Photo courtesy of Green Hill Land and Timber - ghland.com

How many researchers does it take to change a light bulb? Actually, it just takes one, but you’ll have seven others standing around debating about the correct methodology. And that brings us to a challenge with investment data and research:  if we think a data set or analysis “should” exist, it often doesn’t. And if it does exist, it’s probably out of data (especially in forestry). Therefore, my team at Forisk views the systematic aggregation, tracking and analysis of facts related to timberland markets and wood bioenergy as fundamental to forestry investment research.

That said, what’s going on out there?

US Timberland Ownership Led by Private Firms

Part of Forisk’s timberland investment research focuses on how private timberland ownership changes over time. Estimates of the “investable universe” of timberland in the US range from 60 to 100 million acres; we count approximately 210 owners that each own and manage 25,000 acres or more for a total of ~82 million acres. Of these acres, 20% are owned by the four public timber REITs (Plum Creek, Potlatch, Rayonier and Weyerhaeuser) and 37% are managed by 27 US-based timberland investment management organizations (TIMOs). The 43% of acres associated with “other private” owners include forest industry firms, private individual and families, conservation groups and other non-forest industry firms and institutions.

The top 300 timberland owners and managers in the US account for nearly 84 million acres of private timberlands in the North, South, and West. The top 10 alone account for 32.5 million acres. Detailed analysis of these ownership groups highlight the continued shifting of acres to institutions, and the increased activity by private individuals and “family offices” in timberland markets.

Bioenergy Projects Looking for “Solid Ground”

The wood bioenergy sector in the United States continues its extended round of musical chairs. As of January 30, 2012, Wood Bioenergy US reports that projected wood demand for all announced projects in the U.S. dropped 7.4 million tons year-to-date, a 6% decrease since December 2011. This is largely attributed to the removal of several large biomass co-fire projects from the Wood Bioenergy US database, particularly in Ohio. Utilities claim that biomass remains uncompetitive with other alternative compliance options (note: natural gas). Also, some coal units are scheduled to shut down to meet EPA MACT requirements.

In liquid fuels news, the USDA granted ZeaChem a conditional commitment for a $232.5 million loan guarantee from the 9003 Biorefinery Assistance Program. The loan guarantee could help fund a 25 million gallon/year commercial biorefinery. ZeaChem plans to build the commercial biorefinery at the same site as its demonstration plant in Boardman, OR. Elsewhere, LanzaTech purchased the former Range Fuels site in Soperton, GA for $5.1 million in a foreclosure auction. The company plans to use wood residues to produce fuels and chemicals.

Enviva’s first shipment of pellets left from the Port of Chesapeake on December 31. The vessel, bound for Europe, contained 28,000 metric tons of wood pellets. Enviva began operations at the Ahoskie pellet plant in November. Two additional plants are in the planning stages in North Carolina and Virginia; both will also use the same port.

Meanwhile, demand for wood from traditional forest industry users has remained flat as manufacturers look to better housing news in 2012 and 2013. Also, the pulp and paper industry continues to enjoy strong markets and productivity.

Demand for Timberland Remains Strong

One fact continues to percolate up during our ongoing timberland market research: demand for timberland assets remains strong from institutional investors and forest industry firms. After decades of timberland divestitures, forest industry firms are reevaluating the options associated with acquiring timberlands to support raw material needs and to address the question “what’s the best use of our investment capital in 2012?”

In Part 1, the idea of various land specific websites was discussed. This time let’s surf around the topic of social media. Not that long ago everything was e-business, e-commerce, e-books and now it is just normal day-to-day regular business to have a website, shop online and read digital books. The same thing is happening with social media. To re-phrase an old saying… what was once new is old again.

Social media began with an online place for your “stuff” (most notably the music crowd that adopted MySpace in droves when it debuted) then along came likes, tweets, posts, and now timelines. But now it’s not really social media as a “New” category anymore – it’s business. Nearly every brand has a Facebook page or Twitter account and although new tools show up like Klout and Google+… it really all is just forms of marketing.

New social networks like Chime.in are popping up like popcorn all the time. How could anyone let alone your land agent keep up with all these social profiles? They should be outside on the land and not face plowed into a computer screen, right? True enough maybe but the cold hard fact is that nearly everyone starts their real estate search online long before they contact an agent. The National Association of Realtors had a stat a couple of years ago that was nearly 87% of buyers start their searches online first before contacting anyone. That number has likely increased even more.

