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Four Tips for a Successful First Year as a Land Agent

Becoming a land broker sounds fun. You see all the cool pictures, videos, and listings that agents post online and on social media, so you think “Hey, I like the outdoors, I like to hunt and fish, I know my way around the woods, so I’m going to become a land agent and just watch the money roll in.” As many a land broker will tell you, you are dead wrong. Selling land is a lot like farming. It takes time, money, strategic planning, and at the end of the day, a lot of your success still depends on the weather.

  1. Hope for the best, plan for the worst – Don’t just run out and buy a fancy 4×4 truck, UTV, winches, and tires. Being able to navigate rural lands is important, but don’t spend money you don’t have yet to do it. Be modest, create a budget. Work with your broker to outline how much you should allot to your personal digital marketing, print marketing, networking opportunities, etc. and understand when you can expect those efforts to start taking hold. Don’t spend money you don’t have just to break even later. Economies change much like the weather, and as long as you’re not over extending and you are able to adjust, selling land in a bad economy can be equally or more profitable than selling land in a good economy. Learn how to pivot your business around whatever industry weather changes may come
  2. Educate yourself at every opportunity. If you want to be an expert, don’t just play one online. Invest in yourself and become one. Join professional organizations like RLI and align yourself with industry leaders, working toward meaningful designations like that of the Accredited Land Consultant. Learn from those around you in the industry, from their mistakes as well as their successes. Follow and understand pressing industry issues: income taxes, tax shelter opportunities, current or upcoming regulations, laws, or policies that effect your client base, etc. You will be most successful in this business when you know how to best make or save your clients money.
  3. Network & get referrals. Everybody uses postcards, letters, online gimmicks, etc. to promote. Nothing wrong with that; it’s a necessity we all face, but networking is one of the most fruitful investments of time you can make in our industry. The larger the network of people that understand who you are, what you do, and why you are an expert in your field, the more business will walk in your door without you having to spend your valuable budget dollars trying to procure new clients. Start with your friends and family. They are the bedrock of a strong network and the people that will be your biggest promoters. Add your past clients to that essential list once you start to have them. A major key to successful professional networking is reciprocating. Be generous and genuine in your referrals of other professionals first, without expecting or asking for anything in return, and it will pay great dividends throughout your career. Being an RLI member aligns you with a vast network of land professionals from across the country, so make sure to take advantage of it.
  4. Above all, align yourself with a strong brand. By now, we’ve all heard about branding and how important it is. In this context, it’s not only about having a recognizable logo. It’s about what’s behind the logo: like the leadership and support team. Before you join a company, understand its culture and make sure it aligns with your personality and your goals. Join a company that invests in you, promotes your growth, provides educational opportunities, mentorships, etc., one that is constantly innovating and evolving rather than one that’s just waiting on the next disruptor to emerge and knock them backwards.

At the end of the day, you are not successful in this business because you like land, have a real estate license, and want to be successful. It comes down to what you put into it and being too stubborn to quit when it gets tough. There’s a reason a lot of people in this business wear weather hewn boots and hats – They’ve earned them!

This post is part of the 2019 Future Leaders Committee content generation initiative. The initiative is directed at further establishing RLI as “The Voice of Land” in the land real estate industry for land professionals and landowners. For more posts like this, click here


About The Author: Clint FlowersALC is a top producer with National Land Realty, a member of the REALTORS Land Institute of Alabama, and a member of the 2018 Future Leaders Committee.  He was a NLR Top Producer Nationwide in 2016 and 2017. He also won the 2017 APEX National Broker of the Year award for Timberland.

Should I Invest in Timberland Real Estate?

I’m often asked “Should I invest in timberland?” and “If I invest in timberland, is it better than investing in stocks, bonds, farmland, etc. etc.?” My answer is generally “It depends” because the term ‘better’ is almost always subjective… What is better for one investor may not be for another depending on end goals. Understanding the basics of how to establish and achieve your goals in a timber investment is paramount.

