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If you’re just starting out with investing and are looking to diversify your portfolio, land could be an excellent option.
We’re not talking about land for a developer to build you a new house on. Instead, it might be wise to look into timberland. This is land used to grow timber, used for various purposes from paper production to construction material.
Timberland is a huge commodity in the US. Just how many acres of timberland are there across the country? According to the USDA, there are approximately 700 million acres.
Timberland trees continue to grow in volume and proportional value no matter what the conditions are of the current economy. If timber prices aren’t bringing in a good profit margin, the trees can be left to grow until prices stabilize and become higher again.
This isn’t always the case with tangible investments such as stocks or gold. While waiting for stock or precious metal prices to rise, the number of shares of stock or gold owned and the value of the metals are not expanding.
Want to own timberland yourself? Get started with AcreTrader!
Timberland Investing Benefits
- One of the key benefits of investing in timberland is that it’s a prime example of passive investing.
- Passive investing means that you will not need to be involved on a day-to-day basis of working the land or running the business.
- As the owner of the plot of timberland, you won’t need to be out on the site slinging an axe, testing the soil or planting new types of trees.
- You also won’t be running the business side of timbering, including comparing market prices, transportation issues or replacing used equipment.
- However, owning timberland is not a short-term investment. With stocks, you could sell them quickly to make a fast return. That is not the case with timberland, as it often takes years to realize a return.
How Much Is An Acre Of Timberland Worth?
Land experts say that one acre of timberland has a value of approximately $1,500, although an acre of more mature pine trees is closer to $1,900. The value increases dramatically if land owners let the trees mature for decades.
It pays to shop around, and you may be able to find some properties where land comes with a much smaller price tag.
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What Determines The Price Of Timber Per Acre?
As with all real estate, location is one of the major factors of timber prices. Other factors that come into play include:
- Quantity and type of timber on the land
- Surrounding mill types (sawmills, etc.)
- Road accessibility to the mills
- The type of timber used in certain geographic areas
The average stumpage price is $1,800 per acre. Stumpage is the price a timber buyer will offer its landowner for their trees standing on the stump.
How You Can Make Money From Timberland?
Timberland’s main source of income is the sale of mature trees to be milled and then sold for construction and other uses.
There are tons of other ways to pocket some cash from your timberland investment.
The trees will produce seeds that you can sell. The land can be rented out for grazing purposes while trees mature. You can lease the land out to lumber farmers for rent and/or a percentage of the sale profits. Or, you can hire a lumber company and take an agreed upon share of the profits.
The quantity and type of the timber on the land also plays a major role in value.
How Much Is Lumber Worth?
As you can guess, the value of the lumber is based on its type, location and its age.
Lumber that comes from large pine logs are in very high demand, as they are used to manufacture high-quality grades of lumber. Along with the size of the tree, the quality of the wood itself also comes into play on timber prices. Trees with lower quality ratings are used to produce cheaper products.
How Weather Affects Your Earnings
These anticipated annual weather seasons will affect timber harvesting and supply, but there are also unexpected weather events that timber sellers have to take into account. These unforeseen weather events include floods, wildfires, droughts, and hurricanes.
Whenever there is a high demand but low supply, timber prices will go up, earning you more money.