So how do you know if your land agent is marketing your land on the right social media sites? The short answer is you don’t! No magic silver bullet exists that puts your listing on every single place but as with most things there are some hot spots. The major players are Facebook, Twitter, LinkedIn and now Google+ might be added to that list. So should your land be listed in all these places? Probably not. However, agents that network aggressively will have profiles on these sites and keep them current. An agent flooding their news feeds with listing advertisements will be ignored lightning fast as users quickly hit the “Hide” button.

A quick and easy way to look up what profiles a person or brokerage has is to see if they have a Follr profile like this or an About Me profile. These sites or others like them list all the profiles in one place and make it easy to see at quick glance which networks they use. The number of profiles is not necessarily indicative of effective social media presence because sometimes profiles get setup at hundreds of places but they are never maintained so look for activity at least monthly or in some cases weekly depending on the network. So we’ll use the top websites as examples of how land might be marketed.

Facebook

First, Facebook. WHY? Well, because the whole universe is on there it seems. Facebook individual profiles are not the best place to market anything but likely the agent would have their job description and links to their websites or listings from their profile. The other option is a Facebook Business Page which is probably where most agents post information about new listings or they might even have a special tab setup just for listings. However, an overlooked source on Facebook is group interest pages like hunting pages where someone might be posting that they are looking for hunting land. This is a perfect opportunity for an agent to pop in and comment that they have a listing that might work. A word of caution though… Social media is time consuming and not everyone is going to be active on all sites so just because an agent is not posting and commenting all over the place does not mean they are not marketing your land.

LinkedIn

Next up, LinkedIn. This is definitely not a place to advertise listings but it is one of the best places for agents to network and connect. The profile should be current with links to their listings or website but again posting listings in the news feed will not be useful. However, there are several groups where listings can be promoted and discussed. We have used some of the cattle and beef networks where we keep up on hay and alfalfa topics and have posted links to our pasture listings when appropriate. LinkedIn also has several real estate groups where listings are allowed but moderation is key or the listings will just get lost in all the noise.

Twitter

Finally, we have Twitter. Basically a shortened bullet point version of other sites like Google+ or Facebook. You have to talk concise and fast on twitter and the news feeds move so fast that just like the commercial – it will be so… 47 seconds ago. Twitter users hate automatic tweets from other sites so if a twitter account is linked to Facebook and the comments are being automatically posted – they are cut off after 140 characters and then the person has to go click on the Facebook link which defeats the purpose of being on Twitter. The 3 best advantages of Twitter are lists, hashtags and chats. Lists are one way to group users together so you can read news feeds from specific followers. Hashtags are the number pound (#) sign before words on Twitter and they make it easier to find tweets on topics you are interested in. For example, by searching for #LandThink you can pull up only tweets with those hashtags. Hashtags get very popular during breaking news like #Egypt or #Japan and of course Charlie Sheen’s antics can be followed via hashtags. Hashtags go hand in hand with chats as well. You can follow a topic of discussion by following that particular hashtag. #haytalk is only about hay but they also have specific chat times where in real time they discuss issues like livestock feeding and forage management. There are hundreds of chats going on each week and finding new places to connect on any topic is very easy on Twitter.

So how do you navigate the maze of social media and know which places are best? You don’t. Maintaining a few good profiles and making meaningful and helpful posts about relevant topics is a general rule of thumb. Keep in mind that this is just a discussion about one aspect of marketing and that each property will have unique marketing requirements due to its attributes and location. Each agent is also different and has tools that work for him or her the best. Not one social media platform or one website is the best or the only place a property should be posted. Social media is just another tool in the box and in the end that really is all you need… a good toolbox.

[This is Part One of a two-part series investigating the economic potential for investing in the management of land, wildlife, biodiversity, and water resources. Part One covers economic incentives from government programs for establishing conservation practices. Part Two will address private sources of revenue that can be generated from establishing creative and multi-use land use practices and programming.]

On March 1, 1872, Congress signed into law an act that established Yellowstone National Park, the first of 58 protected areas to eventually be designated as national parks. Thus signaled the start of an era in national policy characterized by heavy public investment in conservation and land management.

As of 2010, 138 years later, the Bureau of Land Management held nearly 248 million acres of public land. However, this represents a decrease of two million acres from 2009 and a decrease of 5.5 million acres from 2008. This reduction reflects an effort on the part of public officials who would prefer to see the federal government take a more limited role in conservation efforts while also using the revenue from sales of public lands to pay down the national debt. It also demonstrates a shifting priority away from direct public investment in conservation through outright land purchases and toward providing incentives to individuals and organizations to purchase and manage the land themselves.

While some see this shift as troubling because it means conservation efforts are more haphazard and subject to the varying goals of individual landowners, others see it as an incredibly lucrative opportunity to invest in conservation. Take T. Boone Pickens, for example. Recognizing the economic potential of Texas ranches, he has made a name for himself (and a lot of money) by buying working livestock ranches, improving them with wildlife enhancement programs, and then reselling them. As he recently told The Land Report, “We always made a profit from the ranch sales. But what I really feel good about is knowing that we left the land in better shape than we found it.”

Now it should be noted that Pickens benefitted from a particularly generous set of public incentives with which to offset the costs of his land management programs. You see, Texas implemented a program in 1995 that allows landowners who implement specific land and wildlife management practices to have their land appraised as agricultural land, thereby greatly decreasing their annual tax burden. For those who live in states that do not provide such generous incentives to invest in wildlife management, however, there is an array of state and federal programs that provide payments to landowners for engaging in other various conservation-oriented practices.

While these include such obvious options as securing a conservation easement, landowners also have the option of enrolling in less-permanent programs like the Wildlife Habitat Incentive Program (WHIP), the Conservation Reserve Program (CRP), and the Conservation Reserve Enhancement Program (CREP). In each, government agencies provide cost-sharing and annual payments to landowners that agree to set aside their lands for five- to ten-year periods and commit to protecting and improving wildlife areas, in the case of WHIP, or taking agricultural lands out of production, in the case of CRP and CREP. Case studies abound of landowners who have used these, and other, public programs to help establish and fund conservation efforts and then benefitted greatly from the increased property values when they eventually sold the property.

One of the best examples is that of Robert Macdonald of Triple Chance Farm in Cambridge, Maryland. After recognizing that he could not generate sufficient income from growing cash crops on his land Mr. Macdonald decided to take his land out of production and instead establish an “outdoorsman’s paradise.” With financial incentives from the CRP, CREP, and WHIP programs, Mr. Macdonald developed and instituted a maintenance plan geared toward planting native species that would provide habitat for quail, woodcock, and other bird species. After improving his land over the course of 30 years, Mr. Macdonald fielded bids from five families all vying for his property when he sold in 2009 in the worst real estate market since the Great Depression.

In this era of economic uncertainty, investors are looking for safe bets in the market. Since the housing bubble burst, real estate investment trusts have outperformed the broader market by considerable margins. And best of all, they’re set to continue that trend this year. With help from state and federal programs, landowners can promote greater biodiversity, healthier wildlife populations, and improved water quality, all while earning a strong return on their investment. As T. Boone Pickens put it, what better feeling than to know you’ve improved the land around you and walked away with a few more dollars in your pocket as a result?

Remember several years ago when gasoline skyrocketed to $4.00 per gallon? Of course you do, but did you quit driving, or even change your driving habits much? Probably not.

Now, what if the price had gone to $41.60 per gallon? Think you might have changed your driving, or even stopped driving at all.

In the North Carolina mountains, that’s exactly what happened in April of 2009 when asking prices for 100 acres or more of mountain land shot up to $42,211 per acre. At that same time, the average selling price was a mere $4,017 per acre.

Can you guess what happened next? Yes – that’s correct – land buyers simply said “I don’t think so!” – and promptly disappeared from the land market. That unbelievable level of asking prices was the single most destructive move to hit the land market in North Carolina.

So… How did asking prices manage to climb to such oxygen-deprived levels back in 2009? Better yet, was there already in place something that might have prevented the destructive rise in asking prices?

Most land brokers, also being REALTORS®, subscribe to the REALTOR® Code of Ethics – right?  Take a look at the very first Article in that Code:

Article 1

When representing a buyer, seller, landlord, tenant, or other client as an agent, REALTORS® pledge themselves to protect and promote the interests of their client.

Better yet, look at how the following clarifies that first Article:

Standard of Practice 1-3

REALTORS®, in attempting to secure a listing, shall not deliberately mislead the owner as to market value.  

Nevertheless, in a market where actual selling prices averaged $4,107 per acre for 100+ acre parcels, brokers were taking listings with asking prices that AVERAGED $42,211 per acre. Is that what is called “protecting and promoting the interests of their client”?

In defense of those brokers, property owners wishing to sell were, at the same time, succumbing to plain old human greed. Reacting to false, unfounded rumors of huge sale prices, they were making unreasonable demands on their brokers to list at ever-higher prices. Brokers, under the onslaught of demands from sellers, capitulated and took the listings at unwinnable prices – and the land market collapsed under the weight.

