10 Guaranteed Ways To Lose Money Managing Land and Timber

  1. Relying solely on a Forest Service management plan. Forest Service plans can provide general management guidelines, but not the detailed data, mapping, and customization needed to ensure that you make the best possible decisions for your land and timber. If you have a plan written by the Forest Service or another government agency, the very least you should do is have a private consulting forester assess its “real world” feasibility and financial soundness before implementation. I will review your plan and provide feedback at no cost. If you don’t have a plan, I’ll work with you to develop one.
  2. Failing to establish a timber tax basis. When you purchase or inherit timberland, you should have the timber appraised. This valuation allows you to split your capital cost between your land and timber, so when you do sell, you will only pay tax on the gain in timber value from the time of acquisition. Didn’t do this? In many cases, I can perform a “back cruise,” which estimates timber value at the date of acquisition by regressing current volumes. More on timber tax basis establishment here.
  3. Failing to control the understory in your pine stands. A dense understory can inhibit visibility and mobility, making many types of forestry work (timber inventories, pre-harvest tree marking, boundary location) almost impossible to perform with efficiency and accuracy. Also, excessive understory siphons away nutrients and water from your crop trees, resulting in considerable loss of growth and revenues. Prescribed fire, herbicides, or a combination of both can be used to control understory vegetation.
    Cabarrus County North Carolina before and after understory control.
    Before and after understory control.
  4. Poor site preparation before reforestation. Many landowners plant immediately after a harvest (known as “hot planting”) only to find a year or two down the road that they wasted their money because natural growth has taken over the stand. Natural growth from seeds and stump sprouts routinely results in 5,000+ trees per acre—considerably more than you want or need. There is nothing wrong with establishing a new stand through natural regeneration, just don’t waste your money planting trees if you are going that route—use it a few years down the road to thin the stand pre-commercially.
    Iredell County North Carolina natural regeneration overstocking.
    Natural regeneration often results in overstocking.
  5. Overstocking. I commonly see pine plantations that were reforested at trees per acre rates much too high to make any economic or biological sense. Not only does overstocking cost more, but results in lackluster diameter growth and stand stagnation prior to the first thinning harvest. An initial rate of 450 trees per acre is sufficient on most sites. On rough terrain where future thinning harvest potential is limited, it may be advantageous to drop planting rates down to between 300 to 350 trees per acre. The trees will be healthier down the road, and the cost savings of planting at a lower density adds up to a lot when compounded over the life of the stand (25+ years). More on planting density here.
  6. Failing to properly manage stand density. Managing density begins at stand establishment and is regulated by thinning harvests as the stand ages–affecting its value, health, growth, and wildlife habitat. Not all thinnings are created equal. Timing, post-harvest density, tree selection, and contractor choice are all crucial components of a successful thinning harvest. By neglecting to thin, or doing so too late or improperly, many landowners are unwittingly throwing money away. More on thinnings here.
  7. Assuming a buyer’s offer is the same thing as an objective appraisal of value. Offers vary widely—sometimes as much as 100%. The buyer’s job is to purchase your timber, not appraise it.
  8. Failing to control your lessees. Years ago I handled a timber sale for a client that had their property leased to a deer hunter. Before the sale, we met with the hunter to inform him of our plans. Evidently, we did not make our expectations clear enough. To make a long story short, when a potential buyer came to look at the timber, the hunter told them to leave because he was hunting that day. Unfortunately, the crew went back to the office rather than call me. Later, the mill manager called upset because his crew had lost a day’s work. I apologized, paid his guys for the day, straightened out the hunter, and coaxed him into sending them back out to look at the timber. When bid day came, the buyer that the hunter ran off offered $20,000 more than the second place bidder. Fortunately, in this case, I was able to get the buyer back out to bid—otherwise, the hunter’s actions would’ve cost the landowner a substantial sum. Leasees can be a plus, just make sure they know your management and sales interests come first. More on hunt leases here.
    Self-representation is rarely a good idea
    Don’t let the fox guard your hen house.
  9. Letting a buyer manage your timber. A buyer will always make more money when he pays you less, meaning any advice he gives comes with an inherent conflict of interest. Beware of letting the fox guard your hen house.
  10. Timber sale self-representation. Studies have shown that forestry consultant administered sales result in considerably more money than do-it-yourself sales. You’ll pay a fee for the consultant’s services, but you’ll generate more net revenue, have greater returns in the future, and avoid the lingering doubts that you could’ve gotten more money, a better job, etc. See the study summary here in the 2016 edition of The Consultant: http://tinyurl.com/hy47nt2
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Tim is a forester, real estate agent, and avid outdoorsman. When he is not managing clients’ woodland, you will find him hiking, trail running, reading, or woodworking. Motto: “Never get too comfortable–there is always room for improvement.”