Knowing the right questions to ask a land realtor is the key to making a sound investment in timber property.
Your Land Realtor Knows Best
Investing in timber property in Arkansas is a great opportunity to make money in the long term. The stability of this asset, along with its advantageous annual returns, have made it a choice investment for so many of the most reputable firms and private investors in the world. But, this doesn’t mean that success is guaranteed. Far from it, in fact. Even the most experienced investors have made big mistakes because of unforeseen factors involving Mother Nature, the law, and the market. If you want to make a safe investment in timber property, you need to do two things. First, find an expert land realtor. Next, ask these essential questions:
Are there markets for the timber on this property?
One of the biggest mistakes that investors make is not understanding the relationship between local, regional, and national markets for the timber on a prospective property. A large property rich in valuable timber of a certain type may look like a great investment—national demand may be booming—but if local demand is low and you don’t have the proper infrastructure in place to deliver, your investment is going to underperform. If you’re trying to decide when to invest in land, following the market will only provide half the knowledge you need. You must also know the access that you have to it.
Are there multiple buyers?
The next step to understanding your access to the market is to know your prospective buyers. Your Arkansas land realtor understands the value of your property, which means they understand the demand for the timber it produces. They will give you detailed information about local buyers in your area, making it even easier for you to start turning a profit quickly. If you find a piece of property at an incredible price, there’s likely a reason for that. Assess the real value by looking for red flags like mill closures in the area or cheap properties with only one merchantable asset.
What is the site index of the property?
The site index is the most crucial measurement you need to have before you consider investing in land. This figure is the measurement of the productivity of the land. Simply put, the site index is derived from combining the average height of a tree with its age. The resulting number will give you an idea of how much to harvest, how much to plant, and about how much merchantable timber you’ll have each year.
What percentage of the land is sloped suitably for harvesting timber?
Knowing the sloping of the property is incredibly important for many reasons. Environmentally, deforesting slopes can cause erosion that will destroy the quality of your soil and eat away at your harvestable land. Logistically, logging equipment needs easy access to your timber to keep costs low. Steep slopes, creeks, and valleys can cause problems for machinery that can increase harvesting time, and therefore, your costs. All of your lands may be great for growing timber, but make sure that at least 70% is suitable for harvesting, or your returns may not be worth the work.
Are there wood mills nearby?
It seems an obvious question, but it’s one that is often overlooked. Investing in real estate is about knowing your surroundings just as much as it is about understanding the property. You wouldn’t buy a house without knowing the location of the nearest hospital, good school, and grocery store, so why would you invest in timber property without knowing where all the sawmills were? Ask your land realtor not just about the location of wood mills but also about transportation costs, mill costs, availability, and reliability of nearby mills.
How much timber will be merchantable at the time of sale?
When it comes to land investing, you should always be thinking long-term. Having said that, you don’t want to wait until you’re old and gray to see your first returns. You may save money on a property that is great for growing timber, but if you will not have any merchantable assets for a decade, this could greatly affect your costs (especially when factoring in property taxes). A smart investor might pay more for a property that can start generating income in the short term.
If you’re ready to start seeing significant returns from investing in timber property in Arkansas, you need a land realtor that has the answers to all of these questions and more. Contact DDK Forestry and Real Estate today to get the answers you need and to find out about some of the most promising timber real estate in the country.