Buying a forest as an investment?

[Matt Smith]

How about buying a forest as an investment? Is it good or bad?

I am interested in cash flow meaning the forest would have a resource to generate annual profit (wood to cut, farm, etc.). Any advice?

[Jay Hinrichs]

great thought process I spent the decade of the 90's in the forest products business.

its probably one of the model's I have enjoyed the most in my career ...

to generate annual revenue from Timberland you need to buy mature timber and buy it outside of CA.. CA harvest permits are harder to get than doing a subdivision.

In Oregon they are over the counter and your ready to go in 3 days. and anyone can fill them out even me.

Washington you need a forester little tougher but definitely doable and easier than CA.

I just sold my last Tree farm  700 acres to Stimson lumber about 2 years ago...

numbers looked like this.

700 acres but the front 100 acres was zoned for 5 acre lots so I busted 20 lots out of it.. we netted about 1.5 million out of the lots.

I paid 1.7 mil cash for it.. ( there is no financing for this unless your a timber company and have a mill)

the lots paid for the remaining 600 acres took 5 years to sell them all off..

the timber was 27 to 40 years old  50 to 60 is about as young as you can harvest in this growing site.

WE did have two stands that we logged and brought in maybe 100k net..

sold to Stimson for 2.9 million cash of course..

now the 600 acres in the next 20 years will produce about  30 to 40 MBF  ( thousand board feet) to the acre  ( this because it was strategically replanted back on the second harvest  .... this will be the third harvest since colonization of Oregon..   Right now I will use 400 a thousand as stumpage value so 16k an acre... net revenue  you would not clear cut the whole thing you would just take it in stages over a 10 year period... and of course the Mill gets value add as they turn it into studs to be sold to Home depot  LOL...

So for you as a private investor what you want is to buy a 40 or 80 acre tract that has 20 to 30 year old timber buy it in your roth IRA you can buy these for 100k to 200k.. and in 30 years you will have about 2 mil in standing timber that can either be sold in one fell swoop or logged off over time.

there are many old families that live on their timber.. they log just enough each year to pay the bills.