Now – we all know we are not in control of mankind’s greed for affluence. Brokers do have one powerful tool at their disposal however. On the grounds of the U.S. Air Force Academy in Colorado Springs sits the ‘‘Eagle and Fledglings Statue’‘ – given as a gift to the Academy in 1958 by the personnel of Air Training Command. This statue contains the following inscription by Austin Dusty Miller:

“Man’s flight through life is sustained by the power of his knowledge.”

Very simply, there’s power in knowledge! Therein lies the broker’s solution to accepting grossly overpriced listings – KNOWLEDGE.

If a broker specializes in land (another powerful concept), he or she can list only properties priced to sell instead of wallowing through months and years without showings and buyers. This is accomplished by acquiring a complete knowledge set of actual sale prices over a period of years for land – and only land.

The first step is to acquire from the county tax office a database of all property owners owning over 100 acres. These records can often be acquired over the Internet (Google the “GIS” for your county), or by requesting a CD with the information from the tax office. These records general include the last sale date, and some reference as to the last sale price.

With that information, a fruitful database of actual sales can be compiled showing acreage, last sale price, sale price per acre, Parcel ID #, and name and address of the owner. Once you have 5 or 10 years of actual sales, and can present that data in a friendly, readable form to sellers, you will have ½ of the necessary knowledge needed to list property at fair market value. Notice that I said only ½ of the knowledge.

“What’s the other ½” – you ask? Property for sale now by all other brokers in the area will complete your knowledge base.

If a broker belongs to MLS, listing information can be researched through the MLS land listings. The database of property for sale now should include a Parcel ID number, the asking price, the acreage, and the asking price per acre. Convert that data into a table that is easy for property owners to view and decipher. Be sure to use some identifying information such as owners name, Deed Book and Page, or Parcel ID number. This gives your table added credibility to the person reviewing it.

When reviewing your tables with potential listing property owners, begin with past sales first. Explain that all information was taken directly from the local tax office – not your personal files. By presenting past sales in an objective manner, you reduce the raw emotion likely when they find prices  not as high as they thought.

Next, move on to properties currently listed for sale. These properties will be the competition faced by the property owner once they list. They are normally higher – being asking prices – and are likely to be more pleasing to the prospective listing individuals.

Be wary of listing property at the same level as others for sale now. Being higher than what past buyers have been willing to pay, these asking prices are the “wished for” prices of present owners – and not necessarily indicative of present value.

In summary, many properties in today’s land market are flat out overpriced – well above what any respectable buyer will pay. The broker who educates prospective sellers about the realities of today’s land marketplace will come away with attractive properties – at fair prices. What’s more – buyers are always waiting!

When you decide to sell your land – whether it be farmland, timberland, ranchland or hunting land, be sure to ask the agent about the websites where your land will be listed. After you ask about websites then ask about social media websites. We’ll do a two-part series and cover social media next time so let’s start with websites.

For residential properties the big three are Realtor.com, Zillow.com and Trulia.com. Although some may include Yahoo, it is really just a Zillow feed. For all practical purposes these websites are useless when it comes to the land market. They are not setup for easy searching for rural properties. They require “Actual Addresses” and for the most part they are just cumbersome and difficult to navigate for any type of vacant land properties.

For land the big three are LANDFLIP.com, LandsofAmerica.com and LandWatch.com. We all have our favorites, but for the most part these websites list more land than all other smaller land targeted websites combined. There are others that feed off or have merged with other sites but these are the main ones that buyers will find first in any search.

So, if your agent is focusing all efforts on MLS advertising which mostly only reciprocates out to residential websites to sell your land then you are likely not getting the full marketing you need. Land buyers search out specific land terms and visit land websites often. Most buyers will tell you that they have had a search setup at a land specific website for months or some cases even years in a specific county or even several counties. Recently, a buyer lead contacted us and told us that they found a land listing that they were very interested in but that the listing agent was from out of state and sold houses at their website. They wanted someone who was actually from our state that specialized in land to help them. They did not even call the listing agent on this property. Instead, they searched out the words “land” and the specific area. So, if your agent is not even getting calls about their listing then you have a major marketing problem.

