Are you interested in having a timber sale? This article outlines the basic steps to follow to make your timber sale a successful one. All of the steps below raise questions you need to answer. These questions will help you plan or set goals to manage your timber investment and make your timber sale more successful.
LAND – What’s All the Chatter About?
We have experienced more activity and interest in land during January and February of 2012 than any past January and February. Why is there so much chatter in the land market? What are buyers looking for?
Our statistics show more activity and interest in January and February of 2012 than nearly all of 2011. Could we be at the bottom of this far too lengthy economic turndown? Something has people out looking for all types of land. We have people looking for small to large timberland tracts to home places to institutional cropland investor types. We have had calls and sold tracts to people from Texas, Ohio, Virginia, Tennessee and Florida. Not all of the callers are buying but usually is a period of heightened interest before a period of buying.
We are in a time of intense buyer awareness. Buyers are spending considerable time learning everything they can about their target market and shopping hard. This is absolutely understandable after the last four years we have experienced. As a specialist, in the land market, we are required to provide good accurate information about the investment to help the buyer with their decision process. The buyer should require this of a land broker or find one that does have expertise in that target market.
Investing in real estate is more demanding in the current market. Capital is harder to obtain. Loans and credit are scrutinized much more closely. Correct valuation of the asset you are acquiring is more difficult to ascertain. Consumer confidence and the political environment are also contributing factors. There are risks associated with any investment, including land. However, land has always been a sound investment and should be a portion of most people’s investment portfolio.
We are not sure why there has been a spike in activity and interest in land. Maybe confidence is returning and investors want to jump in at what they think is the bottom or want some land as a hedge against coming inflation. We don’t exactly know what is happening but want to inform you that it appears there is a change occurring in our land market. Let us know if we can assist you in your search for land and we hope you have a prosperous 2012.
The traditional way to value land is through the use of comparable sales. But what do you do when there are no comparable sales, an inability to secure financing and even fewer buyers? Many banks are requiring appraisals and requesting “Broker Price Opinions”. A BPO is what the broker believes is a reasonable price the property will sell for based on several factors related to the current market
The true market value is what a ready, willing and able buyer will pay that a seller not under duress is willing to accept. As a land broker, we try to evaluate the property based on the assets on the property, recent comparable sales of similar properties and other properties of like kind that are for sale on the market.
This valuation process has nothing to do with what you paid for your property or what value you want for the property. I have many landowners telling me they paid X amount of dollars for property and they want that amount plus a brokers fee as the sales price. I understand this and appreciate what they want, but buyers are going to research the property and compare it to other properties to find the best deal.
The first part of our valuation consists of breaking the property down into compartments of varying assets from timber type and size, land type, improvements (houses, barns, lakes, rivers, …) and anything we can find that adds value to the land including character. This may include a timber inventory and many other assessments of value. The second part is in a previous blog on our site regarding knowledge of the product and that market (Two Most Important Factors in Selling Land). It is important to know what other similar properties are on the market in that region. Other available properties do have an affect on the value of your land. Part of our job is to have knowledge of these properties.
Many factors affect the value of land. Green Hill land & Timber is heavily involved in the land and timber market in this region. We understand the process in evaluating land and timber and can help you understand what and why your land is worth what it is. These values do change over time based on economic factors and the value of the improvements. Let us know if we can assist you with your land and timber investments.
Two factors that have a huge effect on the successful sale of your land is product knowledge and market knowledge. We keep statistics on our marketing, tracking who, what and where our leads originate and general listings activity. We also follow other trends in marketing of land and rural property. There are hundreds of places to spend money marketing, but where do you put ads that actually produce real buyers?
Buyers for rural property tend to look in areas other than MLS or Realtor.com. If you are searching for the traditional home buy, go to those sites. They work very well for that market. We have found that many of our leads have come from years of direct mailing and market awareness of who Green Hill Land & Timber is. We also reach outside of our market by participating in several huge networks utilizing the World Wide Web and national organizations that specialize in rural land, farmland, timberland and recreational properties. We have a strong local presence, but also have many non-local buyers contacting us. The ability to interact in both of these markets is hugely important in successful marketing.
