Investing in Pine

I always love the 7% return assumption.
That said most people dont have 150k laying around to invest at once. You can finance the land purchase.
7% is the historical return of the S&P 500 adjusted for inflation over the last 90+ years.

If you are financing $150,000 over 20 years at 5% you will pay $90,000 just to borrow that $150k. You are $240,000 in the hole before you ever pull a dollar back out.

I know "The American Dream" is to own a little slice of heaven.

In my profession, I've seen too many land rich people that basically get it taken away from them by the bank or sell too cheap to the wolves because they are up against it. I guess the title "Investing in Pine" hit a nerve. Just trying to spread some knowledge. Most finance folks agree that Pine Land is not the best investment for most of us.
 
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A lot of great information above. I'm growing pines on 300 acres and agree even at that size it is hard to get someone to thin. My replanted trees got some bugs that took out about 15% of the trees at this point (forester said it was more expensive to spray for the bugs than it would be worth in terms of saving trees). I don't expect to make tons of money on the pine trees but I love owning, working and hunting on the land so at the end of the day it is worth it to me even if I don't make a ton of money. I would just not put all my retirement into land/trees. Stay diversified as others have said.
 
7% is the historical return of the S&P 500 adjusted for inflation over the last 90+ years.
And the since inception (1987) returns of the NCREIF Timberland Index are ~12% per year. In my profession, I've see too many equities rich people left holding the bag when the pundits decide it's a bear market.
 

Triple C

Senior Member
A lot of great information above. I'm growing pines on 300 acres and agree even at that size it is hard to get someone to thin. My replanted trees got some bugs that took out about 15% of the trees at this point (forester said it was more expensive to spray for the bugs than it would be worth in terms of saving trees). I don't expect to make tons of money on the pine trees but I love owning, working and hunting on the land so at the end of the day it is worth it to me even if I don't make a ton of money. I would just not put all my retirement into land/trees. Stay diversified as others have said.
Huntin 4 More...Well said!
 

GeorgeShu

Senior Member
Investing in land to grow pine trees may not be the best option for many folks, but it can be an excellent option for others. All depends on the situation. My experience has been positive and profitable. If you can buy the right land at a correct price, the land is productive, it’s located near woods product markets, the trees grow out properly with minimal losses to insects, disease, weather problems like ice or hurricanes, you manage properly and market correctly, then there is money there.

Could you make more investing in the markets? Maybe, but there is no guarantee of profits there either. You cannot walk on, hunt on or work on your paper assets like you can wooded land. They make new paper assets every day but they don’t make any more land. It’s a fixed resource and relatively scarce at times meaning it tends to hold its value.

Paper assets do not provide the awe factor of God’s creations. Owning land is a daily reminder of where we come from and why we need to be good stewards of nature. Every day is Earth Day when you are a land owner.

Owning land is not for everyone but if you do decide to be a landowner you got to find a way for that land to pay for itself. Pine trees are one of many ways land can generate returns.
 

Timberman

Senior Member
I fooled with a lot of land over the years. Looking back I don’t think I ever lost money on a deal. My average return certainly beat the market average.

I was able to flip and 1031 until I built up a sizable land portfolio. Life changed so I cashed out and invested in the market which suits me fine at my station in life. My time to own land has come and gone but it was one heckuva ride.
 
A lot of good information has been posted and I do agree that buying land and then having to finance it will likely not produce a ton of profit/investment return once you figure the interest paid over a 15 or 20 year period. If you had plenty of liquid cash sitting around and you wanted a safe investment you likely could use the money to buy a tract of land and get at least a 4 or 5% return yearly either by planting trees, renting out the farmland etc.. Adding in interest from having to finance diminishes that return.

Land returns have been made by people like Timberman by buying the land and then selling the land for a higher price a few years later. Eventually you flip the land enough times and you may end up with a tract that's paid for free and clear. Example... I was considering a purchase up in Iowa in 2009/2010. The economy was in the crapper and I was single with a steady income. I received a call about a farm for sale up there and unfortunately I didn't act on it. I was gun shy with the economy and I lived in Georgia so I couldn't enjoy the land that much. I could have flipped the land after 6 or 7 years of ownership and likely made 30% or 40% on my investment even with the interest paid over those 6 or 7 years. The same could be said for beach front property on 30a in Florida.

The problem I have with buying land is I personally get attached to it. I never would want to sell it unless I needed the money to feed my family. I don't look at it as an investment but as a legacy I get to leave my kids and grandkids. I never had it growing up so I appreciate it now that I do have some. I can assure you I get more happiness out of owning land than I do out of my Aflac stock splitting.

As far as timber goes the guys above are correct. It has a lot to do with location to the mills. Timber buyers pay more for trees that can be cut and easily transported to the mill. If your within 50 miles of a mill (Savannah for example) your timber will likely generate more return than if you were 100 miles from a mill simply because of transportation costs. I have cut and replanted trees for the last couple of years. I am 39 so my long term plan is to get a thin then a full harvest in my mid 60s and then replant for the kids. So I will likely have one more cut on those tracts before I am six feet under. If that's not looking long term then I do not know what is but that's the mindset you have to have unless you own 1000s of acres and can rotate blocks every 3 or 4 years.
 
Most folks fall in love with the land, my family is slam full. Anything low maintenance AG like pines on average will never produce a return like a decent stock portfolio. Now if you want the place to hunt and pass on to your kids, that is completely different but don't perceive it as a big return financial asset.

We had some chip and saw size pines cut on 2 different tracts in the past 3 years and both were close to mills and nice stands. Made 2-3K per acre bidding the small one out and letting a close friend cut the bigger tract. Could have made probably 2-3x more return in the stock market since those times (20-25 years) if not more. If you cannot buy the land 1k per acre or less without a loan and it grow premium stands you are backing up IMO.
 

Timberman

Senior Member
If you cannot buy the land 1k per acre or less without a loan and it grow premium stands you are backing up IMO.
Correct. when raw land reached about 800/acre was when forest industry began liquidating.
 

Milkman

Retired Moderator
Michael sadly wiped out many of peoples pine investment. P personally know a couple that lost 100% of what they had..
I drove from Cordele to Albany to Donaldsonville to Panama City and back in the past few days. There are millions of acres of pines destroyed beyond description. Really a sad situation in SW Ga and the panhandle of Florida.
 

Timberman

Senior Member
It will have a huge impact maybe for generations. It blasted the procurement area for the Panama City paper mill and many smaller mills.

Short term prices will drop long term many of the smaller mills will shut down in the area. A whole rotation is gone.

Basically a swath PC to st joe wide running NNE up into ga and ala is flattened.
 

cjones

Senior Member
great article just came out about how pine sales are at a 50yr low and no signs of recovery in the South. Wall Street Journal.
I saw that as well. I grew up in northwest Alabama where a lot of kids I grew up with parents' worked at the local paper mill. The mill closed about 6-7 years ago and the folks that had planted trees 20 years ago expecting it to pay for their kids college - ain't gonna happen now. That mill was pulling pulpwood in from as far away as TN and MS and now I don't know of any other mills to take within driving distance to take it. There is no such thing as guaranteed return on investment - everything has a risk.
 
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