Thinking about forestland ownership?


Land ownership and private property rights are fundamental American values, God-given rights so important that our Founding Fathers specifically listed their protection in the Bill of Rights in the U.S. Constitution.


For many people, owning a piece of land, especially a tract of forestland, is the ultimate fulfillment of their American dream.


There are many reasons why one may choose to own forestland and every landowner’s reasons are different and unique to them. In addition, each landowner’s management goals are unique to them and often multifaceted. Each landowner is as diverse as each tract of forestland they own. However, for the purpose of providing some background information, let’s divide the various forest landowners into two very large, very inclusive groups.


Forestland for Investment


For the first group of forest landowners, the primary reason they choose to own forestland is for investment purposes. Typically, these landowners have invested in forestland because they view their forestland investment as a hedge against inflation and an opportunity to diversify a portion of their portfolio into assets with long-term performance that is not directly correlated to the performance of the stock market.


This group of landowners include private, nonindustrial forest landowners, traditional timber companies or one of the two common regulated entities that own forestland known as real estate investment trusts (REITs) or timber investment management organizations (TIMOs). This type of landowner is primarily concerned with making a profit on their investment through forest management and the associated timber harvests. Even though other non-timber forest resources such as wildlife may be important to them, these are secondary to their primary goal of timber production.


Forestland for Enjoyment, Conservation


For the second group of forest landowners, their primary reason to own forestland is because they want to enjoy non-timber forest resources such as recreation, water or wildlife. However, these landowners still manage their property for timber production by practicing sound forest management because they understand that good forest management promotes and protects their non-timber forest resources.


This group of forest landowners is made up primarily of nonindustrial forest landowners, government agencies, hunting clubs, conservation and preservation organizations and companies that specialize in outdoor recreation. In all but the most extreme cases, these landowners still want to profit off of their forestland through periodic timber harvests. These landowners also conduct a wide variety of forest management activities provided that those activities do not negatively affect the non-timber attributes for which they are managing.


No matter which group you may find yourself in both groups have three things in common. First, just like in any investment, both groups have to invest capital to own and manage forestland. Second, just like in any investment, there is a chance that an investment in forestland can be profitable. Third, just like in any investment, there is a chance that all or a portion of the invested capital could be lost or