Knowledge of your product is equally important in successful land sales. If you are contacted by some of the sophisticated buyers we reach, you must understand all about your product. These types of buyers are usually busy and want all the data necessary to decision making in a brief, condensed package. This means you need a professional with knowledge of the product being sold or you are already at a disadvantage.
Green Hill Land & Timber understands our product and we know where to find the few buyers there are in this tough economy. We specialize in rural land. We have the forestry background necessary to market timberland deals and make them work. When it comes to land and wildlife management, we have developed many properties optimizing the specifics of the landowner’s needs and goals. We understand rural land, what it takes to market the product and where to market your product. We would like the opportunity to help you with your land and timber and make it a successful experience.
Rural landowners have options to reduce their tax liability. Review your information at the tax assessor office to be certain what you pay taxes on is correct. Things to look for are correct acreage, structures, improvements and tax covenants. The tax assessor’s office does a remarkable job managing a huge amount of data. However, there are errors that go undetected and it is the landowner’s responsibility to verify their information.
I worked on one property about 100 acres short and another 100 acres over what the tax assessor was using for acreage. Some of the older plats are incredibly accurate but sometimes there are inaccuracies. I wrote a stewardship plan for a client and asked him if he was renting the house on his property and if he wanted to thin the pines. Turns out he did not own the house and pines, and had been paying taxes on a house and 30 acres of land for nearly 25 years. The tax office said they would start sending the tax bill to the proper landowner. There was no refund of taxes. The landowner needs to be certain of what they are taxed for.
Rural landowners have another very important tool in reducing their tax burden. There are three tax covenants that can be entered into that will reduce the tax bill. If you have larger land parcels, usually larger than 25 acres, you are eligible for local conservation easements. These easements are designed to help farmers, recreational and timberland owners reduce their tax burden by being taxed on a current use basis rather than a higher and better use valuation. If you live near a city and have 500 acres of timberland that could be used for development, you will pay taxes on a timberland investment. The covenants typically reduce the tax liability by 30% to 40%. Two of the covenants (Preferential and CUVA) are for ten years and the other (FLPA) is fifteen years. If you subdivide or develop property, you breach the covenant and have to pay penalties. There is a little more to it than I have explained but it is a great tool we recommend to many of our clients.
The tax assessor’s office assigns value to different land types based on quality or productivity such as upland, bottomland, cropland, swampland… They also assign value to improvements on your property. The tax assessor does a remarkable job but sometimes there are discrepancies that you can appeal or at least question the chief appraiser as to the accuracy of certain valuations.
One last comment on valuation is that, in Georgia, timber is not taxed annually like property taxes. You pay a severance tax or timber tax when you harvest the timber. This was a very good ruling protecting timberland owners. If you paid taxes on the timber as an ad valorem tax for 30 years and never sold the timber, you were taxed for the value of something that was never realized. In case of storm or fire damage whereby the timber could not be harvested or sold, you still paid tax. Today, you only pay tax on income you actually realized at time of harvest.
We hope this information s helpful in these times when every penny counts. Green Hill Land & Timber, LLC always welcomes the opportunity to help you with your land and timber investments. Please give us a call if you have questions on buying or selling land and timber.
Thinning pine plantations is a process that occurs naturally with the help of Mother Nature or better yet, a forester. I am an advocate of thinning pines as soon as possible to keep the stand healthy and growing at its maximum growth rate. Thinning opens the stand so the trees grow, changes character of the woods and enhances the wildlife habitat.
First, let’s look at why we should thin. Different landowners have different goals which can change the timing of thinning. If you are looking at managing for maximum returns from timber harvest, we tailor our management practices to facilitate growth of sawtimber and/or poles. These products are the most valuable. When figuring in the time value of money, it serves no purpose to grow trees past a certain diameter as you will get no more money for the product. Therefore, we grow trees as fast as possible to get them as large as possible or to the more valuable sawtimber size product.
