Diversifying to timber/farmland

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ClemsonFan
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Diversifying to timber/farmland

Post by ClemsonFan » Sat Aug 01, 2020 1:33 pm

Wife and I, both 50, can retire at 55 with well funded and stable state government pensions. Current investments are approaching 1.6M, almost all in Vanguard. House and 20 acres recently appraised at 500K and we owe about 375K. We recently refinanced to 3.1% so have 30 left on term. Currently maxing my 457 as well as both Roths fully funded.

Current expenses are about 5K/mo, which will be nearly covered by pensions in 5 years. One daughter on full scholarship has one year left, so no costs there. Son, age 16, will be entering military so eventual post education covered by GI Bill.

Yesterday, we looked at 360 acres, of which 280-300 is mature Missouri hardwood and pine that hasn't been harvested for 15-20 years. Asking price is 700K. Property has all of our "dreams," already in place, minus a house. We will have a timber buyer assess the possible value of the timber next week. Current yearly taxes about 350/yr.

If purchased, we would sell current home after retirement and move to other property. Land could also be rented for cattle, hay or hunting leases. Finally, wife and I will find some type of "job" after retirement, whether wife's dream of working in floral shop, mine of just getting paid to drive a tractor all day, or just working on farm all day producing income through various ideas we have.

Keeping in mind that this is a "dream come true" (almost like owning your own state park) and "legacy" type of property (timber harvests every 10 years or so, other possible farm income, worst case scenario, land could sustain all of us indefinitely with ponds, creeks, crops, berries, fruit trees, small river, natural springs, recreational opportunities, etc), I have the following questions to consider:

1. Loan officer, who is also a friend and has never steered us wrong, says with our assets, we could get a loan for full amount, rate between 3-4%. I had considered paying cash but every instinct is screaming no. Thoughts?

2. Is it absolutely crazy to consider being in debt 2/3 of our net worth for the next 5 years (current place sells and % of debt drops to 1/3), just to have a long term investment that produces income, is tangible, provides sustainability for family if things turn very sour in this country, and as the old saying goes "God isn't making any more land."

3. Posted same question on a farming website and all responses have been to go for it. For those who have never experienced the joy, peace and satisfaction of working the land, this may be hard to grasp but for those of us who do understand it, is there a point where you can actually put a price on "happiness?"

I currently have two tractors, a backhoe, equipment, so I get to experience that at current place, but having 18 times more land, and being much more in debt, is a whole new adventure.

4. Can we afford to do this?

5. If #4 is yes, and you were in this position, would you do it if this type of lifestyle appealed to you?

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Sandtrap
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Re: Diversifying to timber/farmland

Post by Sandtrap » Sat Aug 01, 2020 1:41 pm

Keeping in mind that this is a "dream come true" (almost like owning your own state park) and "legacy" type of property
With this, you will "make it happen" and the entire process will indeed be a dream come true.

Dreams do not fit on a spreadsheet.

DW and I did do something along these lines and, yes. . . . a dream come true for us! :D :D
j :happy
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retired@50
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Re: Diversifying to timber/farmland

Post by retired@50 » Sat Aug 01, 2020 1:47 pm

ClemsonFan wrote:
Sat Aug 01, 2020 1:33 pm
... of which 280-300 is mature Missouri hardwood and pine that hasn't been harvested for 15-20 years.
...
(timber harvests every 10 years or so, other possible farm income,
The statements above seem inconsistent.

Does timber harvest every 10 or 20 years? If 10, why has it gone unharvested?

The idea doesn't appeal to me, but to each his own...

Isn't timber a somewhat "variable price" crop, in other words you might clean up, or might get next to nothing, depending on the current price of lumber?

Regards,
This is one person's opinion. Nothing more.

finite_difference
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Re: Diversifying to timber/farmland

Post by finite_difference » Sat Aug 01, 2020 1:54 pm

You’ll need to build a house, road, electric? How much does that cost? How much of your expenses would your pensions cover?

Having a hard time picturing mature trees after 10 years but then again what would I know.

