Pros, Cons, & Costs of Timber Land for Sale
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If you're on the hunt for a unique investment you can use to diversify your real estate assets, buying timber land for sale could be a great decision. The timber industry was worth nearly $535 billion in 2020 and is projected to grow to over $950 billion by 2030. Growing demand for paper and wood products has contributed to this growth.
Whether you're looking for timber land for sale in Georgia, timber land for sale in South Carolina, or anywhere else throughout the US, we've got you covered. Here, we'll cover the pros, cons, and costs of timber land and how investors can benefit from investing.
Let's get started.
What Is Timber Land Used For?
Timber land is a type of privately-owned commercial land that's used for growing and harvesting timber and commercial wood products. The US has about 521 million acres of federally recognized timber land that exist all across the nation. Timber wood is an important natural resource manufacturers use for construction, paper, wood products, and fuel.
Timber land is incredibly important to the rest of the real estate industry because it produces some of the raw materials required to build residential and commercial properties. The US is the top timber producer in the world, producing over 298 million cubic meters of timber every year.
How to Buy Timber Land for Sale
When buying timber land for sale, you'll most likely have to get a land loan to finance your real estate purchase. Land loans are riskier than traditional home mortgages, so land loans often have higher down payments, shorter repayment schedules, and higher interest rates.
One very important aspect of buying timber land is the type of trees that grow on the plot you're looking at. Different trees produce different quality wood. For example, black cherry timber tends to cost more than sweetgum timber. Different species of wood take different amounts of time to grow, as well.
We highly recommend working with a commercial real estate broker to find the right plot of timber land for sale. A broker can not only analyze property financials but also negotiate a favorable sales agreement.
Pros of Timber Land for Sale
Below are just a handful of the benefits of buying timber land for sale.
#1 – Land Is Productive
Land in general can be a great investment because of its income-producing potential. Even if you yourself are not producing timber on the land, you can rent or lease the property to another developer.
You can also build structures on the land, like housing, warehouses, sheds, and barns to lease.
#2 – Great Value
Land is one of the best investments you can make because it's finite and continually increases in value. Land value appreciates at an average rate of 2% and 4% per year.
Timber land appreciates in value slower than other types of agricultural and rural land, but demand for all types of land has recently skyrocketed: The average rural land value in the US increased 11% between 2021 and 2022 alone.
#3 – Flexible Uses
Land is also highly flexible: You can live on it, build a house, and use it for recreation like hiking, hunting, and fishing. This flexibility makes timber land a great long-term investment. Additionally, you can pass down any land to future generations as a store of wealth.
Cons of Timber Land for Sale
However, timber land investments have some downsides as well.
#1 – Returns Take Time
Depending on how fast the trees grow, it can take up to 20 years to progress from planting trees to harvesting timber. You may not be willing to devote that much time to developing and caring for the land.
#2 – Production Can Vary
Timber production can also vary significantly depending on several environmental factors, like weather, fire hazards, disease, and natural disasters. Changing land-use policies might also affect timber cultivation and production.
#3 – Management Is Difficult
Unless you have forestry experience, you'll likely need to hire an expert to handle any timber land management and upkeep. Management includes trimming trees, tending ground vegetation, and treating trees for pests and diseases.
Modern management strategies can take advantage of robotics and AI to map and monitor timber lands. Make sure you factor timber management cost into your investment strategy.
How Much Does Timber Land for Sale Cost?
Various factors affect the costs of timber land, such as the type of trees and the presence of sawmills and distribution warehouses. According to data from Forest 2 Market, the average price for a clearcut acre of 25+-year-old plantation pine was approximately $1,870 in 2020.
However, prices for timber can reach over $5,000 an acre in some states.
What States Are Best for Buying Timber Land?
Just like with buying other types of commercial space, location is incredibly important when buying timber land for sale. Below is our list of the best states to buy timber land as an investment.
These states are ideal thanks to a combination of affordable prices, total timber production, and state business policies.
#1 – Oregon
Oregon produces over 3.8 billion board feet of timber per year, making it the largest timber producer in the US. One-third of Oregon's timber lands are privately owned, and these private lands produce over 75% of the state's timber.
#2 – Washington
Second only to Oregon, Washington state produces over 2.7 billion board feet of timber per year. The average cost of timber land in Washington for sale is about $3,661 per acre, and the majority of Washington's timber comes from forests in the western half of the state.
#3 – Georgia
There are over 22 million acres of private timber land for sale in Georgia, with an average price of $4,907 per acre. Most timber land for sale in Georgia produces variants of pine trees, like longleaf, slash, and Virginia pine.
#4 – South Carolina
The majority of timber land for sale in South Carolina grows pine trees, like most other major timber operations in the Southern United States. Timber land for sale in South Carolina has an average stumpage price of $24.83 per ton.
Can You Make Money With Timber Land?
Forest products show fairly consistent demand, so timber income has historically been consistent. According to data from the National Council of Real Estate Investment Fiduciaries (NCREIF), US timber land had a one-year rolling average return of 11.13% between 2022 and 2023.
Overall, timber land in the Northwest region of the US has the highest average returns.
Is Buying Land for Timber a Good Investment?
Yes, timber land can be a good investment for several reasons: Timber land is in constant demand and land values continue to increase. Timber land is also highly flexible as you can build residential or industrial properties on the same land.
Timber land may not produce as much money as other types of real estate investments, like offices or industrial space, but it is very stable. According to data from Timberland Investment Resources, between 1988 and 2022, timber land prices had a standard deviation of 10.17% compared to a 17.57% standard deviation for the S&P 500.
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