Christmas tree farm

[6or7dazeaweek]

Here's the deal.....I've been wanting a tractor for a long time and thought I would be getting one right after having my taxes prepared. WRONG!

I retired in 2003 and started a small groundskeeping business just for something to do...you know, small client base & work the hours that I want to work. I did it right...registered with the county & the State and depreciating my equipment. I thought I'd be able to get a tractor and expense that as well. however, my accountant just informed me that I'd have to be bringing in a lot more $$ in order to do that. Talk about getting bummed out.

The other part to the equation is that I signed up for early social security benefits so I'm limited in how much I can make before being penalized. I think the limit is around $12,000 before you get penalized.

Being that I'd like a tractor to use in the groundskeeping business, I'm considering starting a Christmas tree farm. Yup, I'd have to buy the land, tractor & tiller but that's not beyond the realm of happening. I guess my question is does this sound like a viable thing to be doing in retirement? I am not afraid to work and a tree farm might not need constant attention...but I might be wrong on that one.

I would think that buying land, equipment & trees to plant for the farm would be a good way to depreciate a tractor & implements without running afoul of the IRS or jeopardizing my social security. The other benefit would be that I wouldn't really need commercial liability insurance for the tree farm since it would be my own land. I think the time for harvest is somewhere around 7 or 8 years so by then, I'd probably start making a profit.

Any thoughts on this project or am I being completely senile in my old age? Be kind! /forums/images/graemlins/blush.gif

Jon

 

[arthr31]

Hi Jon,
I don't think you're crazy or senile for such an idea. I have been thinking about the same thing, in fact (and I'm not quite 40 yet). But, if you buy enough land, don't limit yourself to just xmas trees. You might be able to raise all sorts of shade, ornamental, evergreen, and xmas trees. There's a constant need for these all in the NE region. Xmas trees will take about 5-8 years to harvest, so maybe a few different growing types would get you there quicker. And, if you buy the land to start up the business, write startup costs in your business plan which include the tractor of your choice /forums/images/graemlins/grin.gif
good luck, -art

 

[woodchuckie]

I was able to depreciate the entire cost of my trator the year I bought it using the tax law section 179. Check out this link to chech on weather or not you can use it.

SECTION 179

 

[ToadHill]

I agree with arthr31. Don't stop with christmas trees. I planted blueberrys, rasberrys. currents. gooseberrys, and I'm looking at small shrubs like juniper,taxus,etc. If you can sell them direct at 1/2 the nursery price you'll have no trouble selling out.

 

[XmasTreeGrower]

Jon

You can do Christmas trees, but it is not a get rich quick process. It takes a significant amount of time and attention at certain times of the year. Quotes of 7-8 years are only if your growing conditions and management practices are ideal.

Here's a link to the best "primer" I have seen that will give you a good feel for what is involved. It also has a detailed section on taxes:

Growing Christmas Trees in North Carolina

Don't rely on your tractor to do much of the work for you. Most tree farmers plant by hand. Yep, open hole with a tree planting bar, bend over, insert tree, close hole with your boot, move to next hole, repeat 2000 times every year. Planting is done in the spring as soon as the ground thaws enough, and usually too muddy to use mechanical equipment. I have a mechanical tree planter pulled by my tractor that I have only been able to use once in seven years.

Once the trees are set in the field, your biggest challenge will be to keep the ground cover under control. In the most common spacing of five foot centers, a "normal" size tractor with bushog simply doesn't fit. The prefered tool is a simple backpack sprayer with very dilute concentrations of Original Round Up. "Chemical Mowing" is the terminology used. Applications last for about six weeks, but again all hand work. For example, an application on all of my trees requires a five mile walk with a 30 pound backpack up and down sloping terrain in my case, in the heat of the summer. No need for a gym membership or exercise equipment though!