You’d also want to budget for help around the estate as you get older.

In my opinion you could also live a pretty nice dream with 10 acres, compared with 300.

God may not be making more land but you can be sure that humans will increase its property taxes ;)
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FarmWife
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Re: Diversifying to timber/farmland

Post by FarmWife » Sat Aug 01, 2020 2:01 pm

Retirement doesn't mean anything if you aren't retiring to something. Seems to me you have your ideal future outlined for retirement with this property as well as her flower shop job/playtime. We are farmers and completely understand the draw to working the land. BUT, it costs a LOT of money to maintain some properties like that, depending on the direction you intend to take it.

Would you have to finance all of it? What if you played the the numbers, from 1/3 to 1/2 to 2/3 in order to find a comfortable balance between the debt and drawing down your portfolio a bit. Make sure to get realistic information on what the land can produce as income for the trees, cattle, etc. Renting land (post harvest cornstalks) for cows doesn't usually pay a ton. The trees are probably a bigger deal. Property taxes WILL go up. Missouri has more tourist revenue (if covid goes away and travel returns), but they will start to figure out that they could be gouging landowners like Nebraska does.

5 years of debt is nothing when it comes to land. That part isn't so much as issue, especially if you are confident in your likely house sales number. I like to put some money down on these bigger purchases and then reassess in a year or two if I should pay off the note or continue with a mortgage. I like flexibility, especially with Covid nonsense right now. I don't know what kind of revenue this would truly generate. Hunting rights can pay handsomely but also bring some headaches.

Are you paying full asking price or doing any negotiating? Always negotiate. How long has it been on the market? Overpriced unique piece or is it a hot market?

Will you build a new house or live somewhere else away from the land? Building new isn't cheap either. Utilities already on site? That can cost a pretty penny to bring in, especially through wooded areas.

Assuming you're familiar with the climate, cost of building a house on the property, and managing the farm aspect of it, I see no reason to deny your dream if your revenue/expense research pans out. This seems like what you've been building toward, letting a dream that intense slip away could haunt you. If necessary, you can develop it and sell it for likely more.

Good luck!

CurlyDave
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Re: Diversifying to timber/farmland

Post by CurlyDave » Sat Aug 01, 2020 2:18 pm

ClemsonFan wrote:
Sat Aug 01, 2020 1:33 pm

...Yesterday, we looked at 360 acres, of which 280-300 is mature Missouri hardwood and pine that hasn't been harvested for 15-20 years. Asking price is 700K. Property has all of our "dreams," already in place, minus a house. We will have a timber buyer assess the possible value of the timber next week. Current yearly taxes about 350/yr.
Out here on the left coast, the guy who assesses the potential value of the trees is called a "timber cruiser". He is different from a "timber buyer" who typically works for a lumber company, sawmill or paper company. A timber buyer will give you a lowball estimate of value.
ClemsonFan wrote:
Sat Aug 01, 2020 1:33 pm
1. Loan officer, who is also a friend and has never steered us wrong, says with our assets, we could get a loan for full amount, rate between 3-4%. I had considered paying cash but every instinct is screaming no. Thoughts?

2. Is it absolutely crazy to consider being in debt 2/3 of our net worth for the next 5 years (current place sells and % of debt drops to 1/3), just to have a long term investment that produces income, is tangible, provides sustainability for family if things turn very sour in this country, and as the old saying goes "God isn't making any more land."

3. Posted same question on a farming website and all responses have been to go for it. For those who have never experienced the joy, peace and satisfaction of working the land, this may be hard to grasp but for those of us who do understand it, is there a point where you can actually put a price on "happiness?"

I currently have two tractors, a backhoe, equipment, so I get to experience that at current place, but having 18 times more land, and being much more in debt, is a whole new adventure.

4. Can we afford to do this?

5. If #4 is yes, and you were in this position, would you do it if this type of lifestyle appealed to you?
On #2, you need to add the value of the new property to your net worth. Roughly, I see net worth of $1.6 M + 0.5 M + 0.7M = $2.8M .
Debt is $1.075M or just under 40%.

