I'm contemplating investing in timber land in New England

[jim_wilson]

There's been a ton of great responses in this thread - you guys have given me a huge amount to think about and research.

Thanks for the links Dave1949 - I'm going to follow up on some of those and check out swoam.org and the others you sent.

Maybe a little clarification on my intent is in order here.

In about a year - my house will be paid off , and (assuming I still have a job that is) - I will have an income stream that I want to do something with other than just piss it away on toys and vacations. I've basically looked at all sorts of "investments": 401k's, gold, stock market, property, rental property, etc. Everything has it's issues - obviously, but I've already gotten burned pretty good on the stock market before, and have continued to follow it even since then, and as far as the 401k / IRA route - quite frankly I just don't trust the government and the economy to now completely screw that up going forward. There's a whole bunch of issues around what a lot of people think of as "traditional" investment vehicles (IRA's & 401k's) - that make me not trust them going forward.

I've also thought about rental property - and that is high in running candidate list of a place to "invest" money. I know people who have done pretty well with this - and I am as handy as any contractor I have run into over the last 20 years - having done some pretty intensive renovation and construction projects basically on my own over the last 15 years.

But I've read that timber land can be a good investment. So what I was searching for was the nuts and bolts of what would make that so. My first off the cuff impression was that the whole rule of thumb that you can get approximately 1 cord of wood out of an acre - per year in perpetuity - might be correct. I've read this in numerous places - and I just took down a number of ash trees along the propery line of my suburban 1/2 acre lot last year - which yielded probably a cord and a half of burnable wood.

Cordwood around here (Boston area and about 20 miles outside Boston) - can go for about $250 on Craigslist. There is a sizeable and growing market because more and more people appear to be heating with wood - even here in the densely packed suburbs.

I realize that making money from cordwood means basically doing the work myself as that is the only way that it could really be profitable. That would mean investment - likely a heavy investment, in such things as a wood processor, a decent sized tractor, a large truck to haul "good" loads of wood (not a 3/4 ton truck to haul 1 cord at a time) - etc.

My thought process was that timbering a lot for firewood might basically pay the loan on the property on an ongoing basis.

But maybe that's not the way to look at this. Maybe I am better off just finding a decent lot - and just sucking it up and "investing" the money into it - on the premise of a payday in the future.

Maybe timber is just too risky of a venture - that's what I'm trying to find out.

I picked Maine because there are large tracts of land for sale up there. But it's possible that I might be better off going to NH - or even Western MA or CT or something like that. Maybe I just have "Maine" and " trees" stuck in my head.

I knew about some of the firewood importation into Maine restrictions - I am not sure if there are restrictions going the other way (like from Maine back down to MA).

 

[DieselnHooters]

Oddly enough, timber value is not the leading reason people purchase/own wood lands in Maine in the 20-200 acre sizes. They place more value on outdoor recreation, habitat, conservation, solitude, green space, hunting, etc. It worries the forest service because it represents a major shift in what people expect the land to produce and feed into the wood-related businesses. Maine is ~90% forested and state-wide, the harvest is below the replenishment growth rate.

I am probably a good example of that. I don't expect to ever make a dime off my 150 acres from timber sales. It has been high-graded at least twice in the past 50 years, it will be a long time and a lot of work before it becomes the woodlot it could be. It won't happen in my lifetime. But, I didn't buy it with any intention of getting into timber sales. And I bought it at a price that reflects its degraded timber production value.

Developing and maintaining productive forest is really a multi-generational endeavor I think. Eventually, with the right care and time, the land will reach the point where every harvest is bringing in premium payments due to the quality of the trees and promotion of the more profitable species. Very few smaller private woodlots are going to get that treatment because someone has to work essentially for nothing for the first 30 years to reach that stage. How can that be sustained other than as an expensive hobby?

Good post and all very true but it is still amazing what part-time selective harvesting can do. My 40 acres had been mostly clear cut 10 years before i bought. I started by eliminating the undesirables, then draining while building the logging road and finally thinning. The place is now spectacular 15 years later. If you add the investments to the initial purchase price I easily doubled my money and enjoyed every moment even at ¢.50/hour lol

I have a place near me that put up deer exclusion fencing to protect their wood lot.
Clear cutting is an option, and many times a good option for a wood lot, but here if I was going to do that I would be left with beech and poplar. The deer would eat everything else to the ground.

Too many deers are indeed a curse in a woodlot like there are some large white pines here and plenty of sprouts but nothing in between, they will devour anything that pierces thru the snowpack .They move to something else in the summer, they also do love those maple buds, luckily there are so many some make it to heights they cant reach.