Another issue with listings is IDX, MLS feeds, and syndication. Unh? What is all that mumbo jumbo and why should you care? Most folks do not care about these terms nor do they even need to know the technical details but your agent should know exactly what they are and whether they use them or not.  If an agent chooses to list land on the Multiple Listing Service (MLS) then agreements can be made and those listings can be shared via IDX at other agent websites with specific rules. Syndication is where the listing feeds out (or syndicates) to other websites. For example, most MLS’s will syndicate their listings to Realtor.com meaning that the agent does not have to go to Realtor.com and re-enter the listing. This all sounds great but the problem is that not all websites bring in the same data nor do they all present it the same way. Some will only list the brokerage name and no agent contact information, some will only import one photo, etc. and the list goes on. It can become a nightmare for an agent because when the listing sells they find it nearly impossible to get it off all the syndicated websites.

The bottom line is that you need an agent that understands and knows exactly where their listings are posted. Also, they need to be able to edit or delete those listings at each and every site. Nothing is worse than having an old listing that a buyer calls on and they are told it already sold. It frustrates the buyer to no end especially now that most of the major websites offer agent advertising by zip code. A buyer will click on a listing and then see three buyer agents that have paid to be there. The buyer contacts one of them and usually the advertiser has no clue about the listing. Buyer frustration cycle starts all over again. Buyers give up and start searching out the listings and specific companies that sell land and contact the listing agents directly about the property.

A major real estate firm recently announced it will stop sending listings to Realtor.com and Trulia.com. This is not a small specialized local company it is a huge brokerage covering multiple markets. You can read all the details about the specifics but the major point is that it is a residential firm not a land brokerage. They recognize the importance of their listing posts and they want their agents to actually get the inquiries and leads for their own listings. Each area will be different and no blanket statements can be made about which site or which listing strategy is best. However, one thing is certain your listing agent should have a plan for the marketing and know exactly where the listing has been posted.

Websites that focus on certain keywords for search engine optimization (SEO) are one of the best tools a land agent can use. LANDFLIP just announced a new specialized search for land listings this week called RANCHFLIP.com. These are exactly the types of tools that you should be looking for your agent to have in their marketing plan.

Marketing includes more than just websites. In Part 2 we will cover social media marketing.

Early in my investing career, I bought shares of Crown Pacific Partners, a timberland-owning firm headquartered in Portland, Oregon. During market declines in the late 1990s, the firm subsidized its shareholder distributions through borrowing and cash generated from non-organic business activities. In other words, the firm ate its seed corn. Crown Pacific filed for bankruptcy in 2003.

My shareholding experience with Crown Pacific influences my research to this day; it provided valuable lessons on the available (and unavailable) levers for cash generation and risk mitigation with timberland investment vehicles. At the end of the day, timberland owning firms – such as public REITs Plum Creek (PCL), Potlatch (PCH), Rayonier (RYN) and Weyerhaeuser (WY) – must embrace situations imposed by external markets and optimize firm performance for shareholders. How did timber REITs fare in 2011?

Big Decision in Tough Markets

Potlatch leadership dug deep in late 2011 to make the sector’s “stone cold decision of the year” to reduce dividends and harvest levels. These decisions by the PCH Board and senior management (1) placed long-term asset values and maximization over short-term yields and (2) embraced the realities of knowable, quantifiable impacts on wood markets relative to speculative forecasts of key demand drivers. Cheers.

Equity markets embraced the resulting 39% reduction in Potlatch’s yield. While share volume spiked on the day of the announcement, PCH’s share price declined 2.2% after two days of “post announcement” trading. This left its dividend yield at 4.1%, in line with the other public timberland-owning REITs. According to the FTR Index, the timber REIT sector now has a 4.0% dividend yield.

Timber REITs and Timberlands Outperform US Treasuries Long-Term

U.S. Treasuries remain a common benchmark for private timberland investments. Why? Relative safety and low risk over long time frames. However, U.S. Treasuries, thanks to a robust secondary market, are more liquid than private timberlands, making them convenient benchmarks for publicly-traded timber REITs, as well.

We also care about Treasury yields because when they increase, so do interest rates on fixed-rate mortgages. This increases the cost of buying homes and decreases the demand, and prices, of those homes, which can slow the economy. This coincides with another reason why timberland investors take such a strong interest in Treasuries:  they affect the costs of building and buying homes, which influence the supply and demand of forest products such as lumber, OSB and plywood.

On an annualized basis and year-to-date, how have timberland investment yields benchmarked to 10-year US Treasuries? For the ten year period from 2001 through 2010, both private (less liquid timberlands) and public (more volatile timber REIT stocks) investment vehicles outperformed US Treasuries: timber REITs returned 6.65% annually, private timberlands according to NCREIF returned 6.82% per year, and US 10-year Treasuries returned 3.99% per year on average.

