3 Unique Investment Characteristics of Timberland
Timberland is an attractive investment opportunity for investors for a number of reasons, but there are three unique characteristics of timberland for sale in Florida that set it apart from other investment classes. These include increasing financial value as timber grows, portfolio structuring to meet cash flow and appreciation objectives, and unique tax incentives.
1. Timber Growth
A unique opportunity of timberland for sale in Florida is biological growth. As timber grows in size and volume it becomes more valuable. Trees have what is considered a financial life cycle, and the maturity of the timber will have an impact on the rate of return. As trees mature, the use of the wood evolves along with its value. For example, trees that are smaller in diameter, typically 8 inches or less, are considered pulpwood, which is commonly used for paper production and yields lower returns than trees larger in diameter. Trees with larger volumes, typically over 12 inches in diameter are considered high-value saw timber and are used for products, such as flooring, furniture, and plywood.
2. Portfolio Structuring
Investment diversification allows investors protection against changes in the market and is a beneficial technique to reach long-term financial goals. Diversification is most commonly achieved by investments made to varying industries that will be affected differently to the same event, such as a change in interest rates. What makes Florida timberland for sale unique is that diversification can be achieved through the purchase of varying types of timberland.
As previously mentioned, the maturity of trees has a direct relationship with their financial value. So, an investor looking for higher immediate cash flow, can purchase a property with only mature timber that will generate a higher short-term return. However, if long-term appreciation and capital preservation is the objective, purchasing a property with young trees and more growth potential, is a better solution. Another alternative is to purchase timberland with varying young and old trees, which allows for harvesting the mature timber for immediate cash flow, but also allows for sustainable long-term appreciation because of the young trees.
3. Tax Incentives
There are number of government programs and tax incentives that can be utilized by owners of timberland. A conservation easement, for example, is a voluntary agreement to limit the development or harvesting of all or portions of a property for the purpose of protecting a natural resource. In return, the land owner may then qualify for income tax deductions, income tax credits, and state and property tax incentives. Additionally, there are tax benefits that stem from income generated through timber sales which can qualify for treatment as capital gains.
Consult an experienced land professional from CBC Saunders Real Estate to help you determine which types of timberland offers the best opportunities for you as an investor.
For information on investing in Florida timberland, please contact us today at 877-518-LAND, or complete our contact request form.
*Disclaimer: This information does not constitute professional investment or tax advice.