Land/forestry investment?

[2Black]

Does anybody here invest in land and or forestry?
If so, can you let me know if you use a company to handle this and which one, perhaps a link or name etc.
And where can I find other resources relating this subject,
Perhaps a review site of various companies that offer land/forestry investment, what they handle for you, etc…

Thanks.

 

[cooch96]

DF tried to set up a teak and mahogany forestry in Honduras. Utter disaster: mismanagement, mudslides, blight, local corruption. When DF complained that he couldn’t scrape enough money together to buy a chainsaw for culling and thinning, I knew I wasn’t going to see a penny of my investment ever. I believe a couple of my uncles got taken for much more.

I’d suggest Weyerhaeuser. They are a large lumber industry based in the NW that manages much of its own forestry.

 

[MRG]

+1 on WY!

-Zero on anything else.

Seriously stay away, this is not for the meek. I spent ten years logging and in mills. The individuals I met they were not known for honor.

I know a guy, who did run a mill producing most of the Black Walnut in the world. He had a contract of being owed a million dollars if certain production goals were met and they were. The owner filed for bankruptcy later that week.

My career was full of similar sad deals where folks bought a pig in a poke and complained about the bacon.

 

[tps7742]

I was raised in an area where forestry was a major industry and just retired back to this area to live. I am not sure in which manner you were interested to invest in but personally I would stay away from it. Property with timber on it already is expensive, even though they have "pine" timber that has been genetically altered and grows faster it's still a long term investment IMO. The saw mill and logging end of it is not for the meek, equipment is expensive and high maintenance due to the nature of the business. Trying to stay politically correct, the people that actually do the work are of a certain culture that have different work ethics than other professions. I am not sure if this was helpful or not but use caution.

 

[racy]

We invest in farm land via Deeds of Trust purchased at our local realty agency. These give us part ownership & interest in a promissory note held by the realty agency. The note is secured by the farm land. Current interest we're getting, weighted average over several years we've purchased, is 3.9%

 

[OldShooter]

...invest in land and or forestry ...

Ack! Danger lurks!

As @cooch96 suggests, your best bet is to invest in a publicly traded company that holds a lot of land.

Buying land locally where you understand its potential is an alternative, as is buying a mini-storage operation on a busy near-suburban highway. (Mini-storage is a classic way of speculating in land because the build-out is cheap and the income can cover carrying costs.) Neither of these options permits any real diversification of the investment however.

If you can find a publicly traded company that does mini-storage that might be a possibility too. Do NOT go for private deals; there is too much chance of fraud. The good news here is that a public deal that has been in the market for a while will have an audited financial track record and a record of the market's judgment of its value.

If you find a deal that comes with a color brochure and a salesman, run. It is absolutely guaranteed to be a stinky deal or they would not have to sell it this way. The promoter would simply have sold to his friends and eliminated all the selling costs. These are almost always private deals (= unregulated, opaque) but even if an IPO came along I would wait a year until the market had determined its real value.

In the unlikely event that you find a local deal with the offering paperwork on plain 8 1/2 x 11 black & white sheets, that would be the ONLY kind of thing I would even bother to invest due dililgence time in. Local gets you "a throat to choke" down the road. Local gets you the ability to determine whether the price on the land to be bought is reasonable (start with its assessed value from the county). Local means you know something about the potential of the general area. Have an accountant go through the numbers and have an attorney look at the contract and do a thorough background check on the promoters. Then cup those dice in your hand, blow on them, and decide whether to roll or not.

 

[MRG]

Trying to stay politically correct, the people that actually do the work are of a certain culture that have different work ethics than other professions. I am not sure if this was helpful or not but use caution.

Well said. To expand on your point, there was a time I bought walnut logs that were delivered to the mill I worked at.

We had quite a few loggers and you got to know the guys. There were two that absolutely hated one another. I never knew what happened, but the one guy wanted to take a life insurance policy out on the other as he knew some landowner would end up shooting him.

To my surprise one day both showed up with a load of logs, they were logging together! Each was a 50% partner on this job. I didn't ask what happened to resolve their multiple year long fight.

The next morning only one came in with logs, the other was late in the day. I asked about the schedule. Turns out after the first load, they were stealing from the other! They both knew it! The second logger told me he'd waited for hours while the first one loaded his truck!

 

[Breedlove]

I have a small timber farm Pine trees . Greatest thing I ever did. I get a fantastic Ag exemption , lots of good management and planning help .

Like I said mine is small a very good friend of mine has 3000 acres in Mississippi and he loves it. Not a lot of work and with the small not a lot of money . But we really love ours.

You can go to the county court house and find recommended foresters and they are not expensive.

