By Jim Griffith
Even if the talking heads in every form of media weren’t repeatedly telling us that our economy is in the doldrums, most of us would know this by simply examining our checking or savings accounts and observing our receding assets. Many of us wonder how we are going to survive this difficult time. According to recession.org we have had a recession in the U.S. economy every 11.5 years since the establishment of our nation. Over the last 75 years these recessions have shortened to just more than every 8 years. In a down market, everything is relative. It is a great time to buy assets that are under the stress of a price reduction. Throughout the good and bad times timber has remained a relatively liquid asset. Landowners who have been saving their timber for a rainy day often forget they have an asset in their timber that can be quickly converted to income. Timber Buyers are scrambling to buy hardwood, and pine pulpwood is holding its own price-wise.
I recently handled an outstanding sale on a tract of large sawtimber. We had more than an adequate number of timber buyers competing for the timber, and the selling price was substantial. Needless to say, our sellers were very happy with the results. In this time of uncertainty, it might be a wise move to take an asset, like mature timber that has peaked and is no longer growing in value, and convert the proceeds from the sale of that investment into another asset that will increase in value.
In previous articles I have talked about mature timber that is not producing you new income. Growing trees reach an economic maturity and beyond this point do not produce new value. If properly managed, they maintain their value but become like a savings bond. Once a bond is mature, no matter how long you delay cashing it in, it is no longer growing in value. Even at a reduced rate, mature timber could possibly be converted into an investment that will produce you far greater net worth than waiting for the uncertainty of sawtimber prices to peak again. Depending on your circumstances, you might benefit from selling mature timber if you do a like-kind exchange for real estate, which delays paying taxes on the capital gain of any timber you sell.
If the economy has hit your personal pocket book, and you need to produce income fast, you may need to simply turn your timber into cash. The declining economy has not changed timber from its relatively liquid state. It can still be your source of income in times of need; and it can be converted relatively quickly. If you have income needs and own timber, or if you want to know more about converting your timber assets into real estate without paying capital gains taxes at the sale of your timber, talk to a professional forester.
Jim Griffith is Gen. Manager of Georgia Farm Bureau Timber and Real Estate Cos.
Georgia Farm Bureau News – February 2009