Can Fun Hedge a Tree Fund?
Timber investment is not as secure as it once was, but owning a piece of greenwood still has a powerful attraction. An increasing number of careful buyers successfully hedge their investment with a wide variety of outdoor recreation.
Come hunting season, the deer stand on Chris Smith’s Cottonwood Plantation at Dayton investment property will yield its own rewards.
Not too long ago, timberland investing meant buying raw land, holding it, and selling for profit. Buyers watched their trees and bank accounts grow in a venture that was stable, secure and ho-hum. Not anymore.
Today’s Alabama buyers seek the good earth for more than financial gain — they want recreation. Indeed they want good yields but they also want fishing. They sell timber, after installing deer stands on it. They explore cost analysis from all-terrain four-wheelers. These are not just investors but explorers, and timberland is more than financial security, it is the Promised Land.
Of course, most people want a good return from speculative green acres. Real Estate 101 still teaches, “Land does not depreciate.” But more are buying up rural Alabama as a recreational hedge, and no wonder — pleasure forests’ return on investment rivals that of traditional securities. So pack a fishing pole, load the hunting rifle and bring a fat wallet. Deals are everywhere for a price.
For example, here’s a sweet deal in Bullock County: 530 acres, with duck pond, creek access, gently rolling hills, where the deer and the antelope play — or could play — on a home on the range, for $1,563,500.
How about 452 acres on the banks of the Conecuh River, in Covington and Crenshaw counties? How about a cache of old growth hardwood? How about writing a check for $990,000?
Perhaps 460 Dallas County acres with a largemouth bass pond is best. Spend the day setting hooks in trout lips. Bring your fishing tackle, good bait and $1,350,000.
“And there’s the therapeutic value,” says Walter Tutt, of Tutt Land Co. in Linden. “People come to the woods to get away from it all. I have many customers who love being outdoors, mending fences, clearing thickets, planting, working and clearing land.”
It is transcendental meditation with a Bush Hog. Try that with municipal bonds.
“Most people still buy timberland for financial investing, and to be sure, it’s an excellent wealth-building tool,” adds Tutt. “Investors often enjoy nice returns through resale.” Markets fluctuate, but currently 2 to 5 percent price increases annually are not uncommon.
“I don’t want to over-simplify it,” notes Chas Pell, of Black Ridge Land Co. in Birmingham, speaking about investing in timber. “But once you have a stand of trees, you sit back and watch your investment grow, literally. And land value will always increase as more and more people see the potential for timber income. More want a piece of the pie.”
There is no market research, no rise and fall of stock prices. Trees don’t care how the London Market opened. “Timber is the ultimate self-sufficient money maker,” adds Tutt. “Just watch it grow.” Growth is what trees do. A falling stock market is bad, but falling trees, cut and trucked, mean money.
And, while watching the money tree investment grow, no law says you can’t enjoy it. Chris Smith does. The Mobile business owner escapes to Marengo County every chance he gets. Fifteen hundred acres of pristine wilderness awaits him.
“Originally, I purchased 400 acres,” says Smith, owner of Smith Industrial Service in Mobile, about his outdoor adventure portfolio. “But after seeing how the land and timber appreciated, it made sense to buy more.” So he now owns 1,500 acres.
“I have three sons, ages 16, 14 and 13,” he notes. “We love to hunt, and I knew paying hunting club dues would be impractical for all of us. Buying our own hunting land made sense at the time. It still does.”
One reason Smith bought his property was to save money on personal family hunting fees, which he now charges others for hunting his land. “If you work it right, between deer hunting club dues, timber sales and other revenues, the land will pay for itself. Mine does.”
Other purchase factors are less dollars and cents tangible but just as real. “During deer and turkey season, my boys and I are in these woods three out of four weekends a month,” the Mobilian adds. In Smith’s wooded world, there are catfish to catch, deer to hunt, turkey to stalk. “It is more than an investment; it is our entertainment, in a place of our own,” he says. “How can you put a price on that?”
