Should timber value be a factor?

[JTip]

Searched the site and found a couple of good points but wanted to get a fresh opinion on the topic.

100+/- rolling acres, HBU is single family, no zoning, no public w/s making subdivision a nightmare and not cost effective. These 'unique' properties are desirable in this area, to be close to town while having the privacy of a large parcel, hunters dream or atv lovers paradise.

Timber values aren't what they used to be 2-4 years ago but there is still money to be made on a once per generation cutting. Last time cut was back in the 50's so there should be some good stuff in there.

Client is the owner wanting to know current value to sell to a neighbor who already has most of the other surrounding large parcels. Searching on here showed a statement 'no contributory value given for timber' could cover it. I am going to suggest to the owner to have an arborist/timber guy walk the property and give a solid estimate before leaving money on the table. I do have several good sales available, one with a similar timber history (I am very lucky). I am thinking the value should be what it is and the timber be additional. 99.9% chance of the neighbor buying this parcel so the exposure will be non existant. I feel (as an agent) that listing this thing for a couple of months could bring a few more bucks due to the lack of similar properties available. She could get easily get top dollar with a bidding war. My head is beginning to spin...:Eyecrazy:

So, any comments/suggestions/experiences with properties that have timber? As always, thanks for your comments.

 

[Restrain]

Having done dozens of these, here's the deal. Use comps that have timber. If you can find a sale of a property that was recently cut, it should give you a value differential to show the timber differential. You said the people love the woods, etc. You cut the property, you end up with a mess (tree remnants, stumps, etc) which makes a mess for years. It's a 1-time thing for income. Finally, don't use an "arborist". Junk science. Use someone who cuts trees for pulp, etc. Just because there are trees does not mean that there is harvestable timber on the site. Two different things.

So, in summary, value the property using similar comps. As an aside, have a timber cruise done, but don't try to separate the values out. Just put in a separate comment as to the potential value of the timber. You are valuing the property as it exists. If you try to add the value of the timber, you're going to have to deduct for the loss in timber in marketabililty...and it can be 25% of value.

 

[Stone]

Having done dozens of these, here's the deal. Use comps that have timber. If you can find a sale of a property that was recently cut, it should give you a value differential to show the timber differential. You said the people love the woods, etc. You cut the property, you end up with a mess (tree remnants, stumps, etc) which makes a mess for years. It's a 1-time thing for income. Finally, don't use an "arborist". Junk science. Use someone who cuts trees for pulp, etc. Just because there are trees does not mean that there is harvestable timber on the site. Two different things.

So, in summary, value the property using similar comps. As an aside, have a timber cruise done, but don't try to separate the values out. Just put in a separate comment as to the potential value of the timber. You are valuing the property as it exists. If you try to add the value of the timber, you're going to have to deduct for the loss in timber in marketabililty...and it can be 25% of value.

I also do these on a regular basis, and this is good advice. Too many people try and add timber as a separate component. Find sales with timber and go from there. You will probably have to talk to the buyers or sellers to find out the quality of the different woodlots and when they were last harvested. Go from there.

 

[JTip]

Thank you for the quick and well explained thought Restrain, that really helps me out.

 

[CANative]

I do these often and I've found that the small amount of money from harvesting the timber would likely be offset by the diminution of the appeal of the standing forest. It's appeal lies in the aesthic value and a feeling of "money in the bank" that will never be spent. Most people do limited cuts for purposes of conservation and maintaining the health of the land. Perhaps share the money with a timber company which will bring portable sawmill and mill out some lumber for home projects.

100 acres isn't enough for commercial timber uses but when you start getting into the 1,000 acre range with four or five million board feet of redwood and doug fir there is some real money on the table. I don't appraise those types of property.

 

[Mark K]

100 acres isn't enough for commercial timber uses but when you start getting into the 1,000 acre range with four or five million board feet of redwood and doug fir there is some real money on the table. I don't appraise those types of property.

In the midwest, a 100 acre tract of good hardwood (white and black oak, cherry, walnut, hickory) can bring a significant amount of $$$.

I'm a member of a hunt club that currently has about 1,000 acres of woodland. When a neighboring parcel comes up for sale, we cut some timber and use the proceeds to purchase the land. Doing this we've grown from 500 to 1,000 acres in the past 25 years.

A 100 acre stand of good hardwood can easily bring $1,000 to $1,500 per acre on a fairly limited cut. Our last cut averaged $1,200/acre cut with an average of 5 trees per acre, nothing smaller than 20" dia. The cut was about 75% oak and the balance was cherry and hickory.


I'd suggest the owner get a good forester to cruise the property to get an idea of the timber value. It may be significant if it hasn't been cut in 50 years. The owner may want to have the timber cut first and then sell the land. In this area, the land value is often unaffected by a well managed cut.

 

[CANative]

A 100 acre stand of good hardwood can easily bring $1,000 to $1,500 per acre on a fairly limited cut.

Most forestlands out here have brutal topography and very difficult access. In many cases a helicopter to bring out the wood is cheaper than cutting roads. And for tracts of less than a couple of hundred acres the PPA for primarily residential/investment uses is between $5k and $10k per acre. And if you can't do the cutting by yourself you have to pay out about half of the income to the timber people.

Not to mention the time, expense and political/environmental hassels invovled in getting a timber harvest plan approved. It hasn't been that long since tree wackos drove spikes in trees as booby traps which could kill or maim a logger.

 

[Mark K]

Most forestlands out here have brutal topography and very difficult access. In many cases a helicopter to bring out the wood is cheaper than cutting roads. And for tracts of less than a couple of hundred acres the PPA for primarily residential/investment uses is between $5k and $10k per acre. And if you can't do the cutting by yourself you have to pay out about half of the income to the timber people.

Not to mention the time, expense and political/environmental hassels invovled in getting a timber harvest plan approved. It hasn't been that long since tree wackos drove spikes in trees as booby traps which could kill or maim a logger.

Whoa!

It looks like timber harvesting is much more profitable in the Midwest.

Timber harvest plan?....we don't need no stinking timber harvest plan.

We pay 8-10% of the harvest to a Certified Forester who marks the trees, makes an inventory, advertises for bids and then supervises the cutters.

Some well financed cutters and mill owners buy the land for $1,500 to $2,000/acre, cut the timber, and then resell it for nearly the same amount. They'll buy a 200 ac. tract, cut, then resell it in 40 ac. tracts. Basically, they get the timber for free and sometimes make a little money on the resale of the land.

 

[Doug Meyer]

Have a good stand of Black Walnut and see what that does to the price!!

 

[JTip]

Thanks for all the comments.

I have an insurance client who manufacturses/sells veneer. A couple of years ago he was slammed with business. Multiple hundred grand in employee salary/workers comp, solid accounts making cabinet products. These days he is down to one PT employee and mostly sells veneer for casket products. He is a good market indicator of the demand for high quality wood products. Local wood men have been building up stock of the quality stuff because pricing/demand just isn't there these days.

Interesting stuff. Thanks again.