I suspect your current tractors are too small for this property, but, give them a try and see what you think.

On #4, If you can make the payments, you can afford it. BUT you really ought to look into how many parcels are available in the total area you would consider. If this is the last one, go for it now. If there are a half dozen for sale now, you might want to wait and think some more...

I have read a lot of horror stories about logging. Hired loggers tend to promise to clean up after themselves and may promise to leave certain trees. Then they clear cut and leave an unsightly, spread out slash pile behind. Plus they log more area than they are supposed to. Be careful, and get contracts in writing.

JBTX
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Re: Diversifying to timber/farmland

Post by JBTX » Sat Aug 01, 2020 2:29 pm

With the caveat that I know nothing about this area of investments, $2000/acre "seems" like a reasonable price if it is full of harvest able and marketable timber. But it begs the question, why hasn't it been harvested?

I like the idea of having a income producing real property in concept, especially given these unique economic times. But with real estate it is always about the specifics of the situation.

I have no idea but it sounds like a lot of work. It it were me I'd have a plan- an assessment of how much the timber is worth, how much is it going to cost to get it to market, then after that what are the ongoing annual outflows to grow the next crop, 10-20 years down the road.

I'd be aware of any particular risks that can wipe out a crop, like pine beetles. Is that insurable? Can you survive something like that? Or fire caused by lightning? Also an event like the housing crisis can put a dent in demand and prices for some amount of time.

If the debt rate is reasonable, I'd rather have the liquidity than deplete much of my life savings for such a venture. It seems like a situation where you may be looking at long periods of negative outflows. I have no idea the extent that one can stagger harvesting to different years. My guess is that would be inefficient for that much land.

Only time will tell, but I have seen instances where people's dreams often become more of a nuisance long term, but you'll likely never know it until you've tried it. I don't know how quickly one could divest of such an operation if one found it burdensome.

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WoodSpinner
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Re: Diversifying to timber/farmland

Post by WoodSpinner » Sat Aug 01, 2020 2:56 pm

OP,

It’s clear from your post how you really want to spend your retirement. That is worth a great deal!

Do your research on costs and value and then decide. You know way more about the land, timber, hunting and other potentials than I ever will.

WoodSpinner

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Re: Diversifying to timber/farmland

Post by KyleAAA » Sat Aug 01, 2020 3:46 pm

You can afford it and the debt would be easily serviceable with the income from the land. I have an interest in some timber land and harvest is every 20-30 years. I'm not sure what type of timber is growing on your land, but I presume you aren't talking about clear cutting every 10 years but rather harvesting just those over a certain diameter. With 300 acres of timber land, I can easily see you bringing in $450 or so every 20 years, which equates to something like 3% per year income, not including timber price gains. Since your jobs are stable, I think it makes sense to borrow. When you sell your home in 5 years you can use the proceeds to build a new house and pay down the debt. Plus, hopefully your portfolio will be worth well over $2mm by then.

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ClemsonFan
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Re: Diversifying to timber/farmland

Post by ClemsonFan » Sun Aug 02, 2020 3:20 pm

Just to update everyone so this thread doesn't stay active. My wife and I have been back and forth on whether to purchase this land. It has been gut wrenching to say the least. It is an amazing piece of property and would be a dream come true. However, with both of us still working full time, still have both kids, 21 and 16, still at home, elderly parents (10 minutes away) who need help with their small cattle operation, and trying to maintain our 22 acres and large home, we have decided the timing just isn't right. It is disappointing to us and we realize we may regret it someday, but we are extremely happy where we are and just didn't think it would be beneficial for us to work here every evening after work, then spend every Saturday there, coming home exhausted but satisfied, then doing it all again the next week for 5 years.

The final straw was yesterday, when I spoke to the neighbor farmer who is much older and wiser. He said he had been in a similar situation, which I figured he had and was the reason I sought his opinion, and he ended up farming more than he could handle. He said he realized a few years in he had made a mistake when he no longer enjoyed doing something he had previously. He got a little choked up when he talked about all of the things he had missed because he had stuff to do. It was a lightbulb moment for me, and for my wife when I told her.

