Selling Timber

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stormswami
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Selling Timber

Post by stormswami » Sat Feb 17, 2018 8:33 am

I'm looking for some Boglehead advice and experiences in the realm of selling timber to logging companies in regards of what are fair market rates and other expectations. We were approached by a local logging company about removing some of the trees in woods on our farm in southern Illinois. I'm not a tree expert, but it's a diverse blend of trees that include Oak, Maple, Cedar, Hickory etc.

The proposed contractual agreement is to receive 1/3 of sale proceeds for timber priced less than 45 cents/board foot and 1/2 of proceeds of trees valued more than 45 cents/board foot. A neighbor apparently received ~$15,000 for 350 trees (roughly $42/tree) from the same company. Any insight is appreciated.
Last edited by stormswami on Sat Feb 17, 2018 9:03 am, edited 1 time in total.

ausmatt
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Re: Selling Timber

Post by ausmatt » Sat Feb 17, 2018 8:45 am

This may be a touch one to get advice on, but I’m always amazed by this forum. You may want to speak with some commercial or ag focused real estate people in that area who may have a diverse set of clients that did something similar.

MichaelM
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Re: Selling Timber

Post by MichaelM » Sat Feb 17, 2018 8:55 am

Storms,
Just my comment as family owns timber in Arkansas and it is managed by our timber agent who works for many other area concerns. When it comes time to thin out or harvest some trees he provides 3 quotes from local timber companies. If I were near to my files on this might could offer more but am traveling today. There is a process with our timber. You should probably ask to your local area from some others who hav sold timber. You may need a second ref point to compare what you have been offered and you may find this first offer to be exactly fair. Good luck. Michael.

Bonnan
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Re: Selling Timber

Post by Bonnan » Sat Feb 17, 2018 8:57 am

Please contact your State Service Forester BEFORE entering into any any agreements. They offer a wealth of information with out a conflict of interest. In the timber business the logging company holds many more cards than you do. They naturally have an edge even if they are decent honest workers but most take advantage of the situation. Most frequently it is prudent and cost effective to hire a consulting forester to manage the deal for you.

MichaelM
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Re: Selling Timber

Post by MichaelM » Sat Feb 17, 2018 9:01 am

Storms;
Forgot to mention and you probably are aware that you can see the commodity price of timber usually given in 1000 board feet in any good daily financial paper. Not saying you would get this price for your timber but it would be another point of ref. Michael

integrity
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Re: Selling Timber

Post by integrity » Sat Feb 17, 2018 9:13 am

I am absolutely fascinated by this thread (and I suppose I shouldn't be surprised that there are experts on this forum who know the answers). I would love to get some insight from others who have done this before. It has always been a fantasy of mine to buy a large remote plot of land, with a small cabin, and selectively use the timber for some moderate income while using the cabin for family enjoyment.

Like here: https://www.landwatch.com/Timberland

But I haven't really been able to get my head around the economics of it.

stormswami
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Re: Selling Timber

Post by stormswami » Sat Feb 17, 2018 9:27 am

Thanks for all the comments and interest in the topic thus far.

I'm not entirely sure how it will affect our decision, but I had no idea that the price of timber is on such a bull run since 2016. The chart below is apparently the spot price of Timber. For anyone interested, there are apparently some Timber-related ETFs such as WOOD and CUT, which are up 40% and 31% over the past year, respectively. -StormSwami

Image

mrgeeze
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Re: Selling Timber

Post by mrgeeze » Sat Feb 17, 2018 9:38 am

Hurricanes blow down things made of wood
Fires burn up things made of wood.

Houston
Florida
Gulf Coast
Mid Atlantic(Sandy)
California


Demand for timber should be through the roof..... i made a pun

Valuethinker
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Re: Selling Timber

Post by Valuethinker » Sat Feb 17, 2018 10:21 am

integrity wrote:
Sat Feb 17, 2018 9:13 am
I am absolutely fascinated by this thread (and I suppose I shouldn't be surprised that there are experts on this forum who know the answers). I would love to get some insight from others who have done this before. It has always been a fantasy of mine to buy a large remote plot of land, with a small cabin, and selectively use the timber for some moderate income while using the cabin for family enjoyment.