 

[sixdogs]

We lived in rural Maine for decades and owned woodland and farm fields so can offer this commentary. Being an out-of-state landowner the locals with use your property at their discretion regardless of how you have it posted. Think four wheelers and trash dumping like stoves, etc. Plus, some of your best trees will likely be stolen when adjoining parcels are cut by loggers.

Nope, not for me unless you buy a really large amount that justifies the payment of a forestry management group. Better to buy stock in a timber company, management or royalty partnership.
In my view, farmland in the midwest has a much greater appreciation potential, greater cash flow income and the farmer has a vested interest in it's pristine condition. Trees need good economic times to pay the big bucks but people eat 24/7 and food inflation makes the price--- and rent--go up.

 

[jim_wilson]

What about renting?

I've had many offers from local farmers to rent some or most of my property to farm potatoes, soy, wheat or to raise beef. For farming purposes in northern ME where land is plentiful and cheap you can expect rents to be about $50. per acre per year.

There's a cost though to putting up fencing, animal odors, noise, some loss of privacy, exposure to chemicals ...etc. that might put some folks off to the idea.

I've also contemplated buying farmland - and finding somebody to rent it back to.

I'm not sure how exactly anybody makes money on that deal though. If I buy a piece of property - I'd like to (as with any rental property) - be able to pay back the loan with what I make on rent (and then some). I suppose an economic case can be made to justify taking less in rent than you are paying out in loan and tax payments - based on some sort of formula on what future returns would be once any loan on the land was paid off - but if that was so I would think any farmer local enough to the land to want and rent it - would have been looking to just buy the land himself.

 

[dave1949]

We lived in rural Maine for decades and owned woodland and farm fields so can offer this commentary. Being an out-of-state landowner the locals with use your property at their discretion regardless of how you have it posted. Think four wheelers and trash dumping like stoves, etc. Plus, some of your best trees will likely be stolen when adjoining parcels are cut by loggers.

Nope, not for me unless you buy a really large amount that justifies the payment of a forestry management group. Better to buy stock in a timber company, management or royalty partnership.
In my view, farmland in the midwest has a much greater appreciation potential, greater cash flow income and the farmer has a vested interest in it's pristine condition.

Good observations. There are valid reasons why farmers deserted Maine enmass and headed for the Ohio, Kentucky, Illinois, Indiana, etc. 100-150 years ago once the railroads and Erie Canal made economical shipping possible. I'm afraid the trend is continuing. Maine and W. Virginia are the only states where deaths exceeded births last year. Maine has the oldest average resident age of all states.

 

[jim_wilson]

Every lot has it's own individual history and potential. For example a lot that abuts mine of about 150 acres was purchased twenty-five years ago by a banker from Boston. he had it heavily cut getting most of his initial purchase price back immediately then went through the planning and approval process for current use and the plan was to just let it grow for twenty years. In the mean time he has built a rather nice house they consider a camp and a pond and has vacationed and hunted on the property for years while property prices tripled. Two years ago a wind storm made a mess of the wood lot and a salvage operation gave it what amounted to an eighty percent cut. and I'm sure the plan is to let it grow for another twenty five years. The Bankers sons have a nice piece of wealth that costs them little to maintain beyond the taxes on the camp and two acres. They probably got FEMA money on the salvage cut so made out OK even on that.

That's along the lines of what I was thinking my strategy might be. If the carrying costs of the property were kept low - either by an initial cut that pays down the purchase price substantially - and I could put up a small camp and use the land for "recreation" in the mean time - while the timber is growing back - then I could justify the carrying costs of the land as a long term "investment".

 

[crazyal]

One thing I would point out is that there are loggers who do exactly that. They find property that they can log and get as much of their investment back as possible. It keeps them in work while logging it. Once it's logged they might sell it off and move on or put it in land use to reduce the taxes. These are the people who you will be competing against. They can walk the land and determine it's timber value, their lively hood depends on it. It would be hard, but not impossible, to find land before a logger.

 

[clemsonfor]

Living in southern NH, in a small township we know the value of our land and trees. I would try to figure out the area you desire to purchase land in and then check the towns home page. I am sure you will find there is a Forestry link on the page. When you start cutting trees in our town there is a fee to do so if it is timber wood. I am not sure just what it is, but it is there and the town will want to collect.

A friend of mine is a Forester and travels all over the state inspecting and marking trees for cutting. Selective cutting improves the forest value and preserves the natural beauty of the land. Past history has proven that many "buyer land speculators" come in buy up prime land and clear cut the property.

We are all afraid of that and once the trees are cut there is little or nothing the state forestry department can do to the person. This actually happened on our property where they came in cut right up and over the property line and chipped every bit of the wood for the steam plant.\ leaving the property in very poor shape with water run off problems and very unsightly.

