I'm contemplating investing in timber land in New England

[sixdogs]

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.

The odds of buying a piece of land and earning an income stream off it to pay the loan back and leave a little left for you is absolutely zero. Well, maybe if you steal the land for 10 cents on the dollar. Timberland is a maze of tax strategies with income coming after a long holding period with current operating expenses used to offset high earned income from other sources. That tax sheltering of other income is a primary draw.

More than that, there is an invetstment philosophy shift in progress that favors physical assets and commodities over financial assets. So, there's a a degree of "greater fool" thinking going on that prices assets above historical mean, and offers returns below historical, because of speculation that expects price gains to continue. People are now "paying up" because of the trend in place.

The same relative commodity return might well come from owning a Master Limited Partnership of real estate and offered through Wall Street. Look something up in Value Line and research it. Also reflecting commodity gains would be gold or silver, grains or whatever.

Just my two cents here.

 

[dmccarty]

In Maine, the forest management plan that qualifies land for entry into the Tree Growth program must be prepared by a licensed forester. Every ten years, that plan must be updated by a lic. forester and resubmitted to keep the tax advantages. The Tree Growth program is for lands that are actively managed primarily for timber production. You have to do what the plan says you intend to do, within reason.

That stinks that you have to have a licenses forester do the plan. It sure is not rocket science. In NC, at least when I did mine, the land owner could do the plan, pay a forester or the NC forestry department would do one for free. I did not think to have my forester do one, :duh:, but to be fair at the time I did not need one because our land was not in a timber valuation. When our property valuation about tripled I needed a forest plan ASAP. The forestry department was too busy to do mine in time so read up on the subject and did the work. The comment from the tax office was that I had one of the better plans they had seen. :shocked: Which kinda shocked me. They liked my map of the different tree types and plantings I had done so I guess three years of drafting in high school was worthwhile! :laughing::laughing::laughing:

Later,
Dan

 

[dmccarty]

...
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.
...

The Independent Sawmill and Woodlot magazine I mentioned earlier has a "shoot out" every year on portable sawmills and firewood processors which is interesting.

In high school I worked for a man who owned some farm land but he did not live on the place. He had bought it to develop a subdivision along the Ohio river but Indiana decided to put up a nuke plant just down stream from his place which ended his plans. I have used Google Earth to look for the farm and best I can tell someone drained the lake he built which emptied into the river and built a marina. I wonder if it was him....

Anywho, his main income from the farm was cattle, a bit of leased farm land, and cordwood. He had timbered the saw logs and then was going back in and taking out the trees for firewood. He cut down the trees and skidded them out with a small bull dozer. I split the wood and after that summer I never want to bend over a log splitter every again. :laughing: We went up to the farm a couple of times a week. There was an old farm house we stayed in, no AC and the phone was a party line. You knew when a barge was getting close to the house because their radar sweep would show up on the TV. We would work for a few days and then go back home. On the return trip we would hall a truck and trailer load of cord wood. At the end of the summer he would rent a U Haul which we would half fill with fire wood and haul it out a load at a time. He had a place in town were we dumped the wood and from which we would then distribute to his customers.

He tried to haul out with a semi trailer one year but the farm was river bottom land and the truck could not climb out of the valley because the road was too steep so he started renting a U Haul.

The firewood processors today are soooo much more efficient than what he had which was just like the models at HD or Lowes. The processors can split out some firewood ASAP. The problem I see for you as an absentee owner is that I would think people would steal split wood. The farm I lived on was isolated at the end of a road and had multiple gates. Where we split and left the wood was well out of sight and not easily found. There was one way into that place and one way out he did not have theft issues.

One would not need a huge amount of money invested in equipment other than the something to skid the logs and a processor. I certainly would just rent a truck when needing to move the cord wood. Where to store the wood would be an issue.

Later,
Dan

 

[dmccarty]

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.

Your point is well taken but it can be done because we did it. :laughing::laughing::laughing: But you have to move fast and you have to have a prepared for some games. The first piece of land we wanted to buy had been clear cut and put on the market. I don't know why they put the place on the market because the subdivided it and were going to put the lots up for sale. We wanted to entire parcel but they would not sell. :confused3: Another parcel was owned by two guys who were were playing the Buy Land with Timber, Clear Cut Timber, Sell Land game. They would not sell until after the logging and we did not want it then. They were also taking out some short term loans to play this game and I have always wondered how long they were able to play before they made a mistake. The parcel we bought went on the market one afternoon, we were on the place the next day at sunrise, and I do mean sunrise, and we had contract to the seller that night or the next day. Back then, we had learned that you had to move fast or the land was gone ASAP, which certainly is NOT they way it is working in our area today. Land is on the market for years now.

Before our place was on the market, I was researching parcels at the courthouse. I was looking for land in a certain area, of a given size and owned by people out of state. I was making a list and checking it twice. I was about to start sending out letters when our place showed up for sale. One can find some buys, even back then, but one has to put in the work and when it is time to move you have to be quick.

The established players in the area now each other and the system so the new player can be at a disadvantage...