 

[FIREd]

I have some land/forestry investments - but this is the family business. From owning/managing forests to the finish product (fire wood, lumber, or even kitchen cabinets), "we" do it all (I am not active in the business). Growing up in this environment, my very first investment was a piece of land (still own it). My view is that it is a lot of work for the money you make. At the moment they are dealing with pine disease and tree theft.

But you can get lucky. My grandparents owned a farm. The land was not worth much at the time. But the nearby city has expanded over the years and the land has become very desirable. Without putting too much work into it (beside keeping it looking pretty) land prices have gone up 2 orders of magnitude within the last decade or so. My dad will probably be the one cashing in by selling to a real estate promoter.

 

[Fermion]

We bought 30 acres of timber land. Cheap and fun to walk around and camp on. $29 a year in tax.

When we sell it, it will probably have kept up with inflation. We could log it now for about 20% of the purchase price in timber.

It is probably a better investment than CDs but I would rather have money growing faster than inflation.

 

[MRG]

At the moment they are dealing with pine disease and tree theft.

+1

Diseases and theft are very real. When I was buying walnut theft was common. Guys would run around in boom trucks, harvest a big veneer quality walnut and take the veneer log and drive off.

Heck our logs bought in the field had plastic inventory tags on them. People would frequently bring in a log with our tag to sell me! I'd just smile and "buy" it from them, paid with a sight draft. When the bank called, the comptroller would deny it to the bank, explaining the logs were stolen from us. Only a few ever came back to complain, those that did were threatened with the police becoming involved.

 

[target2019]

This subject has come up before. We went with PKG and IP instead of investing in land and forestry. Both companies are classified as "materials" and have a variety of products manufactured from pulp.

 

[Winemaker]

DMIL worked for state forestry for years; I had asked for advice about buying land to plant black walnut 35 years ago. The folks she hooked me up with persuaded me not to get into the business; they were just barely making money on family owned land.
Presently around these parts, loggers come in and look at timber that will be in right of ways for gas and oil pipelines, to get the quality lumber. Then when the pipeline timber men come through, they buy up what is cut down and sell/dispose. Currently, timber prices are low because of supply glut.

 

[powerplay]

I had an uncle who bought timber land over the years. He did well with it, but he started 40 or more years ago. He is now dearly departed and the holdings are part of his trust with criteria for logging only a certain % a year. The time to do this is pretty much in the past. Like others have suggested look at a company like Weyerhaeuser to invest in.

 

[Brat]

Years ago Pope and Talbot spun off its real estate holdings, I wish I could recall the name.

There is Rayonier, Potlatch, Weyerhaeuser are all now REITs. I think the Pope & Talbot real estate was trying to do some development but I don't think it proved profitable.

 

[MOSAT]

Timber and land is a “shoulda, coulda, wished I did a” thing with me, or “The one that got away.” Years ago DFIL, forester for a mega land owner paper megacorp, told me he could set me up with 100 acres of “prime hardwood” along a cliff next to a river for $100/acre. Pros: land was very inexpensive, lots of good hardwood, DFIL really knew his stuff, he couldn’t buy it(some kind of contracting thing), buy land they aren’t making anymore. Cons: First was the biggest. I was just out of college, newly married, and where the heck was I going to get $10000? I’d have to pay a reoccurring, fee called property taxes, it was land locked, no road to access the property, others owned the surrounding acres.

Fast forward 10 years, the land is now prime real estate, in high demand from “city slickers” looking for a second home in ski country. The guy that did buy it was now selling the river over look lots for $20,000 an acre, back lots for $10,000 a pop.



Ya, and that bridge I bought, got it cheap! Sigh, so it goes!

 

[street]

Didn't buy timber land but bought a small farm irrigated farm 20 plus years ago. I rented out the biggest part of the land but farmed a small road side garden business. This was a fun sideline stress relief venture and was a profitable journey. I sold this farm a few years ago and made 14 X what I paid for the property. Real estate has been very friendly for me. I got lucky and found the right buyer.

 

[Brat]

In Oregon land that has potential for vineyards is hot property. California vintners are shopping with thick wallets. The bottom line in my state is that over half of our land is owned either by the State or Federal governments and they aren't managing the forest resource wisely (think lots of fuel for forest fires). We have urban growth boundaries to contain urbanization and protect prime agricultural land. If you have the cash, knowledge and a long time horizon buy ag land west of the Cascades and lease it to nearby farmers.