Like here: https://www.landwatch.com/Timberland

But I haven't really been able to get my head around the economics of it.
that's usually because the economics do not work out.

You need scale and a good combination of local factors (competitive bidders for your timber, access, type of trees etc.).

You have to make the numbers work with no timber sales, then if there are such sales, that is " bunce" (Yorkshire term for unforeseen upside).

I had an aunt who was able to sell quite a lot of gravel in her 30+ years at the farm (started out as a hobby, in retirement became full time residence). In an area where due to park restrictions aggregates extraction became increasingly difficult so supply limits.

But it never paid the freight on the farm (neither did the farming - the land should never have been cleared in the first place). It was just nice to have.

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Sandtrap
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Re: Selling Timber

Post by Sandtrap » Sat Feb 17, 2018 10:26 am

stormswami wrote:
Sat Feb 17, 2018 8:33 am
I'm looking for some Boglehead advice and experiences in the realm of selling timber to logging companies in regards of what are fair market rates and other expectations. We were approached by a local logging company about removing some of the trees in woods on our farm in southern Illinois. I'm not a tree expert, but it's a diverse blend of trees that include Oak, Maple, Cedar, Hickory etc.

The proposed contractual agreement is to receive 1/3 of sale proceeds for timber priced less than 45 cents/board foot and 1/2 of proceeds of trees valued more than 45 cents/board foot. A neighbor apparently received ~$15,000 for 350 trees (roughly $42/tree) from the same company. Any insight is appreciated.
Depending on the type of tree, there can be larger gains if sold to speciality companies and individuals who harvest trees for wood carving, crafts, custom interiors and cabinetry, instruments, etc. Some will travel the nation for the "right tree". Far different from the bulk mill harvesting for 2x4's and OSB. For some older trees, the "burls" are worth $$$.
Wouldn't hurt to inquire.
j :D

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Smorgasbord
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Re: Selling Timber

Post by Smorgasbord » Sat Feb 17, 2018 10:30 am

There are economies of scale in the timber industry, so I would suggest getting together as many of your neighbors together as possible who want to sell their timber, and then getting at least a few bids on the combined sale of the trees (broken out by lot, of course).

mrb09
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Re: Selling Timber

Post by mrb09 » Sat Feb 17, 2018 10:44 am

I live on forested land in California.

There was a harvest at our place right before we moved in, and there was quite a lot of slash (wood waste) left. That's part of the contract with the timber company, they'll take the timber but if you want cleanup, that's part of the price negotiation. Highly recommend you work with an independent forrester on what the terms of the harvest will be, the timber company doing the work may not volunteer information or may simply think you know. They'll likely be cutting some roads as well, so you may want some control over where they'll go.

KyleAAA
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Re: Selling Timber

Post by KyleAAA » Sat Feb 17, 2018 10:46 am

I wouldn’t even consider negotiating this yourself if it’s a decent tract of land. Contact your state forestry service and they can give you pointers. Usually it’s best to have a certified forester negotiate on your behalf as you’re very likely to get ripped off if you go it alone. But if it’s only an acre you’re talking about, maybe it isn’t worth paying a forester. Either way, start with your state forestry service.

basspond
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Re: Selling Timber

Post by basspond » Sat Feb 17, 2018 10:52 am

The price calculation based on price of lumber seems very reasonable. Standard oil leases are 20% and are not on a sliding scale. Make sure they harvest responsibly, you have a say in what areas can be harvested, and do site remediation.

Katietsu
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Re: Selling Timber

Post by Katietsu » Sat Feb 17, 2018 10:53 am

If you care about the land after the timbering, do not just go with the highest bid. You can be left behind barely realizing the property had been timbered. Or you can be left behind with a mess, for lack of a better term. They can dig up the ground with equipment, leave debris and damaged trees everywhere, etc.

montanagirl
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Re: Selling Timber

Post by montanagirl » Sat Feb 17, 2018 11:03 am

Sounds like OP has some nice hardwood...I woudn't use softwood lumber pricing as a guide.

