Invest in lumber?

[Gregg Feldstone]

Got a brochure from Hawaiian Legacy Hardwoods and it looks intriguing. One can buy lots of 100 teak, mahogany or koa trees for $5800-$6100. When the trees are harvested you keep the profits. A $6100 koa investment is predicted to make you $280,000 over 25 years, but you can start getting profits in as few as 7-10 years. Has anyone else looked into this or other tree farms? Lots of variables and risk but they, of course, try to down play that.
It does look like something which may be profitable and play a part in keeping wood available in the future. The fact that the trees are planted on US soil also makes it seem more secure.

[Benjamin Dahl]

It could work out but I'd really want to know about the company, how long they have been around, how they plan to keep you updated, what their rights to the land are, what happens if the land is sold, etc.
Good luck if you decide to go with it.

[Daren K Nelson]

I would buy a sawmill with the $6100 and start profiting from day one, but that is just me As far as keeping wood available...
This is a quote from “Utilizing municipal trees from around the country” Stephen M. Bratkovich
“In the United States over 200 million cubic yards of urban tree and landscape residue are generated every year. Of this amount, 15 percent is classified as “unchipped logs.” To put this figure in perspective, consider that if these logs were sawn into boards, they theoretically would produce 3.8 billion board feet of lumber, or nearly 30 percent of the hardwood lumber produced annually in the United States."
Not to cram my philosophy down anyones throat, sorry, but urban logging is the answer.

[Mark Smith, too]

I would buy a sawmill with the $6100 and start profiting from day one, but that is just me As far as keeping wood available...
This is a quote from “Utilizing municipal trees from around the country” Stephen M. Bratkovich
“In the United States over 200 million cubic yards of urban tree and landscape residue are generated every year. Of this amount, 15 percent is classified as “unchipped logs.” To put this figure in perspective, consider that if these logs were sawn into boards, they theoretically would produce 3.8 billion board feet of lumber, or nearly 30 percent of the hardwood lumber produced annually in the United States."
Not to cram my philosophy down anyones throat, sorry, but urban logging is the answer.

And it will probably really catch on when the indestructible saw blade is produced.

[Daren K Nelson]

And it will probably really catch on when the indestructible saw blade is produced.

Ah shucks a little metal never hurt anyone
Sure I hit a spike in this log.


But I managed to get a few small boards out of it anyway


Bummer this walnut had 2 nails in it...


Under the nails there was 200 bft of curly walnut though


I hit 1/2 a coffee can of tramp metal in this log


But it sure did not slow me down because I was pulling 24" wide figured maple slabs off the mill



So urban logging may not be for the faint of heart and a few bandmill blades die of metal poisoning. I guess we can keep hauling logs like these to the burn pile/landfill because of the metal ? (not in my neck of the woods)

[Randal Stevenson]

It could work out but I'd really want to know about the company, how long they have been around, how they plan to keep you updated, what their rights to the land are, what happens if the land is sold, etc.
Good luck if you decide to go with it.

Besides above, what about damage due to weather/insects, etc. WHO maintains them? Who pays for all the farming fee's? Are you guaranteed a rate of return? Are these also being sold as or used as "carbon credits" (and that whole idea brings more questions, like can you lease them as that).

[Rick Hubbard]

The name Bernie Madoff keeps popping into my mind for some reason.

[Daren K Nelson]

Besides above, what about damage due to weather/insects, etc. WHO maintains them? Who pays for all the farming fee's? Are you guaranteed a rate of return? Are these also being sold as or used as "carbon credits" (and that whole idea brings more questions, like can you lease them as that).

Excellent questions. A "tree farm" out of your own control (like your own personal woodlot...then the afore mentioned natural devastators can still ruin you ) sound like too much of a gamble IMO. I am not aware of any "mail in" lumber jobs, it's hands on. As far as an investment...I would buy land and lease it to tree farms , no risk all return.
And who says the species being planted will be worth even a fraction of the projected price down the road ? I have personally seen American red oak logs drop 75% in the last 3 years. What is that 25 year profit # based on todays prices?
One last thing. OK the "tree farm" where you own your trees...but not the ground. Lets say in 3 years the landowners decide wind power is the best use for the land, or a subdivision, or they find a mineral deposit (just off the top of my head) "Your" trees are now in his way, so they gotta go. Harvested prematurely and at little market value, your out.