Later,
Dan

 

[dave1949]

That stinks that you have to have a licenses forester do the plan. It sure is not rocket science. In NC, at least when I did mine, the land owner could do the plan, pay a forester or the NC forestry department would do one for free. I did not think to have my forester do one, :duh:, but to be fair at the time I did not need one because our land was not in a timber valuation. When our property valuation about tripled I needed a forest plan ASAP. The forestry department was too busy to do mine in time so read up on the subject and did the work. The comment from the tax office was that I had one of the better plans they had seen. :shocked: Which kinda shocked me. They liked my map of the different tree types and plantings I had done so I guess three years of drafting in high school was worthwhile! :laughing::laughing::laughing:

Later,
Dan

It can be complicated here. The mapping required with the application has to show several things. Wetlands, stream banks or other areas not able to be harvested, the type of wood growing: conifers, hardwoods, or mixed growth. Roads and access points.

I have a good idea of where those things are on my land, I don't have the GPS and mapping tools to transfer them to paper. It would be very difficult, but not impossible to get accurate measurements by older methods. It would be very time consuming. I not sure how accurately I could determine the harvest-ability of some areas.

The tax value of the land is based on the type of wood, conifer, hardwood, mixed. The forest service establishes a value per acre, for each of the 16 Maine counties, for each of those classifications. That is what your property tax bill is then based upon if the land is enrolled in Tree Growth.

That said, I think the real value of the forester comes from things like knowing what mills are looking for and at what price. Which logger has the right equipment for the job. Which logger should you never hire. Judging soil and moisture characteristics to determine the best species to plant or promote. Knowing how a sawlog will grade out by the scaler at a mill, how to get the most value out of a tree when it is cut to length. When is the optimal time to harvest, thin, shelter cut, etc. Those are all things I am definitely clueless about, and I am not going to become an expert by doing it once every five or ten years.

 

[keegs]

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.

From the original post I got the impression you might be open to other ideas. Some of the responders seem familiar with the variables involved with timber harvesting. My sense of it is, if you have to finance the land purchase and any capital investment you'll need for the harvesting it will be difficult to break even let alone make a profit.

I really enjoy being at our place in ME. I enjoy the wildlife, the big skies, the openness, the freshness of it. I look forward to the summer projects (I'll be dredging the pond this year to make us a swimming hole). There's a large Mennonite community where we are. Our neighbors are self reliant, industrious, solid folk, many of them farmers or mill workers or craftsman.... It's hard to put a value on all that but we aint gettin any younger and it's lots of fun.

Good luck to you Jim on whatever you decide.

 

[clemsonfor]

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.
.

Im not trying to pick an argument here...but this is a really strange quote?? I very odd idea about who foresters and state licensing programs are about.

Yes you are correct I do not like to see over mature trees sit out there and just blow down or rot over. But then again me nor every other forester do not think that we have to cut every single tree on the landscape either. Letting nature run its course on a tract is fine. Especially like I said if the person paid me to write a plan with a do nothing attitude/plan. We were taught in school that you "do what the landowner wants" after all your working for the landowner. NOw if you work for a government agency they are the landowner, if you work for private folks they are the landowner, if they request to let it be, then you let it be. I of course would lay out a normal or even delayed harvest plan as well as go over tree growth cycle and times as well as explain stand growth as a whole actually will go down after a period of time as your mortality factor out weighs the growth component of the stand, but as a professional its not my place to "convince someone to cut or harvest their trees, on the terms of keeping my license". I work for them if they choose to let It be than that's what I do. It can even entail me monitoring it for them once a year for trespass etc for a fee?

We don't pull a lawyers license for representing a rapist or child molester do we, and if proven guilty that is way worse than letting some trees rot.

 

[sixdogs]

Originally Posted by dave1949

In Maine, the forest management plan that qualifies land for entry into the Tree Growth program must be prepared by a licensed forester. Every ten years, that plan must be updated by a lic. forester and resubmitted to keep the tax advantages. The Tree Growth program is for lands that are actively managed primarily for timber production. You have to do what the plan says you intend to do, within reason.





Not sure if things changed and I'm not aware of it but I had holdings I put into in the Maine Tree growth program, which is really no more than a reduction in market value that reduces property tax rates. The idea is to promote growth of timber for future harvest.
If there ever was a requirement that a licensed forester be involved, no one I knew made a big deal of it. I sure didn't, was in the program and never had a formal plan other than let the trees grow.

 

[crazyal]

I haven't looked too much into VT's program but it seamed to me that it's more about money. The state reduces your property taxes but gain on the sale of the timber through taxes. There's plenty of land around here that's ripe for logging yet the owners are just sitting on it for various reasons. It looks to be a way to force owners to farm the land or harvest the wood. To me a good program would be one that keeps the land open for hunters and other non vehicle recreation. I started looking into putting my land into the program but the taxes are not that great. If I owned 100s of acres it would be very different.

 

[dave1949]

Originally Posted by dave1949

In Maine, the forest management plan that qualifies land for entry into the Tree Growth program must be prepared by a licensed forester. Every ten years, that plan must be updated by a lic. forester and resubmitted to keep the tax advantages. The Tree Growth program is for lands that are actively managed primarily for timber production. You have to do what the plan says you intend to do, within reason.





Not sure if things changed and I'm not aware of it but I had holdings I put into in the Maine Tree growth program, which is really no more than a reduction in market value that reduces property tax rates. The idea is to promote growth of timber for future harvest.
If there ever was a requirement that a licensed forester be involved, no one I knew made a big deal of it. I sure didn't, was in the program and never had a formal plan other than let the trees grow.

How long ago was this? The Tree Growth program is diddled with by the legislature every session. Plus some towns, where you submit the application, will administer the program differently than others--whether they are following the rules or not. I can only tell you what the current rules are.