The Ultimate Guide to Buying Timberland
Owning timberland is a dream come true for many. However, prospective buyers should carefully consider all the complex aspects of buying timberland and be mindful of the purchase process. Having clearly defined goals, conducting thorough due diligence, and fully understanding the purchase process will ensure a successful outcome and many rewarding years of ownership.
At first glance, the direct purchase of timberland may be intimidating to some buyers, but it doesn't have to be. There are over one million private forestland owners in the U.S. who own anywhere from 50 to 1,000,000+ acres. A well qualified real estate agent who is also a professional forester can assist investors in identifying timberland suitable for investment. Direct ownership of timberland is an environmentally strong, strategic investment in a tangible asset that provides periodic cash flows, capital appreciation, a hedge against inflation, and tax benefits. Many timberland owners also enjoy hunting, recreation and other benefits that come with forestland ownership.
Find the Right Forest
Most buyers rely on a qualified timberland broker to guide them in selecting the right forested property and thorough the purchase process. However, when it comes to searching for the right property, the buyer needs to have clearly defined goals to narrow down the search.
There are many different considerations between the purchase of rural recreation, farm or ranch properties and timberland. Clearly identifying the location, purpose and must-have features of the ideal property is one of the most important steps when buying timberland. Buyers need to have carefully thought about the following.
What type of timberland are you looking for and what will be its purpose?
- Investment return potential - i.e. timber, carbon credits, conservation easement, land leasing
- Scale of the property - how many acres?
- Does it have a history of forest management?
- Current stocking and commercial species
- Soil productivity
- Water features
- Recreational aspects - hunting, fishing, hiking
What is your ideal location to purchase timberland in?
- Geographic location - which state or counties and regulatory environment
- Easy access to existing markets for your forest products
- Recreation potential - elk, turkey or deer hunting habitats, fishing, water and cover availability
- Neighbors with similar management goals
- Close to public lands
- Favorable climate - driver of biological growth and productivity
What are your non-negotiables?
- Must-have features or amenities - e.g. income potential, existing road system, river access, public road access, grazing potential, close to town or city services, all year access.
- Deal breakers - e.g. endangered species, no near-term harvest potential, no legal access
Research the Property
Only a few properties will have all the physical characteristics you want. Once you have identified a potential property, it is important for the buyer and their broker to conduct the due diligence necessary to determine it's suitability. Timberland involves more components than most other property types and can involve complex interests such as mineral, timber and water rights; natural resources; legal access; encroachments; leases; and easements. For your peace of mind, utilize the care and local knowledge, comprehensive built-in support system and network of partners that your United Country timberland expert brings to your property search. They are experts at managing the unexpected.
- Acreage determination - e.g. deed, survey, county records, GIS
- Timber cruise - how much timber and what's it worth?
- Is the landowner also the timber owner?
- Property corner and boundary line locations
- Legal access
- Easements and encroachments
- Timber, water and mineral rights, wetlands
- Opportunity for real estate sales
- Is personal property part of the transaction?
- Historic land use
- Property restrictions - e.g. physical easements, conservation easements, leases, timber deeds
- Tax status and exemptions - tax liens
- Current operations - e.g. logging, road building, grazing and hunting leases
- Any outstanding regulatory issues - reforestation or slash obligations?
Inspections and Document Review
- Title report and exceptions to title
- Timber cruise may be needed - hire a consulting forester to provide a detailed forest products inventory
- Phase I Report (if needed) - to address environmental concerns
- Well logs
The Purchase Transaction
So, you've decided that a timber property is right for you. Purchasing timberland is a complex real estate transaction that may take several months or longer to complete depending on the issues that may arise during due diligence and negotiations with the seller. Certainly, this type of investing requires patience. In many instances it's important to consider whether to personally handle all the details yourself or enlist the help of subject matter experts such as consulting foresters, attorneys, surveyors, appraisers and title companies. They will provide invaluable benefits and services before, during and after your timberland purchase. United Country stands ready to respond to situations as they unfold. Our goal is to help you achieve a smooth and seamless transaction for the lifestyle and property of your dreams.
More Than Just A Sale - Possible Deal Killers
- Seller cannot deliver "Clear and Marketable Title"
- Unacceptable seller contingencies
- Unacceptable seller property disclosures - e.g. timber production records, lack of legal access
- Zoning restrictions that limit your property goals
- Environmental issues - contamination, endangered species, wetlands
- Illegal uses - marijuana cultivation, meth labs, toxic dumps
- Liens or court judgments
How To Purchase Timberland Property
The case for investing in timberland remains compelling. However, depending on buyer goals and deal strategies there are a number of investment approaches that can be used depending on budgets and market conditions.
- Cash purchase with available funds - i.e., savings; sale of stocks/bonds mutual funds
- Leverage the purchase using borrowed money - i.e., banks, credit unions, seller financing
- Self directed IRA funds
- 401(K) funds
- 1031 Exchange - tax saving strategy
Timberland investments can be illiquid, and their value is dependent on many conditions beyond the control of the owner. A prospective buyer should consult with their legal, tax and investment advisors before making an investment decision.
Meet The Author
Jim Lemieux is a graduate and seasoned professional forester whose career has spanned four decades in ten states for major integrated forest product companies. His experience as a "dirt" forester and advancement through a variety of technical and leadership positions in the forest product industry has equipped him to manage forests and natural resources. He has had direct accountability for the sale, trade and purchase of small and large scale timberlands.
Connect with Jim by phone (208) 446-6671 or email email@example.com!