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Corder’s Corner

Timber: How Does It Affect Real Property Value?

As previous articles have expressed, valuing property takes into account many different factors. Environmental factors play a key role in assessing the value of land. For example, any kind of water or minerals on the property is going to raise the value of the ground. The same is true when considering timber, although it is often an element that is forgotten about. If you have marketable timber on the property that you wish you sell or buy, for that matter, it can add significant value. However, determining that value is not as easy to quantify as tillable land would be. Let me discuss some of the things you need to know about timber and valuing it.

The vast state of Montana has an estimated 14.6 million acres of forest land that is owned privately. If you plan to buy land, inquire about timber rights alongside of mineral and water rights. Timber includes all wood growth, standing or down, alive or dead, mature or immature, that is capable of providing raw materials used in manufacturing products that utilize lumber or other forest products. The land that has the timber is evaluated by dividing the net income by the capitalization rate. The net income per acre is determined by using the yearly productivity of the land, the average sales from timber over 10 years, the agricultural income, and the forest and ag production costs.

How would you know if the timber on your land is worth anything? There are five major factors that govern what the timber is worth. First, there is a portion of the worth that is dependent on what the market is doing. Things to consider here would be is the property to be harvested near any mills. Second, what species, size, and quality are the trees that you wish to use? Rare hardwoods are going to be worth more than other woods. Next, how much timber are you considering marketing? It might not be worth it to market a small amount of timber. The larger the sale, the higher the price you may be offered per unit of wood. Remember that the greater the harvest expense is per tree, the less you may profit or that the harvester is willing to pay. There are more variables that needed to be calculated in as well. How close to a road is the timber? Does the site have a steep slope or wet soil? Is there a stream that needs to be crossed and perhaps a temporary bridge built? Lastly, you will want to familiarize yourself with the local timber harvesting and management practices laws because they too can affect the kind of harvesting equipment you are allowed to use and how close to streams you are allowed to be. Sometimes there is a protected species of plant of animal that affects timber harvest.

These components of determining the worth of your timber can cause slight anxiety if you do not know where to start to obtain such information. Take advantage of the free services that the state provides or supplied by the local universities. By visiting the National Association of State Foresters website, you can find contact information for state foresters. You can also contact your local Forestry Extension or county Agricultural Service agent. In some instances, you may feel more comfortable hiring a professional to consult. Forestry consultants provide a wide variety of services such as tree planting advice, forest management, timber cruising (terminology for determining timber value), and timber sale preparation and supervision. Last but not least, you can of course do your own examination of the trends in the market in your state and the surrounding states. If you are looking to purchase or sell land that may have a valuable and marketable amount of timber, contact your local real estate agent for any additional questions you may have!