After the trees reach about four feet, you must do the annual shearing ritual. Christmas trees don't just get there preferred cone shape naturally, they must hand trimmed to achieve the perfect look. There are mechanical tree trimmers, but they are more work than they are worth. The most efficient method is with a razor sharp tree shearing knife where you kind of imitate a ninja warrior; walking around each tree, slicing down the sides, until you have the perfect cone shape. Again, visualize doing one tree, move to the next, repeat 8,000 times. Takes the full month of August in my case to get it done.

Then there is the hand fertilization of each tree twice twice a year, possible pest infestations, deer browse damage, etc., etc.

When you finally get to marketable stage, you will find there is no "magical" place to sell your trees. You must either build contacts with individual tree lot owners, or employ a commercial broker who will attempt to beat you down to a ridiculously low cost. Another alternative is to do your own "choose and cut" farm, where you get the locals to come out and pick their own, or set your self up to retail cut trees on your own lots. I went the choose and cut route last year. My wife basically ran the thing, and had a great time. Nothing more fun than watching the kids and parents having fun running all over the farm trying to pick out one tree from several thousands. Lots of internet sites out there to learn from of farmers who have made a major event out of this each year. We didn't make a killing our first year, but we sold some quality trees to our customers, and that word of mouth advertising will build each year going forward.

Attached picture of one of our fields that was ready for sale last year:


One last bit of advice on the tax thing; you MUST be able to show a profit from your growing adventure. You can take the tax credits as you go, but if you don't wind up at some point showing a profit, you will be raising the "audit flag" with the IRS.

Thanks
Bill

 

[SnowRidge]

Thanks for posting that link. I took a quick glance, and so far it looks like it is the best xmas tree 'manual' on the web. Wish I'd seen it before I started.

In my quick glance, I didn't see how they came up with those income figures for trees sold. Maybe I just missed it, but I don't know where they got numbers that high.

I will be planting for our fourth season in a few weeks and can attest to just how much work is involved. We planted an 8x6 grid the first year and 6x6 thereafter. With 6x6, we can mow using our Power Trac PT-425. 8x6 just ate up too much land.

How many years before you were able to show a profit? I don't see how it is possible before 6 or 7 years with most species. My understanding is the growing trees represent capital value and the IRS takes that into consideration in lieu of making a profit in the early years of the operation.

Jon, profits from xmas tree sales are not considered ordinary income. They are treated as capital gains, so you don't have to worry about being penalized. You do have to worry about starting a tree farm for the purpose of tax avoidance.

 

[6or7dazeaweek]

Hey guys...some great advice you've given me and deeply appreciated. Art, I wish I was at your age again...I know I'd be beeting feet to get this project off & running. A lot of people are telling me I've worked hard all of my life & should be enjoying retirement...and here I am looking into another adventure.

I just knew that I could get some good advice here....just didn't know this quickly. I read with earnest the "Section 179" article & think it could apply to this venture.

Quite a few years ago, I worked with a guy that had an ornamental shrub business and he did very well at it. He's since retired and now he & his wife travel. The ornamental shrub business I believe could be pretty lucrative if done properly.

As far as the tree farm goes, I think I'd lean towards the select & cut rather than wholesale out. I wouldn't need liability insurance until the trees are ready to be harvested, and then I'd certainly opt in for some insurance just in case someone got hurt while on the property.

I understand that the IRS wants to see a profit and I'm quite certain that could be accomplished with this type of venture....barring something unforseen like a forest fire. I don't even want to think of anything like that.....fire's a scarry thing.

I'm sure that the deer population would love to browse on the tender trees....and I don't think there's much of a way to stop that. I have some Balsam and Holly at my residence that the deer brazenly come up to & munch on.

I thank all of you for your words of encouragement and advice. This gives me something to brainstorm over. /forums/images/graemlins/smile.gif /forums/images/graemlins/confused.gif /forums/images/graemlins/smile.gif

Jon

 

[6or7dazeaweek]

SnowRidge: No, I'm not trying to avoid paying taxes at all. I'm just trying to avoid being "stupid" when it comes to purchasing equipment.