Conclusion: Timber REIT Kudos for 2011

In 2011, timberland-owning REITs, as a sector and led by Rayonier’s 27% gain, outperformed the S&P 500. As measured by the Forisk Timber REIT (FTR) Index, publicly-traded timber REITs returned 5.69% versus 0.00% for the S&P. The FTR Total Returns Index, which accounts for dividend distributions, earned 9.62% in 2011.

With the recent run-up in row-crop farmland prices, savvy investors should be looking to similar investments that offer many of the same benefits of crop land ownership, without the hefty price tag. Timberland is just such an asset. In fact, timber is a crop. It just has a much longer production cycle. And here’s a secret…when you look at the asset classes held by the ultra-wealthy, almost without fail, you will see a heavy timberland flavor. Institutional investors, and high net worth individuals have already begun to take advantage of this opportunity. If you have not recognized this opportunity until now, it’s time to educate yourself on the benefits of timberland ownership.

Now I’ve mentioned the wealthy a couple of times here, but that does not mean you need 10 million dollars socked away to buy into a timberland asset. Those wealthy individuals had to start somewhere, and for the most part, they did not start out with millions to invest either. They started by making smart investments in assets that appreciated in value, or brought them income in some manner. Timberland will do both. It will work for the guy that can buy 40 acres, just like it will work for the investment group that owns 400 thousand acres. YOU have to start somewhere. As investors begin to substitute away from the higher priced good (Crop Land), the substitute good (Timberland) will appreciate in value. There’s no magic formula or fuzzy math here, it’s straightforward, basic level economics. When the value of a good goes up, so does the value of substitute goods. Timberland is a good substitute for crop land.

Why Timberland and Why Now?

Real Estate is a tale of two markets right now. Everyone knows that the larger real estate market, like our total economy, is not doing well. However, farmland seems to be breaking new record highs on an almost daily basis. Many factors contribute to that. Some of it is scarcity, some of it is commodity prices, some of it is advancement in the productive capacity of good farmland, some of it is capital from non-farm sources flowing into the ag land economy, and some of it is pure speculation.

Let’s focus on the last two, as these are the factors that are driving prices the most in the current market. Speculation. There’s a bad word, isn’t it? I beg to differ. Speculation brings liquidity to markets the world over. Unless you can predict the future 100% correct all the time, every decision you make is a speculative one. Without this speculation many of our markets would swing more wildly than they already do. Speculation will help put a bottom sagging markets. Speculation in the commodities markets helps farmers plan their crops, and protect their investments. Speculation has a purpose in a free-market economy. Speculation can propagate itself to unsustainable levels, as we have witnessed in so many “bubbles” in the last decade. Speculation that is based on provable numbers, and time-tested data is a better bet than speculation in a market because everyone else is doing it. The cropland market has a fair amount of speculative value built into it right now. Yesterday is when you should have invested it cropland. If you are going to profit from the appreciation in an asset based on the forward momentum of speculation, the time to do that is before it’s all the rage. Timberland is positioned well to take advantage of this right now. As the cropland numbers push higher, more people will see the value in substituting timberland for cropland. More people will grow uneasy with the run-up in cropland values and substitute away from it. Get into timberland now, and benefit from this economic law.

There’s also much more capital in the agricultural economy today than is traditionally present. People that would not know which end of a cow to feed, or that peanuts grow in the ground now are owners of farmland. Many of these people have invested in the land factor of production because they are substituting away from investments in the stock market that they have deemed more risky. They simply hold the property for the rental income, appreciation, and hedging ability of the asset. They rely on a traditional farmer to actually produce from the land. Until recently, this was a very uneasy partnership between the big money, city-slicker and the farmer. With the maturation of our ag markets, and the sheer volume of capital available from urban investors, they have grown to appreciate each other a bit more than in the past. Many of these same dynamics are at play in the timberland market. More investors are realizing the income, appreciation, and hedging properties of the timberland investment. This market will soon develop in much the same fashion as the cropland market has in the past couple of years. Plus timberland can be more easily managed by someone who has not been a farmer all of their life, or even someone who lives in a downtown loft apartment. It’s a bit more forgiving to the newbie than is cropland and you have the opportunity to time your harvest to highs in the wood fiber markets instead of taking the going price at the end of the growing season. This puts the investor in the position of profiting from the production aspect of timberland…not just sitting back and collecting rents from someone else trying to work out a profit using the land too.

Why is Timberland a Good Investment Substitute for Cropland?