JGoneRiding
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Re: Selling Timber

Post by JGoneRiding » Sat Feb 17, 2018 2:30 pm

integrity wrote:
Sat Feb 17, 2018 9:13 am
I am absolutely fascinated by this thread (and I suppose I shouldn't be surprised that there are experts on this forum who know the answers). I would love to get some insight from others who have done this before. It has always been a fantasy of mine to buy a large remote plot of land, with a small cabin, and selectively use the timber for some moderate income while using the cabin for family enjoyment.

Like here: https://www.landwatch.com/Timberland

But I haven't really been able to get my head around the economics of it.
Add me to that list. There are some 100 ac plots on a lake for sale that are long and skinny so they all have some lake front and then go up into essentially unusable mountains BUT the timber could be sold. I just cant get around the idea of if it is worth buying the acreage and selling timber why it hasn't already been done. If I could make the numbers work would love to have a chunk of land to ride/snowmobile on and have lake front cabin (tons of restrictions including water so not worried about mass development)

Cheyenne
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Re: Selling Timber

Post by Cheyenne » Sat Feb 17, 2018 2:46 pm

We have a two-acre wooded lot adjacent to out home and a few years ago after Hurricane Sandy a man knocked on the door and said he was helping people clean up after the storm. After walking around with him it became clear that he was really interested in the tall standing oak trees. We didn't want to clear the lot so he said we could pick the trees he could take. I selected about 20 as I recall including one immense oak that was nearing the end of it's life and its limbs were beginning to fall off of it (that was the main one we wanted removed). He said he would take that one too and offered $1,000.00 for all which we rejected. He returned the next day and offered $2,000.00 which we accepted. They removed them and left the limbs for us to use as fire wood, and of course "forgot" to take the dying tree. I called him about that and he said it was now too wet go get in there. Get it in writing.

Doohop65
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Re: Selling Timber

Post by Doohop65 » Sat Feb 17, 2018 3:53 pm

There is a lot of good advise here. I am also in the Midwest and have some experience with this sort of thing

Your best bet is to have a state forester recommend a list of reputable private foresters to interview(most state foresters don’t have the time/ability to manage the whole project). Interview several with the understanding that you are looking for a forester to manage the project from start to finish.

Go over your goals with this person and they can put these projects out to bid. They should manage which trees with be harvested, landing spots for the cut timber, cleanup, counting of loads, and payment.

A private forester will get a percentage of the cut but this also helps you because it incentivized them to do a good job and make sure all wood is accounted for.

Good luck and make sure you have a good contract.

Bwlonge
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Re: Selling Timber

Post by Bwlonge » Sat Feb 17, 2018 4:05 pm

Maybe I'll buy a timber ETF.

https://www.ishares.com/us/products/239 ... restry-etf

I've thought about owning a Christmas tree farm. I should look into that again.

not4me
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Re: Selling Timber

Post by not4me » Sat Feb 17, 2018 4:43 pm

I agree with much of the above advice in that you should have a written agreement, >1 bids, pro advice....I would start with a government (most have mentioned state, but feds also can help, some places have local) official and/or trade groups. However, understand that the price will (or I should say "should") fluctuate & when all is said & done time is money. Getting it in writing shouldn't take long, although you may be uncomfortable thinking through all you want in writing without help. But, in fairness to loggers, if they have crews near you now, their costs may be less now & market higher than it will be in x months if you call them back then. But the 2nd estimate may tell you if they are in ball park.

integrity wrote:
Sat Feb 17, 2018 9:13 am

But I haven't really been able to get my head around the economics of it.
I'd be interested in hearing what hurdles you're trying to get over. Investing in timber can be a great investment. It isn't dissimilar to other investing though in a sense. If the person has needs that line up with a CD, then owning stock may not be a fit for them. Are you talking about investing in timber (&using for recreation) or buying a vacation place (& getting some side money from trees)?