I've lived long enough to make a lot of stupid decisions...and that comes from lack of education. I think I've learned a lot in the past few years of my life that I want to become an informed consumer and purchase wisely. /forums/images/graemlins/smile.gif

Jon

 

[SnowRidge]

<font color="blue"> As far as the tree farm goes, I think I'd lean towards the select & cut rather than wholesale out. I wouldn't need liability insurance until the trees are ready to be harvested, and then I'd certainly opt in for some insurance just in case someone got hurt while on the property. </font>

I don't think you are correct on this. Even though you wouldn't have any buyers on the property, there are other liability issues, including trespassers (think kids and the attractive nuisance doctrine), legitimate visitors, drift from spraying (or alleged drift), etc. Since the property would be business property (a farm), home owners insurance may not cover it.

Not having a business (farm) policy could also be a red flag if the IRS did an audit. They look at many things.

These are precisely the reasons why we dumped our home owners policy and bought a farm policy. The cost was nearly the same, but with a company specializing in farm insurance. We are covered for virtually any liability issue except sales to the public. We will add that coverage when our trees are mature enough to start selling them.

 

[mathey]

here's another link to check out Christmas tree info

We have about 7 acres of trees on our 20 acres. We did it in 2 plantings about 2 years apart mostly Douglas Fir with some Fraser Fur and Scotch Pine (wet areas) mixed in.

We have about 1200 trees per acre, and every year we lose a certain percentage...the first year we lost almost half due to dry conditions. We will have some ready to sell this year but will most likely wait one more year to open to have a larger selection available. We will do a cut-your-own operation mainly because the potential for income is greater than wholesale. We allowed parking for about 20 vehicles, so we'll have to limit our advertising a bit to avoid "overcrowding". We will have to evaluate our liability insurance coverage once we open to the public, since the potential for injury seems quite high (picture weekend warriors in a field with a sharp saw and a tree waiting to fall on their heads!). We currently have a farm policy which covers us as long as sales stay below $14k.

I'll go along with most everything XmasTreeGrower has stated, but we do the bulk of work with tractors. I have the advantage of having a FIL who is a "professional" tree grower (7 farms total, sells 5-6K trees wholesale a year, and another 1200 retail) and he does this stuff year-round, so I benefit from his expertise and equipment.

All the ORGINAL planting is done with tractor and tree planter, but any additional plantings (replants, skips etc) must be done by hand. We can fertilize and spray (herbicides and pesticides) using a NH TC21 with the narrow Ag tires. We can currently mow with our CK20 and a 48" rotary, but the industrial tires will eliminate that in the next year. He recently bought a Kubota B7800 narrow model that works well with either a 40" or 42" rotary mower. Shearing is done by hand, but he has a crew that can zip through a field in no time. We do pick bagworms by hand - ugh.

here's a photo of one field, you can just see the corner of the second field on the right...

 

[scott_vt]

Hi Xmastreegrower,
Excellent post and thankyou for sharing your knowledge!!! What I dont see is what happens after harvest. Do you go back in and do a general stump removal the following spring after the holidays???

Thanks Again,

scotty

 

[meledward23]

good Question. I am used to growing operations that remove the roots (Whole tree transplant). Interesting to see what a Christmas tree farmer does.

BTW, are would you grow Christmas trees or X- mas trees. In todays world it is a big difference. (oops probably breaks a rule or two asking that, dont answer)....

 

[mathey]

We make sure the stump is cut close to the ground (you'd be surprised at how many people leave a 24" tall stump), then hand plant saplings about 6-12 inches from the stump. This works for a few years...eventually, the whole field is just plowed and prepped for replanting. The older stumps/roots rot away pretty quickly, and the newer roots aren't all that large.

 

[RonR]

Mathey,

We have a local "Pick it yourself" tree farm. He does a lot of things right in my opinion.

First, his location is less than 1/2 mile off the paved road, so bad weather/poor roads are not issues.

