“The three most important rules of real estate are location, location, location.” That was the opening statement on the first day of my pre-license course. Though it may sound a little silly, there is a lot of truth to this statement. A property’s neighborhood, proximity to major intersections and population centers, zoning, utilities, and more can heavily influence its value. Without a doubt, location is a big factor in the value of a property as well as the potential for timberland investing.
As a Land Professional and a forester, I tend to think of things a little differently than other real estate agents. I would argue that access and accessibility play just as big a role as a location in property values. Based on my experience in the land industry, the three “rules” of land are the following:
As I mentioned above, location is vital to property values. In the world of timberland investing, the most valuable locations are determined by their proximity to mills. If your main goal is to grow and cut timber on your property, the ideal location to buy will be within 60-80 miles trucking distance of the greatest number of mills possible.
There are many different types of mills that produce a variety of products. They buy timber based on the species, size, and quality of log required for the products they make. Ideally, you will want to be located within reach of multiple mills for each species and product class that you intend to grow on your property. Competition and diversity of product specifications will help to ensure that you receive the highest possible prices for your timber every time you harvest.
2. Access to Timberland Investing
Access is the right to ingress and egress (or to come and go freely). Most of the properties sold today have access by public rights of way such as federal, state, or county-maintained streets and roads. Other properties have access by easements (deeded or prescriptive) along private roads. A deeded easement is a recorded document that guarantees access under specific, stated routes and conditions. A prescriptive easement refers to historic access but is not specifically guaranteed or documented in any way. Properties with prescriptive access are often referred to as “landlocked.”
Lack of public or deeded access can significantly decrease a property’s value. Most lenders will not consider a loan on landlocked property, which limits the pool of potential buyers to adjoining landowners or those who are paying cash for the purchase. The use of the property will most likely be limited only to growing timber and possibly some hunting or limited recreational use. However, under the right circumstances, with the right neighbors, a landlocked property could prove to be a very high-return timberland investment because of the lower land value.
While access relates to the right to come and go from a property, accessibility refers to the practicality or functionality of access. On paper, a property may have excellent access on a public road, but in reality, there could be other issues that would prevent the use of that access. There could be a river, a bluff, or even a railroad track that divides that property with no crossing, forcing you to go miles around the tract to get to the other side (that’s if you can even get to the other side). The property could be in a river bottom that is under water or at least wet and swampy for part of the year. A property with good access, but limited accessibility will suffer a decrease in value, perhaps as great or greater than one with no access at all.
Whether you’re evaluating a property for timberland investing or another use, these three rules serve as a litmus test to help you decide if the price is acceptable for your intended use. But keep in mind that there are exceptions to every rule. Less favorable properties may still prove to be good investments at the right price if you are willing to work around and adapt to the challenges ahead.
Read more: Timberland Investing from the Ground Up