Timberland has all of the qualities that today’s investors are paying premiums to obtain in the cropland market (income, appreciation, hedging). Timberland has a lower capital requirement per unit of production than cropland. Timberland has not experienced the recent run-up in prices that cropland has. Timberland can be more easily managed, in a hands-on manner, by the novice than can cropland. You can do all of this with timberland and still obtain rents on the timberland from outdoorsmen who wish to hunt on the property…while you are growing your timber crop. The numbers you need to make speculative investment decisions are available, proven, and time-tested. No fuzzy math. Just good solid investment sense. Get yours before it’s all the rage. Then profit from a timberland investment once everybody’s doing it. Get ahead of the curve instead of behind it. Buy Low. Sell High.

Before going to go preview rural land with a real estate agent, ask them what’s in their truck. I never was a Boy Scout. I would have loved to have been one, but just never got the experience. The Scout motto, “Be Prepared” resonates deeply with me. So take a look at the inventory of my truck and hopefully you will see what I mean.

• 2 Compasses
• Handheld GPS
• Plat Books for the 8 surrounding counties
• Gazetteer for Alabama
• Sundry assortment of aerial and topographical maps
• Blank copies of contracts to purchase and listing agreements
• Dozens of Real Estate Consumers Agency and Disclosure (RECAD) forms
• 3 bottles of water
• 2 blaze orange vests and hats
• Come-along
• 30 feet of heavy chain
• 20 foot tow strap
• 3 AlaLandCo signs, 4 directional signs (2 pointing right, 2 to the left)
• Shovel
• Post hole diggers
• Large and small pruning shears
• Pickaxe
• Hatchet
• Bolt cutters
• Pruning saw
• $20 bill for emergencies (such as paying someone to pull you out of the mud)
• Pistol with extra ammo
• A bundle of keys to various properties
• 2 walking sticks
• Digital Camera with extra batteries
• Flip Cam
• Smartphone w/charger
• Rope, ratchet straps, and bungee chords
• 2 rain jackets
• Gerber multi-tool
• Roll of flagging tape
• Wasp spray
• Insect repellant
• 2 pairs of binoculars
• Laser range finder
• 1 pair of snake boots
• 1 pair of taller neoprene boots
• Small towel

When I look at this list it shows there are 4 main scenarios I prepare for:

1. Know exactly where you are; don’t get lost.
2. Make your customer comfortable and safe.
3. Don’t get stuck.
4. Be prepared to do business if they are ready.

Most land companies have tools at their disposal such as ATV’s or UTV’s to make showing land easier. Many agents use laptops and tablets to aid in mapping and navigation as they travel a property. The point of this article is for consumers to know that not all real estate agents are equally competent about land transactions. If you are meeting an agent to preview some rural land and the agent shows up in their Mercedes sedan, you might want to consider taking a look with someone who specializes in land sales. I tell people not to trust an agent with a clean truck. It means they are not doing what they’re supposed to be doing: showing land. Look for some dents and a little trail-pinstriping that is proof they know their way around the woods.

It is not helpful at all to see a piece of property with someone who wants to “paint a picture from the road” and describe what the land is like. You have to get out on it and touch corners and see the ups and downs of the tract. It burns me up to see agents advertise land and only post two maps and a picture from the road. I lost a listing to another agent last year that offered to sell some land at a lower commission than I did. Once the listing was secured, the agent posted 5 pictures on their personal website and offered a 7 word description of a $500,000 tract. Now tell me if the sellers were better served by this agent at a lower commission or by paying a little more and getting exceptional marketing and service.

Let me also dispel the notion that women are not qualified to be land agents. I know some knowledgeable and real land pros like Marisa Morgan Dallman from Kansas, Susan Morrison from Alabama, Jennifer Beecher from Georgia, and Beverly Callaway with AlaLandCo. I am not ashamed to say that Beverly is a better hunter than I am too. She has lots of experience in the woods, is very knowledgeable about land-related issues, and has helped transact some large deals in the past two years. The biggest land deal in my county this year was put together by Kay Beckett with Bill Mackey Realty. She made lots of other agents in the area envious when she sold nearly 4000 acres of ground this spring.

The key is finding an agent that has the knowledge and skills to offer you the best advice and who you feel has your best interests at heart. You have worked way too hard for your money to lose it in a land deal because of an inexperienced or unqualified agent. Find an agent who can be your trusted advisor for all things pertaining to land, and get out there with an agent who is prepared and buy some dirt.

The amount of press farmland has received in the last year could fill a few bookshelves. It is amazing that a real estate category that typically turns over at rate of about 3% which is now turning at half that has so much exposure and analysis. So what about all the other land? Recreational land, building land, vacant lots, or any other rural land? What is happening in that market? There seems to be no press and buyers are thrilled.