Timing Your Investment Goal

We all want our investments to grow in value and make us wealthier, and timberland is just that… a growing investment (pun intended). It enjoys stable, steady growth, paying no attention to the volatility of today’s political world, and that is one reason why many of the wealthiest people in the world invest in timberland as a method of diversification and asset protection. Annualized returns range from 6-20% in my experience, sometimes more, with many factors weighing in, almost all of them related to the demand of the local timber market equally or greater than the actual land related aspects like site quality and stocking.

But, while well stocked and managed timber stands grow in size and value each year, unless you acquire a sizable portfolio, cash flows may only come every 3-7 years after reaching a merchantable size. So, when deciding to invest in timberland, it’s important to be able to service any debt obligations during those periods between cash flows and before buying, understand when you’d like to receive the bulk of the cash flows that will come during the timber’s “rotation” (financial lifetime of the stand). For example, if you intend for your timber investment to pay for your 3-year old child’s college fund, it may be wise for you to buy a well-stocked tract of pine plantation that’s 1-2 years old. This should enable you to buy more acres at a lower price, and those stands should be reaching a merchantable status as your child approaches 18 years old. That plantation will generally see 3-4 thinnings between the age of 15 and 30, all the while graduating into more and more valuable product classes through the process referee to as “product change,” until you ultimately clearcut and begin the process again.

But, if you’d purchased the wrong age class of timber, you may have missed your income window and had to come out of pocket or borrow money while you waited on the stand to mature. Please note: The merchantable age of a stand is subject to several factors, and the age of clearcutting and when you thin may change based on your objectives. The ages of 15 and 30 are just commonly seen benchmark ages in the southeast for private landowners. Finding the right timberland tract for your goals is key to success as an investor in this type of property.

Define Your Management Strategy

Elaborating further, a critical part of investing in timberland is having a successful management strategy. Are you managing for money, for wildlife, or a balance of both? They don’t have to be mutually exclusive, but you’re also not growing trees for future harvest(s) inside those huge food plots you installed to hunt monster bucks and turkey in. So, before or after you buy a tract of timberland, enlist a true consulting forester that acts as your fiduciary, working purely for your best interests, in order to help you establish the best management plan for you. We have many forestry consultants on our team that work hand in hand with landowners looking to balance timberland investment and recreational use as well as landowners looking for pure economic return. Whatever your objectives, without a sound timber management strategy in place, you will leave a lot of money and time on the table.

Another major driver in timberland returns, and possibly the most important, is competition. Timber and the product classes that it consists of are commodities, and the value of those are greatly affected by supply and demand. As such, you want your timber investment to be located in an area with a high concentration of mills that compete for the product classes your timberland will produce, generally within a 60+/- mile hauling distance of that market area (commonly referred to as your “wood basket”.) If you purchase timberland in an area with only a single or few mills, demand for your timber will likely be low and local supply will be high, so the timber prices paid will generally be dictated and depressed rather than driven up by market competition, which negatively effects your returns in both the short and long term. And, once it’s time, it’s harder to sell timberland in an area with consistently low timber prices.

In the past, I’ve elaborated on the importance of site index, site prep and planting, and the many tax advantages of owning timberland vs. other investments, such as basis depletion, a multitude of deductible capital expenditures, long term capital gains treatment, and conservation easements. But, one of my favorite attributes of timberland is how tangible it is vs non-land investments. Timberland is an investment with roots than run deep, providing an opportunity for you to manage your timberland in a way that allows you to spend time with your friends and family outdoors, teaching them about the blessings bestowed upon as land stewards, and the ability to leave a legacy behind that your loved ones can benefit from for generations to come. That kind of return is beyond measure.

This post is part of the 2019 Future Leaders Committee content generation initiative. The initiative is directed at further establishing RLI as “The Voice of Land” in the land real estate industry for land professionals and landowners. For more posts like this, click here

 About The Author: Clint FlowersALC is a top producer with National Land Realty, a member of the REALTORS Land Institute of Alabama, and a member of the 2018 Future Leaders Committee.  He was a NLR Top Producer Nationwide in 2016 and 2017. He also won the 2017 APEX National Broker of the Year award for Timberland.

 

Timberland is Timberland… Right?