I greatly appreciate all of those who took the time to offer their opinions. Each of them were considered and discussed. Thank you all. Maybe we'll get another chance in the future.

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Re: Diversifying to timber/farmland

Post by Lafder » Sun Aug 02, 2020 4:38 pm

I always consider if a decision will simplify or complicate my life. If the answer is simplify.......it is a more clear yes.

If the answer is complicate..................it better be really worth it!

Better to miss out on this bigger property than get it and regret it.

What wise words your neighbor had on regrets and turning something you love into a chore!

If a bigger piece of land is in your future, it will fall into place.

It sounds like you made the best decision!

Take the money that you would have been paying monthly on the new mortgage and start saving it as a down payment on a future purchase. It will give you a sense of how comfortable a new monthly debt that high will actually be.

lafder

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Re: Diversifying to timber/farmland

Post by ClemsonFan » Sun Aug 02, 2020 4:46 pm

Lafder, you will never know how much your words mean to me right now. I am still struggling with not buying this place and your words really meant a lot. Wife and I were talking about how just looking at the place, it seemed like a dream come true, but once it was ours, and WE were responsible for the upkeep, it would become a chore and we wouldn't enjoy it like we do our current place. I will pass on to her what you said and make your "equation" part of my decision making process. Thank you.

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Re: Diversifying to timber/farmland

Post by midareff » Sun Aug 02, 2020 4:52 pm

Sandtrap wrote:
Sat Aug 01, 2020 1:41 pm
Keeping in mind that this is a "dream come true" (almost like owning your own state park) and "legacy" type of property
With this, you will "make it happen" and the entire process will indeed be a dream come true.

Dreams do not fit on a spreadsheet.

DW and I did do something along these lines and, yes. . . . a dream come true for us! :D :D
j :happy
Have a friend that bought (40?) acres or either orange or tangerine groves in Florida 3 or 4 years ago to diversify their retirement. Then came the freeze and citrus canker. That doesn't fit on a spread sheet either. It's up for sale and not at a profit.

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Re: Diversifying to timber/farmland

Post by nedsaid » Sun Aug 02, 2020 4:53 pm

ClemsonFan wrote:
Sun Aug 02, 2020 4:46 pm
Lafder, you will never know how much your words mean to me right now. I am still struggling with not buying this place and your words really meant a lot. Wife and I were talking about how just looking at the place, it seemed like a dream come true, but once it was ours, and WE were responsible for the upkeep, it would become a chore and we wouldn't enjoy it like we do our current place. I will pass on to her what you said and make your "equation" part of my decision making process. Thank you.
I have a family member doing a variation of your now postponed dream albeit on a smaller scale. It has been a lot of work for the family member and spouse as well as a lot of driving back and forth from old home to new home. What we don't take into account is that we get older and our energy level tends to decrease over time. What seemed like a dream becomes a burden later. As in the case of my family member, you still have parents living and that is yet another complication. Never say never, it might be you might have even a better opportunity down the road. Really it boils down to how much you want something. Sometimes we find out that our "want to" just wasn't big enough. Good luck on everything and best wishes.

By the way, I was one of the early investors in Plum Creek Timber which was acquired by Weyerhauser in recent years. It has been a great Timber investment, not sure how many acres my shares would convert into but it is certainly a lot less bother than managing my own timber lot. All I have to do is watch the brokerage statement for dividends.
A fool and his money are good for business.

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Re: Diversifying to timber/farmland

Post by Sandtrap » Sun Aug 02, 2020 6:09 pm

ClemsonFan wrote:
Sun Aug 02, 2020 3:20 pm
Just to update everyone so this thread doesn't stay active. My wife and I have been back and forth on whether to purchase this land. It has been gut wrenching to say the least. It is an amazing piece of property and would be a dream come true. However, with both of us still working full time, still have both kids, 21 and 16, still at home, elderly parents (10 minutes away) who need help with their small cattle operation, and trying to maintain our 22 acres and large home, we have decided the timing just isn't right. It is disappointing to us and we realize we may regret it someday, but we are extremely happy where we are and just didn't think it would be beneficial for us to work here every evening after work, then spend every Saturday there, coming home exhausted but satisfied, then doing it all again the next week for 5 years.

