Looking back, my decision to invest in in timberland 7 years ago appears to be paying off nicely. I’ve always had a desire to own land. I think it has to do with the idea of being independent and experiencing one of the purest forms of freedom.

When flying for work I enjoyed sitting by the window seat to marvel at all the beautiful land beneath and dream of what would it be like to own acres of land. On one occasion I sat next to a gentleman from Idaho whom shared that he had inherited thousands of acres of farmland. What an enviable situation! My parents didn’t own acres of land, but they gave me something far more valuable, an entrepreneurial upbringing.

As I looked for possible ways of owning land I kept on encountering a big question. How to get income from the land without having to be a farmer or rancher? Then a friend told me to look into timberland.

Eventually I purchased 58 acres of timberland with 25 and 10 year old Douglas Fir and Western Hemlock stands. Both of which are very desirable softwoods in the construction industry. The woodlot also contains some hardwoods such as bigleaf maple and red alder. These are primarily used by furniture makers.

Why Invest in in Timberland?

In short, I like to invest in timberland because timber grows in volume, quality and it appreciates in value. In addition, land will also appreciate, while property taxes for timberland can be very low. Finally, most timberland can be used for recreation and for leaving a legacy. Let’s explore these things in more detail.

Timber Grows in Volume

As I write this article, the trees in my woodlot are growing without me watering them, pruning them or even thinning the forest. The timber in my tree-farm grows regardless of the economic environment or political environment. When the COVID pandemic hit, I didn’t have to worry about its impact on timber growth.

Trees grow in height and in diameter at an impressive rate, in certain parts of the country. In some cases it makes sense to do pre-commercial and commercial thinning, to improve the quality of the timber and encourage faster growth, but the reality is that the trees are growing whether I do these things or not.

Timber Improves in Quality

As trees grow in diameter timber increases in quality. Generally a 10″ log pays better than an 8″ log. In addition, species like Douglas Fir delimb themselves as the trees grow and they compete for space. Delimbing results in less knots and therefore more desirable timber.

All of this contributes to what people in the industry refer to as “product-shifting”. Special Mill or Better logs pay more than 2 Saw and 2 Saw pays more than 3 Saw, etc.

Timber Appreciates in Value

The biggest driver of timber demand comes from the construction industry. When the economy grows developers build more, requiring more lumber and thus more timber. In addition, as development grows more and more timberlands are absorbed, which tends to limit supply

The correlation between timber logs and finished lumber is somewhat erratic, but from a macro-economic level it should be obvious that as development continues there will always be demand for timber.

In addition, commodities like timber tend to do well in high inflationary environments, like we are seeing in 2022. Given these conditions, it is easy to see how timber will generally appreciate in value. Unfortunately, history has proven timber prices are fairly volatile.

The good news is that forest owners can chose when to harvest timber. If timber prices are depressed forest owners can chose to defer harvests. Unlike most other crops, timber doesn’t mature and go bad if unharvested. Instead, timber continues to grow in volume and quality.

Land Price Appreciation

Raw or undeveloped land appreciates in value because there is finite supply of it and because it is in ever increasing demand. Timber production isn’t financially viable on any type of land, making timberland an even scarcer resource. And as development grows, timberland is absorbed, thus becoming a diminishing resource.

We all know that the biggest factor affecting any form of real estate is location. And as my flying companion from Idaho said, the best way to make money with land is to be in the way of progress. Thus, land in proximity to growing cities will appreciate faster than land in rural areas. But, regardless, land is appreciating everywhere.

Recreational Benefits

One of the best parts of owning timberland is the recreational value that comes from it. The first Christmas we owned our timberland we decided to harvest our own Christmas trees from our own woodlot. When we got there, our kids couldn’t agree on which of two trees to cut. We ended up taking two Christmas trees home.

There is so much to do at at our small forest, from camping, to hunting, to building things like a zip-line and other fun things. In fact, one of the biggest benefits of owning some timberland is the memories we are creating with family and friends.

Low Taxes

Property taxes for forested land are generally very low. In the seven years we’ve owned our forestland we’ve only paid an average of $100 per year in property taxes. Certainly, we’ll pay a good amount on taxes when we harvest and sell the timber, but that’s to be expected.

Building a Legacy

Another reason to invest in timberland is that it is a great way to build a legacy. Depending on the productivity of the land, Douglas Fir plantations can be harvested every 45 to 60 years, or roughly one time per generation. I love the idea of leaving hundreds of acres of timberland to my children and for them to reap the benefits of harvesting and passing the land to their kids to do the same. This may sound idealistic, I am compelled to give it a try because I see the value in owning timber land from a financial perspective, but also for the recreational value of the land and for the sense of freedom I derive from it.

Conclusion on Reasons to Invest in Timberland

The bottom line is that investing in timberland can be an excellent way of owning appreciating land, while also owning a growing and appreciating commodity. The returns can be impressive, but the recreational benefits and the opportunity to leave a legacy are even more impressive.

For other land related investments see RV Park Investing, Mobile Home Park Investing, and RV Storage Investing: