Author Topic: Buying / Owning Timberland  (Read 8660 times)

JanSvenda

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Buying / Owning Timberland
« on: August 23, 2018, 07:43:15 AM »
Hey,

I am wondering if there are people here that own timberland. I am not talking about stocks like KEWL etc., I mean physical ownership. If so, would you be able to share some sources on how you prepared for your first purchase and generally share some timber-related sources?

One of my long-term goals is to continuously accumulate ownership of this asset class. In my mind timberland should also present an easier way to acquire solid collateral than say buying a house etc.

Thanks,

Jan
Focused on Building Walker's Manual 2.0 - https://jansvenda.com/otc/ Feel free to email me at overthecounter@protonmail.ch

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BG2008

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Re: Buying / Owning Timberland
« Reply #1 on: August 23, 2018, 08:24:30 AM »
I love how you specifically mention "not KEWL"

bizaro86

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Re: Buying / Owning Timberland
« Reply #2 on: August 23, 2018, 12:06:25 PM »
I think buying timberland requires a bunch of specialized knowledge. You have to evaluate the trees that are there already and the growth potential. However, you also need to have an understanding of the marketing factors. How close are you to a saw/pulp mill. Are the species on your land what they need? As with most things, if you have more than one buyer you will probably do better, so maybe you need two mills.

I have a relative who owns a long term timberland lease with a government in Canada, which he manages for a fee and a 'cut' of the sales. It's in a remote area, so he is only able to sell from it every few years when someone is harvesting in the area.

JanSvenda

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Re: Buying / Owning Timberland
« Reply #3 on: August 23, 2018, 12:15:00 PM »
I love how you specifically mention "not KEWL"

Haha yeah, did not want to read the pitch for the tenth time. Although I hope that value is going to be created after the reshuffling.

I think buying timberland requires a bunch of specialized knowledge. You have to evaluate the trees that are there already and the growth potential. However, you also need to have an understanding of the marketing factors. How close are you to a saw/pulp mill. Are the species on your land what they need? As with most things, if you have more than one buyer you will probably do better, so maybe you need two mills.

I have a relative who owns a long term timberland lease with a government in Canada, which he manages for a fee and a 'cut' of the sales. It's in a remote area, so he is only able to sell from it every few years when someone is harvesting in the area.

Thanks for the note. I am fine with taking the time to learn as much as possible. I also understand that the purchase is really only the start as the maintenance is crucial. I will be buying in Europe so some factors might be slightly different.
Focused on Building Walker's Manual 2.0 - https://jansvenda.com/otc/ Feel free to email me at overthecounter@protonmail.ch

My favorite investment? Buying a house for the price of the bricks.

John Hjorth

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Re: Buying / Owning Timberland
« Reply #4 on: August 23, 2018, 12:31:15 PM »
Jan,

Is your approach and are your considerations at this stage here strictly rational, from an investment angle? - Please do not consider the question here asked as sceptical or negative in any way, because it's not meant that way. There can actually be other incentives and motives for doing such an investment, which is a personal matter.
”In the race of excellence … there is no finish line.”
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JanSvenda

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Re: Buying / Owning Timberland
« Reply #5 on: August 23, 2018, 12:51:12 PM »
Jan,

Is your approach and are your considerations at this stage here strictly rational, from an investment angle? - Please do not consider the question here asked as sceptical or negative in any way, because it's not meant that way. There can actually be other incentives and motives for doing such an investment, which is a personal matter.

Yeah, I view this as an investment (long-term appreciation & diversification). I am not a huge fan of gold (physical).
Focused on Building Walker's Manual 2.0 - https://jansvenda.com/otc/ Feel free to email me at overthecounter@protonmail.ch

My favorite investment? Buying a house for the price of the bricks.

oddballstocks

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Re: Buying / Owning Timberland
« Reply #6 on: August 23, 2018, 12:52:11 PM »
Been into this off and on for ~10 years.  Bought an acre as a test for $300. 

I don't know where you're at, but each area grows different types of wood.  If you're in the NE then you can buy land and do hardwoods, the most valuable wood.

For your area look at the proceeds from a cut at market rates, then figure you might be able to cut 25-30% of an area every few years, and back into what you need to pay for the land to get an acceptable yield.  Like any investment the price you pay for the land determines your return.

If you're buying timberland as-in get the forestry officer to do a cruise.  Most counties/states do this for free.  They'll estimate the value. 


The hardest part is finding the land at a reasonable price.  Your best bet is going to be visiting county courthouses and looking for land in tax sales.  Next to that going door to door and making cash offers.  I know someone who does this for gas rights, it's grueling, but it works.  Timber is no different.

I've found plots I like, written letters, made offers, like most sales 90% of the time you'll come up empty.

Last year I looked into building hunting camps.  Basic math was buy 10 acres for $18k or so (1.8k/acre) and then subdivide into three plots 3.33 acres apiece at the county level.  Pay $2k for a bulldozer to clear a road, pay $1k for gravel, pay $3k for electric service, buy three Amish made cabins at $8k apiece.  You're in for $48k or so, you can sell them in an urban area for $50k cash.  So a profit of roughly $100k on that $48k investment.

I sourced people for all of these things, they're a pretty good estimate.  Electric varies depending on your land and how far the furthest pole is now.  Between all of this figure it might take 6-8mo to do and complete, then another 1-2mo to finish?  It closely approximates a full time job.

Make sure you have a solid truck, all the tools you'd need.  The more I went down this route the more I realized you need a warehouse to store things, and suddenly this little "I'll buy land..." idea turns into a "I have a full cabin development company".

Get the land right and things will fall into place. 

Where are you?
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rb

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Re: Buying / Owning Timberland
« Reply #7 on: August 23, 2018, 02:05:01 PM »
Teachers has a timberland group. They're quite happy with the asset class. But it was stressed to me by one of those guys that diversification is really important otherwise it can be quite risky. They have lots of plots all over the world. I decided that it's way too much trouble for a smaller investor.

John Hjorth

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Re: Buying / Owning Timberland
« Reply #8 on: August 23, 2018, 02:20:19 PM »
...Where are you?

Nate,

Naturally Jan can reply for himself. But the TLD in Jan's email adress in his signature is ".ch". Jan's LinkedIn profile says Czech Republic.
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai

TwoCitiesCapital

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Re: Buying / Owning Timberland
« Reply #9 on: August 23, 2018, 06:23:24 PM »
I looked into this before given timber being at what appeared to be secular lows due to the tepid rebound in U.S. housing -

I kind of came up the same as others here. It requires specialized knowledge to know what you're buying - how much it will yield, how healthy the trees are, are they too densely populated for proper timberland or too far apart to maximize the land yield, how to process/cut/sell the wood, how frequently you have to cut out the undergrowth to generate a small return, etc.

It was a bit more than I expected going in and that's all just if you want to own the timber. Redeveloping the land brings in whole new complexities.

I settled on a stock that owned timber where I could acquire acres/share more cheaply than I could acquire acres and have been happy with the lack of effort on my part.