Jack FFR1846
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Re: Selling Timber

Post by Jack FFR1846 » Sat Feb 17, 2018 4:53 pm

You can also pay a private forester to come and assess what could be taken and give you a ball park. If you have an idea of what you want the property to look like when they're done, he can help with better companies to work with.

I forest manage my property mainly for firewood extraction that I do myself so it's never a mess and it's done to help remaining trees grow healthier and faster. My tree makeup isn't too different....oak, maple, white pine, cedar and beech mainly.
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bhsince87
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Re: Selling Timber

Post by bhsince87 » Sat Feb 17, 2018 5:24 pm

I would start by contacting a forester. They will look out for your best interests and help you manage the land in the manner you prefer. It will cost you some money up front, but they almost always get you more for your wood than you would typically get negotiating on your own.

Plus they will know what is best for the future viability of your trees. This is a hard science, and these folks live it everyday.

https://www.dnr.illinois.gov/conservati ... esters.pdf
Retirement: When you reach a point where you have enough. Or when you've had enough.

jadedfalcons
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Re: Selling Timber

Post by jadedfalcons » Sat Feb 17, 2018 10:14 pm

Is there any walnut? I can't say as that I have much knowledge in this arena, but $42/tree is making me feel very uncomfortable. My father helped broker a couple deals here recently on walnut trees, and those are going for over $1k/tree (highly variable, depending on the condition of each tree)

Knowing that I don't know what I don't know, I'd echo the previous posters who are suggesting you get somebody that has more knowledge. One landowner just a mile away from our store was offered $10k for his walnut trees. Dad got one of our customers to go see him about logging it and the same landowner is getting a check for $54k now. Easy to get taken advantage of.

nodenuff2
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Re: Selling Timber

Post by nodenuff2 » Sat Feb 17, 2018 11:57 pm

Consider Retaining a forester to handle the sale. He will market your timber to get you the right price. He will keep you,from getting taken advantage of. Of course you have to find one that is honest. Make sure you get a contract that addresses land damages.
2014 No. 42 2015 No.342 2016 No. 6 2017 238 what do I know? "Good bless America land that I love..."

GCD
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Re: Selling Timber

Post by GCD » Sun Feb 18, 2018 12:12 am

Wood sales are highly variable by region. I used to have 40 acres in the Black Hills of South Dakota that bordered over a million acres of the Black Hills National Forest. It was all pine. It used to be (pre-2010) that you could make good money logging your land. It was a source of income. However, the 3 sawmills in the area were bought up by the same guy and the price dropped precipitously. I actually had to pay a guy to thin my property. I had to thin it because there was a pine beetle infestation at the time and it was a real fire hazard. He discounted heavily for the wood he harvested during the thinning, but in the end I still had to pay him, not him paying me.

If you want to buy a property and plan to sell the wood off it you need to get a good understanding of the local economics before jumping in. Eastern hardwoods vs. western soft wood is going to make a lot of difference. Not too many forest fires in the east due to humidity, rainfall, type of tree, etc. You can lose your crop pretty easy in the west. Logging equipment is hot too and can start fires. The guy that did the work for me started a fire by accident, but got it under control quick.

Another issue is agreeing on what they are gonna cut. I wanted the smaller stuff thinned out and the logging company obviously wanted to take the nice big stuff. That probably affected the price a little as to what I got. Had to keep a close eye on the work in progress too.

I should add that I worked with the state forestry department and got multiple bids so I didn't get screwed. It's just the way the market is in that spot in the country.

Tarm
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Re: Selling Timber

Post by Tarm » Sun Feb 18, 2018 8:42 am

Do you need the money? The logger is proposing what is called a "high grade." A high grade harvest is "cutting the best and leaving the rest." I have performed 12 timber sales on my properties over the years. I've learned a lot, most of it the hard way. My advice to you is to NEVER sell timber to someone who knocks on your door. Usually you can get free forestry advice from the state forestry department. If the state forester feels that a timber harvest is possible hire a private consulting forester to set up the sale. He/she would lay out your options, mark the trees to be harvested and put the job out for bids. Yes you would have to pay them but you would almost always come out ahead. I've seen to many landowners take the fast money and regret it for years.

