Featured Professional: A Comment by Northwest Management, Inc.
Timber Investments Hold Great Potential
Today’s investors are beginning to see real profit potential in forestland. Once considered an unexciting investment, forestland has shed that image over the last decade. The reason: timber and land prices have risen dramatically in many areas of the U.S.
A constant rise in demand for wood and wood products is behind the price increase. The U.S. Forest Service forecasts that prices for the Douglas-fir region will climb 40% between the years 2000 and 2040 and Douglas-fir stumpage prices have increased 3.8% in real terms per year for the last nine decades.
A big advantage to investing in timberland is that it offers a profitable combination of long-term stability and attractive returns. Based on the risk-return ratio, timberland outperforms most stocks, bonds and many commercial real estate transactions.
Yet many forest owners are not able to fully benefit from these positive economic trends. That is because many owners have not developed long-term forest management plans. These plans help ensure the productivity, health and sustainability of their valuable forest resources.
One profitable management technique is to control stocking through thinning during growth periods in the forest’s life. This reduces the competition for soil moisture and nutrients. It is typically done when a new stand of trees is planted, but can also prove profitable in older forests.
Marketing your logs by species and quality and playing the market pays big dividends. During the past 4 years, landowners selling cedar and lodgepole pine have hit these species highs and received terrific returns.
The more intensively the stands are managed, the more options can be available to the landowner. The landowner can take advantage of market conditions to continue enjoying investment gains and still retain the recreational benefits from owning forestland.