[John Lucas]

Slick website. Good idea. But not one picture or name of the individuals who are taking your money. No pictures of the place. No 10K or any other offering support material. Great links but not to them, just forestry. What was that about the Brooklyn Bridge?

[John Keeton]

Invest in lumber? The quick answer is yes, but your methodology is way too risky.

I purchase lumber whenever I see a really good deal, and store it. I can see it, feel it, use it, and sell it - anytime I want. I think good wood, at good prices, is always a good investment. If you can buy green walnut for $1/ft, and in two years, it is worth $3-4/ft, that is a good return.

No way in the world would I do this. You aren't investing in lumber, you are investing in someone's get rich quick scheme. I think Rick Hubbard has it right.

And, by the way, even though I would not be inclined to do it simply because of time constraints, I think Daren has a great plan. I bet he can make money doing it, and there is always that chance of a real payoff like the curly walnut

No such thing as getting rich with no effort (unless you are Madoff!), and all things worth having are worth working for.

[Quinn McCarthy]

Gregg,

What you need is somebody that can do some forest investment analysis like a consulting forester with a financial background. There is a chance that it is a good deal. Without finding out what the growth and yield is of those species on that site or soil you will never know. I am sure that the harvest in 7-10 years is a precommercial thinning on your woodlot. In order to do the analysis you need to know the rotation age of the species. What if the yield on your woodlot is more than advertized? Does that money go into somebody elses pocket. What if it is less? Every tree grows at a different rate. In an investment analysis shorter time period is better. The longer the roation age the less rate of return you get. Most companies look for better than 7% IRR to make the investment.

With any investment in timber you have risks involved. Like insect, diseases, fire and weather events.

When you think about the risk/return curve timber is considered as a moderate risk investment. Usually timber has a slightly higher return for the risk so it is considered a good long term moderate risk part of a portfolio. There are several companies and financial institutions like retirement funds that invest in timberlands.

I hope that help.

Let me know if you have any more question.
Quinn
Forester by day woodworker by night

[Steve Rozmiarek]

Gregg, if this is something that interests you, I bet there is a way to do it. There are good companies out there that grow trees for lumber, and I have yet to meet a company that turns away investors. Do a little legwork, and find a few of these companies, and see if they want an investor.

In my line of work, we have a fairly constant flow of outside investor activity. People apparently like to grow things, including money, and these investors do ok herel. I'd imagine that there is an infrastructure for supporting tree or forest investors similar to the one that exists for ag investors.

Cold calling on the other hand...

[John Keeton]

There have been some good, common sense ideas offered here on how to invest in the lumber business by those that are in that business. You will here those businesses speak of real risks, and reasonable profits.

But in my experience a business that stands to make huge profits does not go out and solicit people to share in those profits. They keep it a "trade secret", accumulate capital from venture capitalists in a closed environment, and reap the rewards - if any.

There are no free lunches, and a business that advertises "$6100 koa investment is predicted to make you $280,000 over 25 years" is a scam. That is an unreasonable profit, and not a legitimate venture.

[Jules Dominguez]

It's obviously a scam.

[Chris Konikowski]

There have been some good, common sense ideas offered here on how to invest in the lumber business by those that are in that business. You will here those businesses speak of real risks, and reasonable profits.

But in my experience a business that stands to make huge profits does not go out and solicit people to share in those profits. They keep it a "trade secret", accumulate capital from venture capitalists in a closed environment, and reap the rewards - if any.

There are no free lunches, and a business that advertises "$6100 koa investment is predicted to make you $280,000 over 25 years" is a scam. That is an unreasonable profit, and not a legitimate venture.

Honestly, that is only about a 16.5% rate of return for 25 years. I know that this is good, but that is not unfathomable by any means.

That being said, I would not bother with this. There are many other ways to make good money than this in markets and such...