Valuethinker
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Re: Selling Timber

Post by Valuethinker » Sun Feb 18, 2018 2:21 pm

Bwlonge wrote:
Sat Feb 17, 2018 4:05 pm
Maybe I'll buy a timber ETF.

https://www.ishares.com/us/products/239 ... restry-etf

I've thought about owning a Christmas tree farm. I should look into that again.
If you go back a few years, we discussed the options for investing in Timber stocks in great detail.

malabargold
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Re: Selling Timber

Post by malabargold » Sun Feb 18, 2018 6:58 pm

Get sealed bids from loggers.
If it’s only 350 trees they may not do that

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Bruce
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Re: Selling Timber

Post by Bruce » Mon Feb 19, 2018 2:17 am

I would start here at this link, reading about how a consulting forester can help you get a reasonable price and help ensure the land after harvest is in the condition you want it to be. Best price is not all you are intersted in, future health of your forest is also a strong consideration. Condition your property is left in after harvest is even more important.

http://illinoisconsultingforesters.com/#timbersaleslink

Then I would call and talk with several of the foresters listed who reside closest to your timberland and discuss what they might be able to do for you.

https://web.extension.illinois.edu/fore ... tance.html

You also may want to see what technical assistance is available in drawing up a forest management plan for your timberland from your Illinois extension service at the link above.

The advice you got from bhsince87 is also helpful
"I would start by contacting a forester. They will look out for your best interests and help you manage the land in the manner you prefer. It will cost you some money up front, but they almost always get you more for your wood than you would typically get negotiating on your own.

Plus they will know what is best for the future viability of your trees. This is a hard science, and these folks live it everyday."

https://www.dnr.illinois.gov/conservati ... esters.pdf
Bruce | | Winner of the 2017 Bogleheads Contest | | "Simplicity is the master key to financial success."

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Bruce
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Re: Selling Timber

Post by Bruce » Mon Feb 19, 2018 2:28 am

This article on "selling timber, what a landowner needs to know" is also very well done

https://extension2.missouri.edu/G5051

Even though it is from the Missouri extension service almost all of the information applies to Illinois forest landowners as well.

Bottom line, this is an infrequent event for you, and is not like index fund investing where you can do it your self and get the same result as a professional.

For a infrequent timber sale by a private landowner, hire a professional forester to guide you and help you get best value.

Regards,
Bruce | | Winner of the 2017 Bogleheads Contest | | "Simplicity is the master key to financial success."

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4nursebee
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Re: Selling Timber

Post by 4nursebee » Mon Feb 19, 2018 5:07 am

No direct experience but have heard of family selling timber. $42 a tree sounds WAY OFF for quality large trees. I expect there are single pieces of hardwood lumber for sale for $42. Top of my head I think I recall triple the total price for fewer trees. Last harvest was prompted by concern for species related problems.

There is no rush.
Talk to more locals.
Talk to more timber cruisers.
Get educated.
How the land is left is important.
4nursebee

forgeblast
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Re: Selling Timber

Post by forgeblast » Mon Feb 19, 2018 9:46 am

First off GET A FORESTER!!!!
The forester works for you, you need someone on your side who will make sure your goals will be met.
There are different ways to harvest a forest, some are bad.
For example High grading...that is when the best trees are taken and the worse are left. The worse trees will be the ones reproducing in the vacant areas, which means then your forest will have bad genetics.
Also you need to address roads, skidding, etc (forester will help).
We live in a a rural area and have been approached a few times to have our trees logged. The problem is that when I had my state forester out he pointed out the logging company (on my property with out permission to tag trees) was going to high grade everything. The trees especially my black cherry are growing at 1/2'' a year. This means 100$ trees will be worth a lot more in 10 years then if I cut them then.
The same people were going to offer me 35$ a trailer for fire wood and turn around and sell it for $900....
A person near me was getting lumber cut, their forester worked at setting up a timber auction because they had a lot of high quality veneer quality logs (worth 1k a piece). He maximized their sale by having people bid...remember the forester works for you.
Your local department of ag, will be able to give you a list of foresters, they should have one on staff that can walk through your property with you too.
http://knowyourforest.org/learning-libr ... ing-timber is also a good read.

