Drove into Huntsville today to retrieve the trailer and haul a 4 wheeler back up to the farm. Son-in Law took them down two weeks ago in order to scope out some property that he was considering investing in. I needed the trailer to haul some corn and sweet mix for the cows, and I’m planning on picking up a deer stand and some lumber later in the week.
One of the ways to generate income around here is to sell the timber off of your land. Son-in-Law was looking at roughly 60 acres with an unfinished home on it. Price was $200K. The value of the timber was about $80K and this had to be split ($40K each) between the owner and the timber firm. So essentially he could have acquired the 60 acres for $160K ($200K-40K).
The value of land goes down, generally, if the property has been recently cut. The exception to this is if the property is to be converted to farmland. The more clearing, the less the value and the more waste is left on the land. Waste is neither easy or inexpensive to dispose of.
Now around here, non-farm land varies in price depending on its distance from a ‘major’ city (Huntsville, Athens, Decatur) and by size. The greater the size (typically) the less price per acre. The 110 acres where I built my house is roughly 50 miles from Huntsville, 25 from Athens. We paid $190K, or a little over $1700 an acre. We have gently rolling pastures for 50 or so acres and 60 in woods that had been ‘selectively’ cleared about 8 years earlier. Selectively cleared means that it wasn’t stripped and many mature tree remained.
Back to the property Son-in-Law was looking at: It was about 30 miles from Huntsville and should have had a value of $2-2.5K per acre plus the value of the unfinished house that was on it (40K). Selling price should have been $160 to $190. The value of the property post cutting should be about $1.25 to 1.5K per acre. On the high end that would be $130K including the unfinished house. In short, Son-in-Law could have proceeded with the deal and broke even for all of his time and trouble. Of course he could have finished building the house that was on the property, but his estimate was that it wouldn’t return more than he put into it.
I applaud him for looking for additional sources of income and, importantly, knowing the difference between a good business proposition and a bad one.