If you are in the market for land for recreational use or as a building site then now is the time to search. Farmland that may have been split up and converted to transitional development land is a good start. Prices are usually reasonable and tend to mirror more of the residential market values. Interestingly, farmland has historically and is also now the case, not run concurrent with residential market values. The run-ups in values have usually occurred when other sectors are doing poorly so take advantage of market conditions and prices.

If you are looking for a relatively small plot of land; say about 20 acres or less, then a great place to start looking is LOTFLIP.  It is easier to find what you are looking for when the search parameters are already filtered for you.

If you have a specific area and have narrowed down your requirements and still cannot find anything suitable then search all land listings in the area. If you find a larger tract and only want a portion then contact the agent and make an offer for a split. Many times if you are willing to pay for the survey on the split portion or share in the split costs then a seller is more open to the possibility. Sometimes they will say no immediately and adamantly state they are not going to split the land.  In that case, go ahead and leave your name and number as often times after they think about it they will re-consider.

Other options include finding two or three small lots (1 to 2 acres) and trying to buy simultaneously so that you have a larger piece. In many failed rural subdivisions this is usually fairly easy to do because you can contact the Homeowners Association (HOA) and ask if anyone is interested in selling their lots. Every time we have listed lots in rural subdivisions almost immediately the adjoining sellers will contact us and let us know they are interested in selling too. However, make sure you find out all the rules and regulations of the HOA in advance because if they continue to charge fees on a per lot basis instead of your one continuous parcel it could be costly. Many HOA subdivisions will work with buyers and may even change rules if necessary because they want the land sold to a buyer that will maintain the land.

Whatever you are looking for in a land parcel be sure to do your homework. Some sage advice from Jonathon Goode in his recent article, Why Hire a Land Agent when Dealing with a Neighbor and many other articles on LandThink are good resources.

LandThink.com, an industry leading website that delves into the challenges and issues of buying, selling, or investing in land announced today that Shawn Terrel and Craig Peebles have been added to the 2012 LandThink Advisory Board.

The LandThink Advisory Board is comprised of individuals representing various sectors of the land industry including land brokerage, timberland, development, lending and technology.

“We are privileged to have Shawn and Craig joining our trusted panel of advisors,” said Ryan Folk, LandThink Founder and CEO. “They are visionaries whose industry-specific experience will be a tremendous asset to LandThink. The group of strategic thinkers we’ve assembled will contribute expertise and outside perspective, which will steer LandThink in the direction for continued growth.”

Shawn Terrel, from Kansas City Missouri, has over 18 years in the professional real estate and asset auction business. He is a graduate of the Missouri Auction School as well as the Texas Auction Academy, where he is a certified instructor. He is also a graduate of the Certified Auctioneers Institute (CAI) at Indiana University, and holds the Accredited Auctioneer Real Estate (AARE) designation. In 2006, Terrel accepted an executive position as Vice President of United Country Auction Services, a division within the parent company United Country Real Estate. Terrel has been instrumental in building a national auction services division within the largest land sales company in America.

Craig Peebles, Divisional President of AgSouth Farm Credit, has over 30 years experience in the lending industry with Farm Credit. Peebles holds a Bachelor of Science degree in Agricultural Economics from the University of Georgia and has served as loan officer, branch manager, and SAM unit manager. He has spent 12 years as regional lending manager at Southeast Georgia Farm Credit and its successor, AgSouth Farm Credit. Peebles supervises AgSouth’s delivery of credit in Georgia.

Terrel and Peebles will join 4 incumbent members of the LandThink Advisory Board:

• Harry Mehre, Sr. Vice President, Jones Lang LaSalle
• Barry Gittleman, VP Land and Strategy, John Wieland Homes and Neighborhoods
• Brooks Mendell, Ph. D., Founder of Forisk Consulting
• Ryan Folk, Founder and CEO, LandThink and LANDFLIP

Since its initial launch in 2008, LandThink.com has evolved and grown into the premier website for land professionals, owners and investors seeking information about the current land market. LandThink is an invaluable source of guidance for those interested in land investing. Land industry professionals contribute articles and posts to LandThink on a regular basis. They tackle an array of topics related to land such as how to buy land, how to sell land, 1031 exchanges, land ownership, land marketing and conservation.

To read full bios for all members of the 2012 LandThink Advisory Board, click here. Follow @LandThink on Twitter, “like” LandThink on Facebook and join the LandThink group on LinkedIn.