The final straw was yesterday, when I spoke to the neighbor farmer who is much older and wiser. He said he had been in a similar situation, which I figured he had and was the reason I sought his opinion, and he ended up farming more than he could handle. He said he realized a few years in he had made a mistake when he no longer enjoyed doing something he had previously. He got a little choked up when he talked about all of the things he had missed because he had stuff to do. It was a lightbulb moment for me, and for my wife when I told her.

I greatly appreciate all of those who took the time to offer their opinions. Each of them were considered and discussed. Thank you all. Maybe we'll get another chance in the future.
Thanks for the great update.
And, a good decision.

Sounds like you could've stepped. . . . in quicksand.
j :happy
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123
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Re: Diversifying to timber/farmland

Post by 123 » Sun Aug 02, 2020 6:49 pm

How many other properties have you looked at and priced for comparison purposes?
The closest helping hand is at the end of your own arm.

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ClemsonFan
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Re: Diversifying to timber/farmland

Post by ClemsonFan » Sun Aug 02, 2020 7:08 pm

123, we looked at dozens!! But that was only on the internet. None of them had the things we wanted.

Just got back from taking a walk in our woods, in the rain with my amazing and gorgeous wife of 26 years. We walked in the creek that runs on our property, threw sticks for the dog, and then ended the walk by picking out a spot for the 3 acre lake we want to build. Life is returning to normal and I am at peace with our decision. At least for now😀. I'm now sitting in my shop, drinking a cold one and thanking God for all of my blessings, one of which includes the good advice and collective wisdom of The Bogleheads!!

Have a good evening y'all.

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ClemsonFan
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Re: Diversifying to timber/farmland

Post by ClemsonFan » Sun Aug 02, 2020 7:18 pm

123, we looked at dozens!! But that was only on the internet. None of them had the things we wanted.

Just got back from taking a walk in our woods, in the rain with my amazing and gorgeous wife of 26 years. We walked in the creek that runs on our property, threw sticks for the dog, and then ended the walk by picking out a spot for the 3 acre lake we want to build. Life is returning to normal and I am at peace with our decision. At least for now😀. I'm now sitting in my shop, drinking a cold one and thanking God for all of my blessings, one of which includes the good advice and collective wisdom of The Bogleheads!!

Have a good evening y'all.

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Re: Diversifying to timber/farmland

Post by bogledogle » Sun Aug 02, 2020 7:50 pm

ClemsonFan wrote:
Sun Aug 02, 2020 7:18 pm
Just got back from taking a walk in our woods, in the rain with my amazing and gorgeous wife of 26 years. We walked in the creek that runs on our property, threw sticks for the dog, and then ended the walk by picking out a spot for the 3 acre lake we want to build.
Sounds like you are already living the dream. :sharebeer

BuyandHold37
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Re: Diversifying to timber/farmland

Post by BuyandHold37 » Wed Aug 05, 2020 6:46 am

I own a little over 220 acres of timberland with a 4 BR 3 BA cabin, lake, roads, etc. on it. Has been in my family for 70 years, but I took ownership/purchased it back in 2014, so I have been dealing with it for 6 years now. I do all tractor work myself (New Holland TN65 with PTO), live 6 hours from the property. I converted some old fescue fields (about 35 acres) to planted loblolly pines back in 2016, and am working with a consulting forester now to clear cut a few select areas (about 40 acres) of 60 year old loblolly to then replant. The remainder of the property is made up of magnificent oak-hickory or beech-maple climax that I would never cut. I hunt myself, so do not lease it out.....these old loblolly harvest areas will be the first income I have ever had from the property, and most of it will be saved to do site prep/replant.

Sadly, due to encroachment and noise pollution from local meth-monkeys and urban sprawl, my plan is to eventually sell the property when I retire, maybe in 20 years, and move somewhere more remote like Montana or Wyoming.

