Why do people invest in timber?
According to the National Woodland Owner Survey, the top reasons for investing in timberland include enjoying the scenery, privacy, conservation, hunting and fishing, timber products, outdoor recreation, and owning land to pass on to their heirs.
What are the risks of investing in timberland?
Depending on your level of involvement, the ability to withdraw money from your investment, or exit liquidity, can vary, and real estate transactions can take a number of months to complete. Also, maximizing returns on timberland will require a certain level of forestry management expertise, or the willingness to employ those with that expertise. In addition, timberlands can be subject to environmental threats such as wind damage, fire and biotic agents.
What are the environmental effects of harvesting timberland?
Responsibility harvested timber is a sustainable resource. Proper forest management can help alleviate fire danger, and harvesting on a shorter rotation can reduce the chance of damage from wind storms.
How are timberland investment returns generated?
In addition to timber harvests, timberlands can provide income through leases for hunting, grazing and minerals, government programs such as CRP, wetland mitigation banking, carbon offset market credits, and the sale of non-timber forest products such as maple syrup, walnuts, ginseng, mushrooms and herbaceous plants.
Who buys timberland?
Timberland is purchased by both public and private entities. The majority of timberland in the U.S. (69%) is owned by private corporate and noncorporate investors. The remaining 31% is publicly owned and managed by the U.S. Forest Service, Bureau of Land Management, state organizations and others.
What happens if there is a forest fire?
Ordinarily, most fires do not consume the entire trees within a stand, and if the timber is harvested within a couple of months there is usually no loss in stumpage value. However, if a fire does occur and the trees survive, the burn may leave a fire scar at the base of the tree, leaving it susceptible to wood decay fungi that could decrease its economic value.
How is a timberland investment portfolio diversified?
Direct land investors can choose to own multiple parcels in different areas, or own a parcel with multiple species in individual timber stands. Those who invest in publically traded companies can purchase stock in multiple companies or a Timber Exchange Traded Fund (EFT). If an investor decides to become involved with a Timber Investment Management Organization (TIMO), geographic diversification can be obtained by owing timberland in different areas of the U.S. or even in other countries.
What factors affect the price of timberland?
As trees continue to grow year after year, some timberland prices are independent of financial markets. The three factors that most commonly affect timberland prices are biological growth, timber prices and land value.