Even among real estate investors, timberland is still generally considered a niche investment, so it’s not surprising that many land buyers and sellers may not be familiar with how to value timberland.
Timberland is seen as a long-term investment that provides added value in a mixed-asset portfolio. While overall, timberland is a great investment and addition to a diversified portfolio, not all parcels of timberland for sale are created equal.
A quality stand of timber is not necessarily the only cash flow a timberland property can provide. Timberland investors naturally care about cash flows over time. They want to make money on their timberland investment in two ways, one way is by increasing the land value and the other is in the natural growth of the asset on that land. Non-timber assets which provide a potential added income stream and add to the overall value of the timberland may include hunting leases, cabin leases, carbon sequestration, or even leases for mineral exploration and mining, wind turbines, and more.
The best timberland will be stocked with quality species but ideally it should be located close to sawmills and pulp and paper mills. A timberland property with written, deeded access significantly impacts to the value of land. A good road system and access to utilities are also a factor in the success, management, and recreational enjoyment of timberland.
Pat Porter, owner and broker at RecLand Realty, talks about the nuances of timberland investment and why some timberland tracts can sell for a higher price.
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