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Re: Diversifying to timber/farmland

Post by Jack FFR1846 » Wed Aug 05, 2020 7:01 am

You would want to pursue all the "ifs" in your plan. Go directly to the nearest sawmills to get "real" numbers. Do this before you buy anything. I have a sawmill less than a mile from my house. I also have a small lot (13+ acres) of land under forest management, so I pay only 10% of tax value with a state program. I periodically check in with the sawmill. Every price I've received over the last 20 years has been zero. What they offer depends on their stock, for the most part. On the high side, they'll cut and take the timber and chip the branches and pay me nothing. On the low side, they'll provide a truck to me to load the lumber for $100 a day and pay me nothing for the timber. My normal practice is to cut hardwood for firewood for my own use. Softwood gets taken down when insect or storm damaged of when it's infringing on hardwood (which technically is the other way around because hardwood grows much faster than pine).

I do like the idea of a big lot with a single house secluded in the middle. It's sort of what I have at a smaller scale. Be sure you can get a driveway and utilities to the house. Mine are all underground, so the woods just look like woods without a bunch of wires. If you're in snow country, you may choose your vehicle based on the ability to mount a snow plow. I've done that for years after a big snowfall and estimate from a plow guy of $350 to clear the driveway. Tractors are fine for moving snow but are not for plowing. If the driveway is paved, snow blowers on a tractor using the PTO is great but unpaved, the gravel can really mess up your equipment.

If the area you're looking at is full of meth heads and cookers, I personally would not want to be anywhere near there. My lot is in the middle of suburbia, so I'm mostly surrounded by entitled millennials driving $100k Range Rovers. I can deal with that.
Bogle: Smart Beta is stupid

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Re: Diversifying to timber/farmland

Post by TxAg » Wed Aug 05, 2020 7:42 am

BuyandHold37 wrote:
Wed Aug 05, 2020 6:46 am
I own a little over 220 acres of timberland with a 4 BR 3 BA cabin, lake, roads, etc. on it. Has been in my family for 70 years, but I took ownership/purchased it back in 2014, so I have been dealing with it for 6 years now. I do all tractor work myself (New Holland TN65 with PTO), live 6 hours from the property. I converted some old fescue fields (about 35 acres) to planted loblolly pines back in 2016, and am working with a consulting forester now to clear cut a few select areas (about 40 acres) of 60 year old loblolly to then replant. The remainder of the property is made up of magnificent oak-hickory or beech-maple climax that I would never cut. I hunt myself, so do not lease it out.....these old loblolly harvest areas will be the first income I have ever had from the property, and most of it will be saved to do site prep/replant.

Sadly, due to encroachment and noise pollution from local meth-monkeys and urban sprawl, my plan is to eventually sell the property when I retire, maybe in 20 years, and move somewhere more remote like Montana or Wyoming.

I'd like to buy a couple hundred acres in the next 5 yrs, but I have some of the concerns you mentioned. I'd be 2.5-4 hrs away and the thought of meth heads or poachers drives me nuts.

BuyandHold37
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Re: Diversifying to timber/farmland

Post by BuyandHold37 » Wed Aug 05, 2020 7:58 am

TxAg wrote:
Wed Aug 05, 2020 7:42 am
BuyandHold37 wrote:
Wed Aug 05, 2020 6:46 am
I own a little over 220 acres of timberland with a 4 BR 3 BA cabin, lake, roads, etc. on it. Has been in my family for 70 years, but I took ownership/purchased it back in 2014, so I have been dealing with it for 6 years now. I do all tractor work myself (New Holland TN65 with PTO), live 6 hours from the property. I converted some old fescue fields (about 35 acres) to planted loblolly pines back in 2016, and am working with a consulting forester now to clear cut a few select areas (about 40 acres) of 60 year old loblolly to then replant. The remainder of the property is made up of magnificent oak-hickory or beech-maple climax that I would never cut. I hunt myself, so do not lease it out.....these old loblolly harvest areas will be the first income I have ever had from the property, and most of it will be saved to do site prep/replant.