Here are a few links that you might find interesting Oh and I am not a tree huger just like things to change slowly, very slowly.

Wayne

NH Forest Society

Forest Society: Welcome

NH Board of Foresters

NH BOARD OF FORESTERS

This is the link to our towns home page Once there you can go to the pull down window and find the Town Forest Committee.

Dunbarton Website:

Town of Dunbarton, New Hampshire USA

Town Forest Committee
Town Forest Committee

Your past experience has swayed your views. Different forests require different mgt techniques. Clear cutting at some point is the only option. For one you will get a better stumpage rate on a clearcut vs several thinnings over time. The reason is that its more efficient to cut it all at once. That said if you have a bunch of weed or low value species that are limiting growth on crop trees you will want to do a marked thinning. Without adequate regeneration you can only do so many thinnings before you need to clearcut. Also if the species diversity is more swayed to low value trees and or poor formed target species you will cut your losses and restart over today so that your no longer wasting time on low value trees. Also remember that trees are sustainable, cutting and oak or maple or cherry will not kill it, they resprout from the stump and eventually will develop a tree, if your labor intensive you can cut the suckers off and allow the best coppice sprout to live and thrive. This is why you have a forester who knows the area, I don't do hardwoods, I am a southern pine forester.

That said there still can be mismanagement.

Also I don't know your state but in SC if some one commits a "timber trespass" when taken to court the restitution is 5x stumpage value. There is a way to determine what was taken from the surrounding timber and doing what is called a stump cruise.




AS far as the income stream question that the guy above you asked, that is the loaded question that every one askes. There have to be many assumptions made about an area, the land fertility, and future markets (which are always based on todays price with some conservative interest rate applied to it). Not knowing the area and grade hardwood and the thinning regimes I will not even fathom a comment on that. Like I said I am a forester but I deal in pine. Yes we have hardwood, but never, grade HW, most HW is sold for pulp and the logs almost always go to a pallet mill, and then a super small percentage will go to the sawmill for things like flooring and boards.


VTsnow.... first there is no FEMA money for storm damaged timber??? And second this is kind of branching off your banker neighbor and what others referred to about mgt plans. A management goal and plan can be to do nothing, period. If I was to write on for someone for just say tax purposes and they were a naturalist type person that hated logging or human intervention I can write a plan for the next period of time or in perpetuity that basically says that the landowner chooses to do nothing and let nature take its course. This is a professionally accepted plan as that's the goal of the owner. This is a free country and no state call tell a landowner what he has to do with his timber. You can have any variable to this plan as well, meaning you are to do nothing except salvage harvests, which would be in the case of insect damage, storm damage, or fire.

 

[clemsonfor]

Yes most timber companies, foresters, consultant and all the TIMOS and REITS will snap up good "deal" land when it comes on the market or is reduced to a rate where purchase becomes possible. It is still a possibility to find land then clearcut it to pay for the land but harder than ever. Use to be 30-50 years or more ago you buy almost anything around here and pay for it by clearcutting it, but that's changed today with just a few diamonds being around anymore. One did come up for sale a few years ago a few miles from my house though. I talked to the forester whos company was clearcutting it for the new owner. He told them what he paid for it and they about received that in timber revenue from it. THe guy I knew said if they had know about the tract they would have bought it and cut it then sold it. most of it is about having the money at the time and being able to jump on it. I am only 30 and will neber probably have the money to buy any land period, but when I was in school, there was a tract that we knew the owner of. He sold it for like $650-900/acre for 350 acre tract. I just don't remember how much as it was over 10 years ago. Had I had the cash or convinced an investor I could have done pretty well for myself and could be a millionaire now if I could of bought it. I could of bought it and thinned it and got about 1/5 of the money back on that and then chopped off the road frontage lots for those trailer lots and received profit there while maintating 99% of theland base. Then clearcut the tract in another 8 years or so then sold it off for more than I paid for it at the time.

Just have to have money and be ready to pounce.

 

[dave1949]

You could have a management plan here under the Tree Growth program that says do nothing, or next to nothing, for the next 30 years if that is what fits the management needed for the land involved. But since the idea is to promote the timber industry, eventually it will be harvested if it stays in the program. I don't see many foresters signing off on letting over-mature trees rot standing in place if they want to keep their licenses.

It is possible to convert land in the Tree Growth program over to the Open Space program without paying a penalty.

Maine has other land conservation programs that would be a better and more honest fit for those who want no harvests. I've run into people who, on principle, don't participate in any tax-saving land programs. They don't believe in the concept.

In Maine it's definitely true that what the town doesn't collect in taxes on one piece of land, they have to collect more taxes on the rest to make up for it. We do get a state reimbursement to the town for Tree Growth tax reductions, but of course that just comes from other taxes, mostly income.