Considering Purchasing A Property: Don’t ignore the trees! - Trophy Properties and Auction
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Considering Purchasing A Property: Don’t ignore the trees!
Author: Eric Holzmueller, PhD
If you are considering purchasing a recreational property, you might be looking for something that will give you a return on your investment. After all, a two or three percent annual return certainly comes in handy when it is time to pay property taxes or put in a food plot place! While tillable land can generate that return, there may be another asset on your future property that you might be overlooking: Timber.
Oftentimes, properties with marketable timber are not properly assessed and they are priced similar to properties that have timber but with no additional value. I have personally seen adjacent properties with similar amounts of tillable and wooded acres sell for similar prices. However, one of them had thousands of dollars of valuable timber while the other had none. Given the same price, which property would you rather have?
Not only can a wooded property have timber value, this value can appreciate over time. There are two primary factors that account for this appreciation: tree growth and timber prices. Regardless of what is happening to the economy, properly managed timber will continue to grow every year. In this region, it is not unusual to see growth rates of 4% on an annual basis and as trees grow, they get larger and accumulate more volume, making them more valuable. In addition to increased volume over time, there is also an increase in overall product value as trees get larger (i.e. larger trees are worth more per unit of measurement than smaller trees).
Unlike tree growth, timber prices are dependent on the economy, but over the past 30 years, timber prices in Illinois have outpaced inflation. Another advantage of owning timber is that when prices are low, you have the option of ‘storing value on the stump” without incurring additional costs. The same cannot be said for agricultural commodities such as corn and soybeans that must be harvested annually and require special storage structures to prevent decay once harvested. Once prices return to favorable levels timber can then be liquidated at preferred prices. Depending on the region of the country, productivity of the soil and management regime, a forest can potentially be harvested for sawtimber every 20-40 years.
So when looking at a property, consider looking more closely at the timber. A well-managed sale can help you generate funds to put up pole barn, remodel a cabin, or pay off your loan. Always make sure you get a timber estimate from a trusted source. Take what values the seller gives you with a grain of salt and consider getting a second opinion, even if you have to pay for it. It can make, or save you, thousands and will be well worth it in the end.
Eric Holzmueller is a professional forester and licensed Realtor with Trophy Properties and Auction. He also operates a consulting firm, Holzmueller Forestry Consulting, that specializes in Forest Management Plans, Timber Assessments, and Timber Sales. Do not hesitate to send me a message eholzmueller@trophypa.com or call/text 618-713-0034 if you have a timber question on your property, whether it be in Illinois, Missouri, or anywhere else in the Midwest region.