Sadly, due to encroachment and noise pollution from local meth-monkeys and urban sprawl, my plan is to eventually sell the property when I retire, maybe in 20 years, and move somewhere more remote like Montana or Wyoming.

I'd like to buy a couple hundred acres in the next 5 yrs, but I have some of the concerns you mentioned. I'd be 2.5-4 hrs away and the thought of meth heads or poachers drives me nuts.
Yes, it comes with the territory unfortunately. I keep a locked front gate, use Spartan cellular cams at pinch points/food plots, and have Ring cameras around the cabin. Also, it is my hometown, so we have a couple of people who do not hunt who we have known for decades who go out there periodically to check on things. Even if you live on the property, neighbors turn over occasionally and kids get older/have kids, so when there are teenagers/young adults living nearby, they test boundaries, literally and figuratively.

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TxAg
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Re: Diversifying to timber/farmland

Post by TxAg » Wed Aug 05, 2020 8:18 am

BuyandHold37 wrote:
Wed Aug 05, 2020 7:58 am
TxAg wrote:
Wed Aug 05, 2020 7:42 am
BuyandHold37 wrote:
Wed Aug 05, 2020 6:46 am
I own a little over 220 acres of timberland with a 4 BR 3 BA cabin, lake, roads, etc. on it. Has been in my family for 70 years, but I took ownership/purchased it back in 2014, so I have been dealing with it for 6 years now. I do all tractor work myself (New Holland TN65 with PTO), live 6 hours from the property. I converted some old fescue fields (about 35 acres) to planted loblolly pines back in 2016, and am working with a consulting forester now to clear cut a few select areas (about 40 acres) of 60 year old loblolly to then replant. The remainder of the property is made up of magnificent oak-hickory or beech-maple climax that I would never cut. I hunt myself, so do not lease it out.....these old loblolly harvest areas will be the first income I have ever had from the property, and most of it will be saved to do site prep/replant.

Sadly, due to encroachment and noise pollution from local meth-monkeys and urban sprawl, my plan is to eventually sell the property when I retire, maybe in 20 years, and move somewhere more remote like Montana or Wyoming.

I'd like to buy a couple hundred acres in the next 5 yrs, but I have some of the concerns you mentioned. I'd be 2.5-4 hrs away and the thought of meth heads or poachers drives me nuts.
Yes, it comes with the territory unfortunately. I keep a locked front gate, use Spartan cellular cams at pinch points/food plots, and have Ring cameras around the cabin. Also, it is my hometown, so we have a couple of people who do not hunt who we have known for decades who go out there periodically to check on things. Even if you live on the property, neighbors turn over occasionally and kids get older/have kids, so when there are teenagers/young adults living nearby, they test boundaries, literally and figuratively.
Thank you for the feedback

Valuethinker
Posts: 40599
Joined: Fri May 11, 2007 11:07 am

Re: Diversifying to timber/farmland

Post by Valuethinker » Wed Aug 05, 2020 8:40 am

ClemsonFan wrote:
Sat Aug 01, 2020 1:33 pm
Wife and I, both 50, can retire at 55 with well funded and stable state government pensions. Current investments are approaching 1.6M, almost all in Vanguard. House and 20 acres recently appraised at 500K and we owe about 375K. We recently refinanced to 3.1% so have 30 left on term. Currently maxing my 457 as well as both Roths fully funded.

Current expenses are about 5K/mo, which will be nearly covered by pensions in 5 years. One daughter on full scholarship has one year left, so no costs there. Son, age 16, will be entering military so eventual post education covered by GI Bill.

Yesterday, we looked at 360 acres, of which 280-300 is mature Missouri hardwood and pine that hasn't been harvested for 15-20 years. Asking price is 700K. Property has all of our "dreams," already in place, minus a house. We will have a timber buyer assess the possible value of the timber next week. Current yearly taxes about 350/yr.

