to Consult with a Forester
Before closing on a timberland purchase, it may be wise to contact a local forester for a consultation. A forester can provide valuable insight into the prospective land, the current and future state of the timber market in your area, and potential management options for the property. They can also provide advice on harvesting schedules and techniques, and help ensure that the property is managed in a sustainable manner.
Buying and investing in a parcel of timberland can be a wise decision for those who are willing to do their research and understand the unique considerations of this type of investment. The species composition of the property, quality and quantity of the timber, site and soil productivity, terrain, road access to the property, survey and boundary lines, zoning and regulatory restrictions, location, and price are all important considerations that should be carefully evaluated before making a purchase. Additionally, it is important to have a long-term perspective and a willingness to invest in the necessary management and improvements to ensure the sustainability and profitability of the investment. If you can do this, you are ready for one of the most satisfying forms of investment available.
