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Help with analyzing a TIMBER investment opportunity

Started by JWillis, February 06, 2018, 08:31:47 PM

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Southside

Quote from: JWillis on February 08, 2018, 04:49:43 PM
Texas Ranger ... yep.  Not viable.

2.31% IRR on the timber.
5.60% IRR if the seller cuts his asking price from $2350 to $1200 per acre,  which won't happen.   

Assumptions:
Pulp $8.35 per ton
ChipNSaw $17.06 per ton
SawTimber $23.99 per ton

Yields and Mix:
Thinning #1 ... 25 tons ... 100% Pulp
Thinning #2 ... 30 tons ...  40% Pulp, 45% ChipNSaw, 15% SawTimber
Clear-cut ... 85 tons ... 2% Pulp, 12% ChipNSaw, 86% SawTimber

This parcel doesn't need a Timber investor.  It needs a home owner who wants a forest to walk his dog in.

Jeff - Yes,  I will be gone.  Not because of your threats,  or Raider Bill's asinine comment.  I'm leaving the board after a brief presence because there's no one here with any financial modeling acumenI've come to learn that the entire industry is woefully lacking in talent to assess the financial returns from owning TIMBER.  Wet your finger,  stick it up in the air, and guess ... appears to be the main mode of operation in the US Timber Industry.  It's dominated by Axe Jockies and Chain Saw Bubbas.

TIMBER is a hobby,  not a viable investment.   That's what I've come to learn and understand after a couple weeks of deep dive into the economics of TIMBER.


First bold  - I told you that based on the data you had posted, and a couple of us explained that your assumptions on improvement were not reasonable given the history of the lot.

Second sentence - Seriously lack of financial modeling acumen?  It would be quite interesting to know the net worth and total timber land holdings of the members of this Forum, many of which were earned - not inherited.  More than a few write a check each week for logs, fuel, payroll, etc that exceeds the "investment" you have spent a whole two weeks pondering. 

The bold with italics well, somehow an industry which built a country has been lucky for the past couple of hundred years - so glad you are here to clear things up for everyone. 

You came here and said you know nothing about timber and were treated with kid gloves, several of the posters who answered your questions could write a novel just giving you an answer to your question.  Did you act this way to the landowner?  If so you still wondering why he won't come down to the price you think is right?  So many things in life are about attitude. 

Franklin buncher and skidder
JD Processor
Woodmizer LT Super 70 and LT35 sawmill, KD250 kiln, BMS 250 sharpener and setter
Riehl Edger
Woodmaster 725 and 4000 planner and moulder
Enough cows to ensure there is no spare time.
White Oak Meadows

ohiowoodchuck

I'm no genius or know it all but it's hatd to make a 1000 a acre off hardwood here in Ohio unless you find that piece of land that hasn't been touched in 150 years. These kinda tracks are getting few and far between. I know your lucky to get 200.00 a acre of there chipping around here. Just my experience but I'm not a logger or a forester, just a landowner putting out more then I'll ever see back.
Education is the best defense against the media.

SwampDonkey

Bare minimum stumpage for most landowners has always been $500-600/acre here for a long time, at least 25 years. But some regions of the province seem to sell when markets are down instead of waiting for better prices. We have advantages here because of marketing boards, everyone can find out quick what the current situation is. Woodlot owner groups do have advantages.  In this region, landowners are a lot closer to there land, half the population is rural. Cities are small and not growing too fast, a lot of them with one main industry, making pulp products. Most of the sawmills are in villages and towns with small populations. :)
"No amount of belief makes something a fact." James Randi

1 Thessalonians 5:21

2020 Polaris Ranger 570 to forward firewood, Husqvarna 555 XT Pro, Stihl FS560 clearing saw and continuously thinning my ground, on the side. Grow them trees. (((o)))

PA_Walnut

Van Gogh once said, "If you hear a voice within you say 'you cannot paint,' then by all means paint, and that voice will be silenced."  :o :D
I own my own small piece of the world on an 8 acre plot on the side of a mountain with walnut, hickory, ash and spruce.
LT40HD Wide 35HP Diesel
Peterson Dedicated Wide Slabber
Kubota M62 Tractor/Backhoe
WoodMizer KD250 Kiln
Northland 800 Kiln

coxy


47sawdust

I sure do like to see a good guard dog in action.This place has several,very entertaining. 8)
Mick
1997 WM Lt30 1999 WM twin blade edger Kubota L3750 Tajfun winchGood Health Work is my hobby.

DMcCoy

Quote from: JWillis on February 08, 2018, 04:49:43 PM
This parcel doesn't need a Timber investor.  It needs a home owner who wants a forest to walk his dog in.