If purchased, we would sell current home after retirement and move to other property. Land could also be rented for cattle, hay or hunting leases. Finally, wife and I will find some type of "job" after retirement, whether wife's dream of working in floral shop, mine of just getting paid to drive a tractor all day, or just working on farm all day producing income through various ideas we have.

Keeping in mind that this is a "dream come true" (almost like owning your own state park) and "legacy" type of property (timber harvests every 10 years or so, other possible farm income, worst case scenario, land could sustain all of us indefinitely with ponds, creeks, crops, berries, fruit trees, small river, natural springs, recreational opportunities, etc), I have the following questions to consider:

1. Loan officer, who is also a friend and has never steered us wrong, says with our assets, we could get a loan for full amount, rate between 3-4%. I had considered paying cash but every instinct is screaming no. Thoughts?

2. Is it absolutely crazy to consider being in debt 2/3 of our net worth for the next 5 years (current place sells and % of debt drops to 1/3), just to have a long term investment that produces income, is tangible, provides sustainability for family if things turn very sour in this country, and as the old saying goes "God isn't making any more land."

3. Posted same question on a farming website and all responses have been to go for it. For those who have never experienced the joy, peace and satisfaction of working the land, this may be hard to grasp but for those of us who do understand it, is there a point where you can actually put a price on "happiness?"

I currently have two tractors, a backhoe, equipment, so I get to experience that at current place, but having 18 times more land, and being much more in debt, is a whole new adventure.

4. Can we afford to do this?

5. If #4 is yes, and you were in this position, would you do it if this type of lifestyle appealed to you?
Do not do this for financial return.

There are too many site specific risks with a piece of farmland or timberland.

Insects. Drought. Fire. Developments in the county which lower property values (major industrial or agro-industrial development; near my relatives it was a super quarry to ship sand and gravel to China - did you know there is a world shortage of certain types of sand?).

If you do this for lifestyle reasons, then fine.

I wouldn't rely on any rural property being sustainable in a national breakdown scenario. What would you do for gasoline? Medicine & medical treatment? Dentist? etc. Just to say I would not factor this in as a reason to do it - too many uncertainties).

Scottymus
Posts: 1
Joined: Wed Jan 08, 2020 5:36 pm

Re: Diversifying to timber/farmland

Post by Scottymus » Wed Aug 05, 2020 9:14 am

My wife and I started a hardwood tree farm in Michigan 10 years ago. We enrolled in the Conservation Reserve Program (CRP) which covers the cost of the planting and initial tree maintenance. Basically, the CRP program buys a lease to your property but in return you must plant either trees or grasses on tilled property. The CRP program pays us an annual rental fee based on a point system per acre. Hardwood trees return the highest point count. We signed a 15 year agreement which is renewable for another 15 years when it expires. We planted 35,000 hardwoods on 65 acres over a three year period. The CRP program will cover virtually everything needed to get started including seedlings, planting, fuel, rental equipment and labor. You are assigned a forester to help you develop a forestry plan and answer any questions you may have. As part of the deal, you must follow the forestry plan and associated rules for maintaining your trees. If you get a drought or disease that destroys over 20% of your trees, the CRP program will cover replanting where it is needed.

There are hidden costs. You will need a tractor, mower and sprayer to maintain the property. You will also need a lot of free time. If you intend to plant yourself (we did), then you will need to purchase a planter. Your equipment will need occasional repairs and you will need a shelter or barn to store the equipment. The planting process is fun but a lot of hard work. We planted, Black Walnut, Cherry, White Oak, Red Oak, and Maple trees. The first five years require a lot of mowing a spraying. After that a canopy starts to form and the maintenance can be discontinued as the canopy forms. After the canopy forms, the tractor will to cause more damage to the trees than it helps. In our case, our CRP lease payments cover about 75% to 80% of the annual maintenance costs.

If you are planting hardwoods, then you are looking at 40 to 60 years before the trees can be harvested. Clearly this is an investment we are making for our children and grandchildren. While projecting returns on a tree farm 40 years in advance is difficult at best, we do expect our children to receive reasonable return on the trees when harvested.

There are also other state programs available besides the CRP program. Consult a forester in your area.

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