I have done some further investigating into the harvesting of timber on my farm, and I thought I would share the details. I ended up having the department of forestry come out to analyze the hardwoods, they looked them over, measured the diameters, and marked nearly every tree on my property. What a great deal, they spent nearly 4 hours looking at 150 or so trees and didn’t charge me a red cent! Come to find out, this is a free service available to the fine taxpayers of this great Nation! Anyway, based on their analysis they determined that, at one time or another, there were cattle grazing on the property. Because of this, there is a considerable amount of minerals in the soil. Apparently, the soil minerals do not add value to the timber, which is contrary to what I would have thought. The forestry department recommended clear cutting the trees, meaning cut the entire inventory down to the stumps. They said, by doing this, it will allow for the new growth of younger trees. Currently, they younger trees are being shaded by the older ones, and are not growing at a healthy pace. So, by clear cutting the older hardwoods, it will spur growth on the younger stronger trees. They also noted that, the older hardwoods have weakened over the years and eventually will fall fairly easily, in which case would lower their value. They pointed out that the value of timber is high right now, so don’t be foolish, harvest the timber now!
So where do I go from here?
Nevin, my logging buddy, will be able to harvest the mature trees in the next couple months. He provided me with 3 references, who I called, and each had high praises for Nevin, so I feel very comfortable with him doing the harvesting. Nevin thinks, that with good weather, he can harvest all the trees in a month, all while working alone. Amazing, he is one hard working man, the guy never stops! We have tentatively agreed on a contract where he would take 55% of the profits and do all the work to harvest the timber, and I would receive 45%. I got another bid, which was pretty comparable, so it must be normal to get less than the logger. I can’t even imagine the amount of work required to cut an 80-100 foot Red Oak down, then trim it down to a more manageable size, move it at least 500 feet up a hill, load it on a truck and deliver it to a saw mill. Then repeat this 149 more times. I’ll take the 45% and not look a gift horse in the mouth! Truly, I would do the deal even if I was only getting 20% of the profit, because my objective is to clear the land and replant pine trees.
Just then, a new opportunity presented itself.
In my timber harvesting negotiation with Nevin, we exchanged a few personal life tidbits. He told me about how he wanted to get out of all his debt and move to another part of Tennessee. This means selling his house, barn and 10 acres, which has been listed for $139,000 for some time. He let me know that his debt obligations equal $110,000, once he rids himself of this, he is outta here! I asked him if I could take a look at his property, maybe a good opportunity to pick up another rental. He was happy to show it and more than willing to make a deal!
Here it is…. Drumroll Please!
The property is located 5 miles outside of town, the barn is 40 by 100 and could be used for RV or boat rental. The house would likely rent for $450 a month. If Nevin and I could come to terms on a deal involving the timber and the property, it could be a great opportunity for both of us. I was not necessarily in the market for real estate, but this may be to good to pass up! Will keep you posted.
Join our newsletter
If you like Critical Financial, subscribe and get our latest content via email.