stormswami
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Re: Selling Timber

Post by stormswami » Mon Feb 19, 2018 10:07 am

OP here... again, a big THANK YOU for the EXCELLENT advice. Bogleheads never cease to amaze!

My update is that I'm in the process of receiving an initial quote and more details from the logger in terms of what they are proposing for harvesting. More importantly, I have emailed a 'Professional Consulting Forester' (frankly never knew there was such a professional) from the same County in which the land is located. I'll report back as I learn more.

To otherwise answer one of the questions, I don't "need" the money per se (and certainly no hurry), but an extra chunk of change would be nice for the kids college funds etc. I'm looking for a fair and decent payout. But, I'm also wanting to minimize any damage to land entryways and crop farming operations while leaving an appropriate and healthy diversity of trees. The particular piece of wooded land does not have a homestead (no one nearby), so aesthetic factors are not paramount. Before making a final decision, I will also talk with my farm operator since we actually might be able to gain a couple of extra acres of crop productivity by choosing to selectively clear more trees in certain parts of the property (something we talked about years ago) -- a win/win perhaps.

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Jimbo9911
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Re: Selling Timber

Post by Jimbo9911 » Mon Feb 19, 2018 10:45 am

I did not read the whole post but:

I know some folks whose families have made their living in the timber business for many years as the people who buy, cut and sell the timber.
Their advice is to never sell your timber based on someone's estimate of the board feet because that is never an accurate estimate.
Always sell it according to the tonnage weighed at the lumber yard when the trucks are weighed.
That will give you the most return on your trees.

Jim

WVbaron
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Re: Selling Timber

Post by WVbaron » Mon Feb 19, 2018 10:55 am

We have a cabin in West Virginia and although we have never done this ourselves yet, have looked into it. We have friends who do this kind of work and it is usually around 50% / 50% in terms of revenue sharing. They obviously provide all of the equipment, labor, etc. I do agree with other comments about working with a forester, understanding the current market for timber, etc before proceeding to make sure you are getting a fair quote.

If there are some good, mature trees on your property, it is worth strongly considering. Based on the last time it was timbered, you can usually have this done every 20-25 yrs.

Good luck!

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Bruce
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Re: Selling Timber

Post by Bruce » Tue Feb 20, 2018 12:33 pm

https://www.extension.purdue.edu/extmed ... nr-111.pdf

An excellent 10 page introduction primer to timber harvest for landowners, from Purdue University extension service.

Though written for Indiana timber owners almost all the advice is applicable to any Midwest timber owner.

Includes a sample timber harvest contract template with terms to consider,in your own sale contract.

Also strongly recommends hiring a forester to help you.
Bruce | | Winner of the 2017 Bogleheads Contest | | "Simplicity is the master key to financial success."

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Watty
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Re: Selling Timber

Post by Watty » Tue Feb 20, 2018 12:46 pm

I don't know anything about timber but it would be good to get a good land survey done early in the process.

If you are friendly with the adjoining landowners considering talking to them early in the process to make sure that there are no misunderstandings about the property line. They might also be interested in buying part of the land from you either before or after it is harvested.

There was a post here a while back by someone who had a neighbor harvest timber and the company doing it went way into their property. It was a messy situation to say the least.

It would also be good to get tax advice before you start by someone that knows how this will be taxed and what costs are deductible so any contracts can be written to give you the most tax advantages. It could be that harvesting it over several years would also make sense because of the taxes.

If they need to build roads across creeks or wetlands that could have all sorts of restrictions and that could also be a mess if they ignore the rules on that.

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