 

[2Black]

Hi guys,

Thanks very much for all the replies.
Interesting to read.
So most advice is to stay away from it.
With some who made a profit, mainly I think because of trust/knowing a friend, etc…

Regarding Weyerhaeuser, thanks for the tip, what i understand its a stock (ticker: WY) but to be honest I’m not impressed by it.
It crashed in 2008 like all others but spy did a far better job if you compare the last 10 years or so..
Even with dividend taken into account, you may be better of with spy.

Again thanks for the replies!

 

[MRG]

Good luck.

Last night I was looking at logging equipment manufacturers. The smaller companies I was familiar with seem to have been brought up.

Looks like John Deere and Cat have bought up some of the smaller companies (Prentice, Timberjack....).

 

[Brat]

The names of the forest real estate firms was not a recommendation, it was simply information. Years ago I did consider the Pope & Talbot entity (I knew two Pope executives who were excellent) but invested in index funds. The problem with wood products/forestry, like the shipping industry, is that the business is cyclical and subject to ever changing environmental regulation.

Disclosure: I am a native Oregonian and grew up during the zenith of the wood products industry. My grandfather was a partner in a sawmill in Oregon (he died when I was very young). The most profitable wood products businesses are privately held.

 

[target2019]

Regarding Weyerhaeuser, thanks for the tip, what i understand its a stock (ticker: WY) but to be honest I’m not impressed by it.
It crashed in 2008 like all others but spy did a far better job if you compare the last 10 years or so..
Even with dividend taken into account, you may be better of with spy.

SPY is usually much better than one bet. Forestry is a 30-year investment, I believe.

 

[Brat]

Unless you can find land with harvestable timber ripe for development.

 

[nwsteve]

Hi guys,

Thanks very much for all the replies.
Interesting to read.
So most advice is to stay away from it.
With some who made a profit, mainly I think because of trust/knowing a friend, etc…

Regarding Weyerhaeuser, thanks for the tip, what i understand its a stock (ticker: WY) but to be honest I’m not impressed by it.
It crashed in 2008 like all others but spy did a far better job if you compare the last 10 years or so..
Even with dividend taken into account, you may be better of with spy.

Again thanks for the replies!

Actually owning Weyerhaeuser or any other the timber REITS is a great but conservative way to participate in the long value of timber assets. Plus from WY you are getting a 3.3%+ dividend without all the asset risks of actually owning the asset directly. Also important to appreciate timber is a unique asset that actually compounds in volume and value every year. Most assets depreciate and loose value. Universities and pension funds really like timber as an asset class for their portfolios due to its unique properties
I worked 20 years at WY early in my career and have followed since. The WY of 2017 looks nothing like the 2008 version. In 2008, WY had significant operations in pulp and paper as well as a 6 major home building companies under the umbrella of Wey Real Estate com. Since the new CEO took over, all the assets but the timberland and wood product mfg/distribution are now gone.
Weyer is now the single largest private owner of timberland in the US. Also of note is their timberland quality is exceptional in terms of growth capacity and geographic diversity (major blocks in the W Canada, US West, So Central, SE, and NE). Certainly not going to compete with the FANG stocks but does offer a low beta, reliable vehicle for accumulating long term appreciation while paying an above average dividend.. There are more detail reviews of the company on seekingalpha.com

 

[AndyS]

I have a small timber farm Pine trees . Greatest thing I ever did. I get a fantastic Ag exemption , lots of good management and planning help .

Like I said mine is small a very good friend of mine has 3000 acres in Mississippi and he loves it. Not a lot of work and with the small not a lot of money . But we really love ours.

You can go to the county court house and find recommended foresters and they are not expensive.

Here's the only personal experience I have knowledge of.

When my Dad passed away some 20 years ago my brother, sister, and I all lived States away from where we grew up in Mississippi and all of us knew we would not be moving back there. To simplify splitting up the estate my brother offered to buy-out my sister and my shares of Dad's 70 acre farm, which at that time was about 30% timber. My brother had the rest of the land set out in pine trees.

A few years later he bought an adjacent hundred or so acre parcel at a "right price" that came up for sale from which all the timber had been cut on & had pine trees set out on that. Doing this several more times over the years whenever a nearby parcel came up for sale "at a right price" he acquired about 500 acres altogether and all currently set out in pine trees in various stages of growth.

He's pretty much managed the whole thing himself all this time. He also benefits from always having had a very good paying job combined with a modest lifestyle that allows him to have cash to throw at this "investment" when needed or desirable. He recently had a "thinning" done, (necessary because he was getting pine beetles in some of his timber), from which he profited a sizeable sum. Whenever he does start having his timber cut in large quantities on all of the land he'll have a really big payday.

But mind you ... he's been in this "investment" over 20 years, with few paydays. So yes, it can be profitable if done correctly. But it's a long term investment. Very long term.