Jeff - Yes,  I will be gone.  Not because of your threats,  or Raider Bill's asinine comment.  I'm leaving the board after a brief presence because there's no one here with any financial modeling acumen.  I've come to learn that the entire industry is woefully lacking in talent to assess the financial returns from owning TIMBER.  Wet your finger,  stick it up in the air, and guess ... appears to be the main mode of operation in the US Timber Industry.  It's dominated by Axe Jockies and Chain Saw Bubbas.

TIMBER is a hobby,  not a viable investment.   That's what I've come to learn and understand after a couple weeks of deep dive into the economics of TIMBER.

Wow!  :)

mike_belben

Out of curiousity, i used the huntstand app to measure a chunk of remaining backyard parcel i cut last year in a trade for dirtwork. 

Primarily white oak, and a few "big" hickory with the usual bulk of pulp and tie junk.  A 10:1 ratio of pulp/firewood per load of stave grade.  Most loads were tie at an avg of about 30cents/bf.  All wood total avg 57cents.  Zero management, whole neighborhood was a former single commercial timber site, subdivided to trailer trash housing in the 1970s or 80s, and just became a backyard.  The commercial site was high graded to the max prior to subdivide,  and the trees i cut were passed over during the homeowners own logging because that corner was filled with too much junk for the logger to bother.  Biggest small end diameter i cut was probably 18 inch.. Maybe 20.  Most logs were 12" to 14"

The patch was only 1.3 acres and i have receipts for a hair under $3,600 in sawlogs.  I sold one load of pulp and decided the rate i could get just didnt warrant the hauling distance and brought it home for firewood.  This was my first winter in firewood here which i messed up.  Just didnt have enough dry wood on hand, sold it all in the first cold snap, delivered it too far for too cheap and was out when the real cold came and everyone was out of dry wood.  I did $1,010 in firewood. 

Im still bringing home firewood from that lot, he is a friend/neighbor.  Also much of the small, sellable tie grade stayed here for timbers to frame my first barn.  Maybe 40 logs. 

Sadly, this leftover junk was some of the fattest timber in a dense forest patch that ive seen here.  Avg diameter is shrinking fast.  To get a 20" white oak buttlog a tree needs to be passed over in the last TWO harvests.  Thats rare.

I woulda done the pond for $500 cash. 
Praise The Lord

starmac

Mike, I am curious. You stated you would have done the pond for 500 cash, what is the going rate for a dozer the size of yours in your area.

Around here 500 bucks will not get folks interested in doing much of anything.
Old LT40HD, old log truck, old MM forklift, and several huskies.

mike_belben

Maybe $75 an hour for a 450 size?  But everyone has a dozer in the rural south, theyre parked all over the place.   I have advertised for all sorts of services and had no calls on anything.  Im not saying i woulda made a profit at $500, just that i was desperate and fool enough to do it.  I drove the dozer from here to his house down the road and it was a come and go as i please, with my kids most days, kind of a job.   Only other thing with those kinda terms so far has been splitting wood on farms.   That mom life is kickin my butt.
Praise The Lord

47sawdust

Mike there certainly is no shame in being Mr.Mom.I was a single parent for 12 years,yes,it was a lot of work but you know who is raising your kids.You have my respect,good for you and your family......besides you seem like the kinda of guy that shouldn't have too much time on his hands. ;D ;D ;D
Mick
1997 WM Lt30 1999 WM twin blade edger Kubota L3750 Tajfun winchGood Health Work is my hobby.

mike_belben

Praise The Lord

PA_Walnut

Whoa!! $75/hr for dozer work!?  :o

Round here it's $225 or so.  :-X :-\

I have a big backhoe/loader and have been thinking about doing small(ish) jobs locally, but by the time I get a trailer to move it, DOT license to be legal, insurance to cover me/them/it on gigs, etc. I calculate I'd just be entertaining myself. (not that playing on a tractor all day isn't kinda great!  :D ;D)
I own my own small piece of the world on an 8 acre plot on the side of a mountain with walnut, hickory, ash and spruce.
LT40HD Wide 35HP Diesel
Peterson Dedicated Wide Slabber
Kubota M62 Tractor/Backhoe
WoodMizer KD250 Kiln
Northland 800 Kiln

longtime lurker

I did a Mr mom stint for 10 years before I remarried. Its hard but worth it. Mine are pretty much grown now - 20 and 17 - but I can remember how frustrating it was to be turning good work away because of the dad stuff that made it impracticable when they were little. i had to throw a pretty good business that I loved away for it ... cant say i havent regretted it at times but if it all played out the same I'd do it again tomorrow if I had to.

You're doing the right thing Mike. Be proud of it.
The quickest way to make a million dollars with a sawmill is to start with two million.

mike_belben

Thanks.  I do have a great wife, but she has the stable career and i have the floating life.  I have a few more years of relocating equipment to go and thats sporadic so i cant go looking for a job.  No one hires a guy who is randomly available.  We make it work pretty well.
Praise The Lord

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