The majority of our market in the Southeastern United States consists primarily of timberland. One of the biggest problems I encounter with both Buyers and Sellers of timberland is that they don’t understand the value components of timberland tracts and what questions to ask to determine them on a tract by tract basis. A bigger problem is that many times, neither does their agent. Understanding what to look for in timberland enables you to be a smarter seller, buyer, or agent.

What makes a good timberland tract? A combination of important factors come into play with timberland: soils, site preparation, stocking/ stand density, and as always with real estate: location.

Soil

In regards to soils, you want to ensure that the soils are capable of growing the species that perform best on that site and grow at a rate competitive with other species/products in your timber market. And while you can take actions to enhance your soil’s growth rate like fertilizing or mechanical site prep applications like bedding, the better your soils are to start with, the faster you’ll see results from your timberland. Learn what site index rating the property has for the species you intend to grow or the species it’s already stocked with. The site index correlates closely with the yield of your forest. It acts like a score; that score is the height of that species at a certain age. The higher, the better. A site index score of 70 for loblolly pine in a plantation setting, the most common species see in timberland in our market, indicates that under normal conditions, a dominant and codominant loblolly pine would be 70 feet tall at 25 years old. Always remember that Site Index is species and age-specific and can vary greatly by both, so before using a tract’s site index rating to make a financial decision, be sure to confirm what base age is being used.

Site Preparation

Regarding site preparation, an analogy I use frequency is a vegetable garden. Which grows best – A garden that was tilled and sprayed or removed competing weeds, etc. or one that was planted directly into the soil without any site preparation? The prepared site of course. Timberland is no different, especially in a plantation setting. Reducing the initial competition through chemical and/or mechanical site preparation applications can greatly affect the long-term yield of timberland.

Stocking/Stand Density

When it comes to stocking and density, understanding your goals is key. Some saplings, speaking primarily of pine here, are genetically designed to grow fast but not necessarily clean, meaning more limbs and wider growth rings, both of which can affect the stand’s ability to grow lumber grade logs and poles (in pine stands). These stands will be more prone to produce products that are pulp and chip-based throughout their financial lifetime, also known as a “rotation.” Regardless of the source/type of seedlings you have, stand density can also affect the quality of your timberland. Wider spacing equals fewer trees. That helps them grow in diameter faster, but may limit vertical growth and the natural pruning that occurs in a properly stocked stand. Beyond that, a more simplified explanation can be fewer trees potentially equals fewer harvests and less money over the lifetime of the stand.

Assuming all things being equal between two tracts of timberland, location can be the most important factor in determining which is more valuable. Logging and hauling costs are the first expense that comes out of the gross income generated by a timber sale. The closer your proximity to mills that process the products your timberland will produce, the less it will cost to harvest that timber and the more competition you’ll see for that wood, both of which yield a higher net income to the landowner. The net income from a timber sale is also known as “stumpage”. Stumpage is the rate most experts are quoting when asked about current timber prices. Location can also determine what types of weather you can perform harvests in, which affects when you can bring your timber to market. Tracts with logging limitations due to weather concerns, such as wet natured or floodplain tracts, can be restricted to selling during the dry season vs tract with dryer ground or abundant road frontage that can be logged year round. Being able to sell your timber in a wet weather market can allow you to take advantage of huge swings in timber prices because when supply is limited, demand rises, and prices along with it. I’ve witnessed timber prices go as high as four times the norm due to wet weather logging demand.

I’m often asked how “the timber market” is doing or “isn’t timber down right now?” It’s important to remember that timber is a commodity and there is no single “timber market”. Every species can produce several product classes, each has their own market with contributing or limiting factors, and the current value of each product class is driven by supply and demand. One market may be down while another is up. Arming yourself with a true expert in timberland is imperative to ensuring your maximum yield is reached as a buyer or seller of timberland.

This post is part of the 2018 Future Leaders Committee content generation initiative. The initiative is directed at further establishing RLI as “The Voice of Land” in the land real estate industry for land professionals and landowners. For more posts like this, click here.

Clint Flowers, ALC is a top producer with National Land Realty, a member of the REALTORS Land Institute of Alabama, and a member of the 2018 Future Leaders Committee.  He was a NLR Top Producer Nationwide in 2016 and 2017. He also won the 2017 APEX National Broker of the Year award for Timberland.