“You can’t,” answers Danny Fulford, of United Country Fulford Realty in Hartford. “That’s why we are seeing more family investors. They want income from their purchase, but they also are buying family time.”
Prices and parcels are as varied as the people who buy them and the wildlife living on them. “I sell anywhere from a few acres to a few hundred,” says Fulford. “Average plot sizes can range from 20 to 60 acres on the small end. We just sold 300 acres to a man wanting to move his cattle business from north to south Alabama.”
Others want to get away from business, to share the same zip code with deer, turkey and quail.
“I’m seeing more customers buying not just for wildlife but for four-wheeling and horseback riding,” adds Dan Hargrove, of Cypress Partners in Northport. “There is no typical size parcel. We sell anywhere from 40 to 250-acre plots. An average size would be 120 acres.”
Like all land transactions, recreational parcels are governed by the holy trinity of real estate: location, location and location. “People want water features or access,” notes Tutt. “Anything with a river, lake, creek or pond is desirable.”
Water properties are often more expensive, but worth it. Landowner Smith agrees. “Our next project will establish a duck pond,” Smith says. “And it would be great, stocking a pond with catfish.”
And now a realty reality check: Shangri-La has a price.
Before exchanging life savings for the wilderness, briefcases for hunting rifle or a business hat for a coonskin one, know what you’re doing. “Get reliable data from professionals,” says Bill Mackey, broker/owner of Bill Mackey Real Estate in Demopolis. “You will be spending thousands, maybe millions of dollars. This is about much more than pretty trees.”
Mackey has seen good and bad in timberland. “It’s still a good investment financially, but not as good as it once was,” he says. “As for recreational use, timberland purchasing is like owning a boat; it doesn’t make a bit of sense, but sure is fun.”
Before establishing a presence in The Great Outdoors, the Demopolis expert advises, “First, have exit strategies. Ask yourself before you spend one dime, ‘How can I get out of this if I need to? Can I get out of this property what I put into it?’”
The sale price is just the start, he warns. “Do not go into this transaction without knowing your operating expenses.” How much will equipment like tractors, land-clearing machinery and planting expenses cost? “Yes, it is fun to hunt and fish on your own land,” according to Mackey. “But look at this as a business and the expenses that will incur.”
“Always know, in writing, legally prepared and documented, the legal access to your property,” Mackey emphasizes. “It’s not good enough to say, ‘Joe next door lets us in through the dirt road.’ If Joe controls your property’s entrance, Joe controls your property, not you. A bank won’t touch it. The first thing a bank will ask for is the property’s legal access,” says the Demopolis broker. “Have this clear before making the first payment.”
And this may sound funny coming from the forest, but Mackey advises, “Know the neighborhood.” It may be the most pristine plot of land since the Garden of Eden, but if it borders a kudzu forest, it may be a poor investment.
“Your land may be great,” adds the Demopolis realtor, “but if next door has 18 house trailers and 20 dogs tied to trees, in what we call ‘a crack village,’ you will suffer. Know your surroundings before buying.” Also have a professional, certified, registered forester check out your timber, not Uncle Fred who loves trees or a Boy Scout with a nature merit badge.
Stocks rise and fall, bonds mature and expire, but land has been around since Adam and Eve farmed it. Fun, recreation and a financial hedge where rabbits live may sound too good to be true, and if you aren’t careful, it is. But with the right planning and knowledge going in, the rewards of rec-land are great, going out.
The upfront work and costs are great but so are the rewards. Scarlett O’Hara’s daddy said it best in Gone With the Wind, “Land is the only thing in the world worth workin’ for, worth fightin’ for, worth dyin’ for, because it’s the only thing that lasts.”
The joys of one’s own forest, the thrill of yanking trout from a personal pond, the satisfaction of watching wildlife thrive in a sanctuary you provided can’t be put in a bank. But it can be much more valuable than mere money, maybe even priceless.
Emmett Burnett is a freelance writer for Business Alabama. He lives in Satsuma.