Got Land? The Economics Of Timber Harvesting

trees-2Who would have ever thought that buying acreage could offer multiple streams of income.  From rental property, to leasing your land out to farmers or hunters, or even harvesting timber.  For all the environmentalists out there, let me start by apologizing for even considering the harvesting of trees for money.  Make no mistake, I love trees, heck I really love anything that grows on its own.  I recognize that trees have a cherished environmental value, but with so many products made out of wood, the economic value is hard to overlook.  Since this is a blog about finances and not about the environment, I feel I can share my personal experience with the value of trees, from an economic perspective.

So without further adieu, here we go…  I have roughly 8 acres of timber on my farmland.  It is made up of red and white oaks, cedar trees, pines, various maples and willows.   Not to mention, mixed in with the trees is just overgrown scrub brush whose only purpose is a home for ticks and poison ivy.  I wanted to have a few acres removed because in the future I would like to have cattle and they need wide open spaces to roam and to eat.  So, getting rid of this scrub brush was my sole purpose for making the phone call to my timber logging friend.

Nevin, a simple man, who I genuinely admire for his values and strong work ethic came out to the farm for a “walk through”.  He spent 30-45 examining trees, explaining to me the value each had to the saw mills, and building a case for why I might consider getting rid of them.  Up until this point I knew I had trees on the property, but had little knowledge for what they were worth.  So, Nevin being the wealth of information he is, gave me a value of what he thinks the timber would sell for to the saw mills.  $20,000, I couldn’t believe it, and he said this was on the conservative side.  He said that in order for him to harvest the trees, he would need 50% of the sold value.  I thought that was actually reasonable, I mean for someone to cut all those down, load them on a truck and haul to the saw mill, would certainly come with a considerable cost.  This way, Nevin is encouraged to get the highest value for the trees and sell to the saw mills at a time when the wood is in high demand.

So I am torn, I hate to get rid of the beauty that the trees offer.  The fall brings dramatic orange and yellow leaves, and it really livens up the property.  It would also mean less grass to maintain, but grass in its own right provides a picturesque scene, which I like.  So, do I remove the most valuable trees, which will afford the removal of the scrub brush and re-grading of the land to be more conducive for cattle?  Or, do I keep all the trees and retain the aesthetics of the farmland?  I am leaning on removal of about 75% of the trees, that way I can retain the view, but get rid of the scrub brush.  Thing is, in order to get rid of the scrub brush I have to let Nevin have some of the most valuable trees which will offset the harvesting costs.  I had already thought of just removing the scrub brush, but just getting rid of it would cost me about $2-$3000, and that is far above my budget.  I have until the winter to decide, due to the fact that Nevin is too busy right now to remove the trees.  Also, the winter would be a good time to capitalize on an elevated value of the wood.

So, this was a pleasant surprise to know that there is significant timber value per acre, and they are just sitting on my land, looking pretty.  I knew that some of the trees had value, but not enough to warrant the labor of cutting down and removing.   So the moral of the story is, if you are ever looking to invest in acreage, be sure to have someone from the forestry department, or a timber logging friend you can trust (some may try to take advantage of you 🙁  ).  Have them give you an unbiased assessment of what is on the property.  You may be surprised and have a gold mine and not even realize it.

What are your thoughts on my harvesting the trees?

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13 Comments

  1. Jamie says:

    This is a really good perspective of one of the many income prospects land can provide. Deep down, ultimately, my dream is to own a ton of land for multiple income streams. One thing our investment advisor suggested, for when starting to invest in land, is buying some acreage to rent out to a farmer. Because we don’t have enough money to buy a huge farm with land, this would be a good first step into how owning land actually works, plus we’d hopefully learn about soils and the seasons and planting times, etc.. The rent would be great extra income, and maybe there’d be trees we could even harvest too! Now for the trees, I completely understand your reasoning and am glad that you said you’re thinking of removing only 75% of the them instead of all! I, too, love them. One of our goals is to have cattle and alpacas, and I know that wherever we have our pastures, ideally we want trees (enough but not too many) to provide good shade in the summer, but not enough to kill the grass everywhere/hinder growth. I look forward to reading updates on this venture!

    • Jim says:

      Thanks Jamie, I hope you are able to find some good land to invest in, I am looking for more. I would like to find 10-20 acre tracts with a house (to rent out of course) then that allows me to use the land for cattle or planting something. I love it though, I think with a growing population and more mouths to feed, that land will be a premium going forward. Thanks for stopping by!!

  2. There may be an income opportunity there, but I wouldn’t do it. Trees add so much to a property. What about getting rid of just some of them?

    • Jim says:

      I think getting rid of some of them is the answer. I love the look of them, but do wanna make room for cows.

  3. Yeah, I think removing some (as much as you need for the cattle) is a good choice, and a huge investment, and the cattle too will bring in more cash. Great job, Jim!

    • Jim says:

      Thank you Laurie. Yea, you never know how much value the cattle can add in the time of crisis. The trees….Not so much!

  4. Tom says:

    I think you could be asking some better questions here:

    1. What would be the value of trees if they grew another 10 yrs? 20 yrs? 30 yrs? The answer may surprise you.

    2. Could you improve your return if you did some thinning now and a final harvest at some later date?

    Without a forestry plan for your property, it is impossible to see if this is a good deal or not. You might be able to earn 3-5 times as much money over the next 20 years if you did something slightly different, but you need a proper plan to evaluate your options.

    It sounds like Nevin works in procurement, with interests not necessarily aligned with your own. I am not saying Nevin is a bad person or is being dishonest, but is just not the right person to help you make long-term decisions about your property.

    • Jim says:

      Well said Tom, I have been thinking of the future value of the trees and I believe they are more valuable to me today than they would be in 10, 20, 30 years. WHo knows if I were to own the property then. I think that because my reason for the removal is to make room for cattle, rather than for the money, than its the right decision.

  5. Hello!

    I just wanted to let you know that I nominated you for a Leibster award 🙂 I’ve posted it here.

    http://suburbanfinance.com/get-to-know-me-suburban-finance-has-been-nominated-for-a-liebster-award/

    I really enjoy your blogs and hope you participate. Great job so far and keep growing!

    Daisy @ Suburban Finance
    http://suburbanfinance.com
    @suburbanfinance

  6. Tricky one, as you don’t know the value in the future, or what the ecological impact will be in the future regarding soil erosion and such. “Selling the back 40” is an environmental economist conundrum, as it makes sense for the marginal person, but at some point everyone does it and there are no more trees!
    My Dad and some of his brothers bought some land and then logged part of it to pay for it, about 20 years ago now.

    • Jim says:

      Thanks Anne, I agree about the concerns over the environmental impact. I just want to clean it all up to make room for cattle in the future. I am even considering replanting pine trees. Pine trees will take a while to mature, but I really love the look of them. So, needless-to-say, I am still mulling it over!

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