We plant a certain number of quality trees per acre in order to get good growth and stimulate the natural pruning of the lower limbs. It is time to thin, when you see the lower limbs beginning to die and fall off, tree diameters have reached a certain size and tree height is adequate. You should not wait so long as to lose the proper percentage of crown (tree top) that you loose growth potential. Some soils are better than others, varying the timing of first thinning. Typically, we thin around the age of fifteen years. We will groom the stand again five to seven years later. The purpose of second grooming is to take out less desirable low quality trees and save the best crop trees. Final harvest will be around thirty five years of age.
There are several factors that will influence when we will harvest. First would be stand health and quality. There are times when disease, seedling quality, pine beetles, or fire will dictate an early harvest. In rare situations, the harvest may even be a final or clear-cut harvest to start over. Even though we have provided basic guidelines for harvesting, we can still harvest timber at any time during the rotation or life of the timber once it reaches merchantable size around age 14.
Most timber harvest are a result of sound management that follows the goals of the landowner. Some other management criteria are wildlife management, aesthetics, and sawtimber production. If we are managing for wildlife, we may thin heavier than normal or leave special buffers. Most sawtimber rotations thin at ages 15, 23 and final harvest around 35, as mentioned above. Soil productivity may vary the timing somewhat. We manipulate timber stands for aesthetics based on what the landowner perceives to be beautiful or appealing.
Price deserves a paragraph for itself. Timber is not an annual crop that has to be harvested exactly at a certain age. It does not make a huge difference if we harvest this year or in two years. Most likely, the timber will be fine and remain in good condition. Personal tax preferences or timing of other investments may influence a timber harvest. Price does fluctuate heavily, influencing when we may want to harvest. It is very important for pulpwood thinning to be done in a timely manner to keep stands healthy and growing. The second or final harvest of higher value products should be timed with a good market. Weather will have an influence on pricing, too. Weather can cause a basic supply and demand curve that will produce significant swings in the market price of all products.
Green Hill land & Timber, LLC works very hard to bring all of these factors together in managing our clients’ timber investment. We would like the opportunity to help you with your land and timber investment.
Opinion or Truth? Every commentator on every network has their opinion which they call “the fact of the matter” or truth. So I will offer my fact of the matter or “opinion”.
Government manipulates various parts of the economy by changing policy, regulation, interest rates, taxes, lending requirements and so many other factors. Changing these various factors is an effort to stimulate Corporate America, Small Business and Individuals to change or participate in certain behavior.
If the business community and general population, what I call the market, want to participate in this directed behavior, things seem to trend in that direction. If they don’t like this policy or direction, you have an unfavorable reaction. I find it interesting that Corporate America has huge cash reserves, profits and earnings yet we are in a double dip recession with no clear path out from our leadership in Washington. I know individuals with large amounts of cash waiting for the right environment for them to participate or invest. The market is hording cash. This behavior has basically stopped the United States of America in her tracks.
It is obvious the “Change” we have heard so much about has stimulated the wrong behavior, or has it? A true leader inspires a nation and encourages prosperity. A leader stimulates prosperity and provides an environment to work and succeed. Teach a man to fish so he can survive, don’t just give him an entitlement.
The fact of the matter is when the proper environment is created, the market will respond. When the proper “Change” has occurred, the people of the United States of America will show the world that “The People” One Nation Under God rule this great land.
If the proper leadership and change is demonstrated coming into the November election of 2012, we will see an immediate change in confidence in the people of this great nation. There are many positive factors waiting for the correct environment for us to begin to thrive and prosper like we always have. Be active and participate, for what is happening in our country is one of the most important times in history. And remember, under all is the land and land is a good investment.
There are many reasons to own property. We see a growing interest in people getting back to basics. Organic farming, big gardens, no herbicides, organic fertilizer, fresh eggs and range chickens are some of the reasons people are inquiring about land. One of our clients has some of the last remaining genes of the Piney Woods Cattle and goats brought over by the Spanish settlers. [Read more...]