You park in a lower area, then walk into the tree field. It is segregated by a couple of streams, so he can somewhat control where the people go. When he's cutting in the "far" field, you can ride a hayrack to the cutting area, then haul your tree back on the trailer. One kid does nothing but SAFELY drive the tractor/hayrack.

Once you pick, one of several kids with the hand saw comes over to cut your tree for you. This costs him some in labor, I'm sure, but I'd bet his insurance is cheaper, and he "sells" that all you do is Pick It, We Cut It. Also, looking at your house pics, you don't want some yahoo cutting down one of your landscape trees!

He also has a homemade "shaker" to shake the needles out of your tree. It's made from a sickle mower pitman and runs from an electric motor. The kid who cuts your tree takes it to the shaker, shakes it while you pay in the travel trailer next to it. You can enjoy a "free" hot chocolate or coffee after you get your tree (build the cost into your tree price).

They provide twine to wrap the tree for hauling and/or tying it on top of your car.

It's PAINLESS for the customer, and everyone smiles. My guess is he makes some good money from it, and hires only seasonal kids to help. He's a retired teacher, so he has had access to laborers!

They leave their stumps (cut to the ground level by the first cut of the tree) and hand plant next to the stump. It rots in a coupla years.

Hope you can glean something beneficial from this.

ron

 

[scott_vt]

Thanks for the clarification !!!

scotty

 

[mathey]

thanks for the info Ron...

I too am less than 1/4 mile from a busy road, so my "advertising" will be one sign on that road. We are such a small operation, we won't have a shaker, and most likley no baler either. We'll need to control how many people we get at any one given time.

On the other hand, my FIL's operation is huge. Its not unusual for us to handle 300 trees per day there. We have 2-3 people who do nothing but park cars, 2 in the Christmas shop running the registers, 4-5 guys running 2 twine balers and one shaker non-stop, 2-3 "greeters" who greet and point people in the right direction, 3-4 guys running around in trucks picking up trees to bring in (they each have a chainsaw, and will cut your tree if you ask nice or are pretty). This year we had my BIL serving hot food all day along with the complimentary hot cider we've always offered. It's actually a lot of fun, and some of the help is family (3 SIL's, 2 BIL's, my son and daughter and the in-laws)

 

[Bird]

</font><font color="blue" class="small">( you don't want some yahoo cutting down one of your landscape trees )</font>

Many years ago, my parents, along with a 5 year old granddaughter they raised, moved to Anchorage in October. By sheer coincidence one of my brothers got transferred to Elmendorf AFB the same month. So when Christmas came around, my brother and my mother decided to go out in the boondocks at the edge of town and cut their own Christmas tree, and they did. After the snow melt in the Spring, they were out driving around familiarizing themselves with the area and discovered that they had cut the top out of a big tree in a city park. /forums/images/graemlins/blush.gif

 

[SnowRidge]

Must've been a bad snow year. /forums/images/graemlins/shocked.gif /forums/images/graemlins/laugh.gif

 

[scott_vt]

That was a good one Bird. /forums/images/graemlins/grin.gif

Quite a few years ago my Dad was trying to help out my wife and myself knowing we were raising a couple of kids and we were a little short on cash. He had a nice blue spruce growing on his property line and he topped it so we could have a nice tree. What he didnt do was cut it down completely, the next spring his neighbor comes over to him and asks him when he is cutting the rest of the tree down /forums/images/graemlins/grin.gif

scotty

 

[rox]

6or7dazeaweek

I think it is wonderful to start a new enterprise, to learn something new. I do beleive it keeps you young.

One tip, I would think that mostly 25 - 40 year olds would be interested in cutting their own trees. Please do not forget Internet advertising. People that age get 90% of their information form the Internet So while you are waiting for your trees to go you can spend the time deloping a good website.

I use www.NetFirms.com to host the website for our olive oil. I am very very very pleased with their service and price.