We asked Missouri consulting forester Jay Law of St. James, Mo. to give us some advice on an investment opportunity involving woodland. Jay's Tree Sheperd Products and Consulting Co. serves the central Ozarks with appraisals, assessments, educational services and forest and plant protection products. If you have questions, contact Jay at 12121 Country Rd. 3410, St. James, MO 65559. Phone: (573) 265-6036.
The Investment: There is a 12-acre patch of timber for sale in our area that consists mostly of black walnut trees with some hickory and elm and a few honey locust and other brush. We measured and counted the walnut trees on about 3 acres which is typical of the whole tract.
There are an average of 80 black walnut per acre ranging in diameter from 3 to 8 inches. Average would be about 5 inches. The land is along a little creek bottom and the trees have grown well at about .5 inch per year. This was mostly open land 25 years ago. The trees have fairly straight trunks and are clear for up to 20 feet on many of the larger ones.
The owners want $650 an acre for the 12 acres. I'm tempted to buy it as an investment. How would you rate the potential return on this compared to a bank CD?
Forester's Assessment: Yes, I'd say that little 12-acre tract with 80 walnut trees of 3 to 8 inches diameter would be a fun property to own. A realtor friend tells me that $650 per acre is a fair price for a small wooded tract that adjoins a creek.
However, your question is: "Should I buy this property as a forestry investment or put my $7,800 in a bank CD." I think a financial advisor would say, "Do neither!" His or her advice would probably be to put $130 a month into a good mutual fund over the next five years. That strategy would likely provide you with the best return from your hard-earned dollars. But in my opinion, that is not nearly as much fun or personally rewarding as working with trees.
Unfortunately, the small acreage and the low stock of pole-sized walnuts will limit your financial returns from this property. This is particularly true if you don't plan to plant more walnuts or work around the existing trees to improve stem quality and insure their survival. If nothing is done over the next 30 years, their numbers will be reduced by nearly half through natural mortality. The good news is that the average diameter of the remaining walnuts will nearly double in that time and in 40 years you'll have sawlogs.
Walnut research indicates that for nut production plus quality sawlogs there should be at least 200 trees per acre by the time trees are averaging 5 inches in diameter. The present stocking of walnuts on this 12-acre tract is far short of the ideal. To gain the maximum return you'll need to add substantially to your investment and intensify walnut management on this tract.
Aside from wanting a return in CD equivalents, you don't state a full range of objectives for owning a forest property. Are wildlife and aesthetic values important? Do you want this property to become part of a family inheritance? Would you like to harvest nuts and market veneer quality logs or both? Foresters can be of most help when clients share all their interests. "Growing" trees by computer modeling and developing investment scenarios tailored to a client's interests are just some of the things a consulting forester can do for people considering the purchase of forest properties.
