investment in land?

Muckit

Is there any merit in investing in land? I'm more thinking about those of us who are working part time off farm. They reckon you should never invest in something that you have little interest or knowledge of. So instead of say investing in property, would it make sense for a part time farmer to invest in land?

I'm not talking about farming it yourself.

I'm talking more as a landlord or to put into forestry etc

Any thoughts/ideas?

patjack

Muckit wrote: »

Is there any merit in investing in land? I'm more thinking about those of us who are working part time off farm. They reckon you should never invest in something that you have little interest or knowledge of. So instead of say investing in property, would it make sense for a part time farmer to invest in land?

I'm not talking about farming it yourself.

I'm talking more as a landlord or to put into forestry etc

Any thoughts/ideas?

I was looking at some forestry plantations, with say between 5-8 years left to maturity. On a typical 30-40 acre plantation you could wind in a nice little sum once matured that would cover your initial investment and leave you with a tidy profit. Plenty of these plantations selling, just wish I had the money to invest.

bbam

patjack wrote: »

I was looking at some forestry plantations, with say between 5-8 years left to maturity. On a typical 30-40 acre plantation you could wind in a nice little sum once matured that would cover your initial investment and leave you with a tidy profit. Plenty of these plantations selling, just wish I had the money to invest.

Was talking recently to a lad who was at a forestry sale as he was thinking of selling his own to release some cash...

He said plantations were being sold for the value of remaing payments, at the end you'd have the lumber and then whatever land was worth afterwards to sell or replant..

towzer2010

Muckit wrote: »

Is there any merit in investing in land? I'm more thinking about those of us who are working part time off farm. They reckon you should never invest in something that you have little interest or knowledge of. So instead of say investing in property, would it make sense for a part time farmer to invest in land?

I'm not talking about farming it yourself.

I'm talking more as a landlord or to put into forestry etc

Any thoughts/ideas?

I've planted some and if you can get the land cheap enough I think forestry is a good option.

My figures is for a 10% diverse plantation (teagasc figures)

Year 1 to 20 = €427 per ha premium
1st thinning after 20 years approx. €485 p/ha
2nd thinning after 25 years €921 p/ha
3rd thinning after 30 years €1653 p/ha
4th thinning after 35 years €2197 p/ha
Clear-fell at 40 years €20632 p/ha

So if you intend to live for 40 years you should have earned €34428 from that ha. These figures are obviously at current prices but shouldn't change to much. I know the forestry companies will tell you there is nothing out of thinning and it will cost you to thin but surely the way fuel prices are going it will be profitable.

Insurance is around €20 per ha and replanting has to be taken out of that as well

lstmd

Just wondering what you did re your post above. Am in a similar situation right now.

Thanks

Bass Reeves

towzer2010 wrote: »

I've planted some and if you can get the land cheap enough I think forestry is a good option.

My figures is for a 10% diverse plantation (teagasc figures)

Year 1 to 20 = €427 per ha premium
1st thinning after 20 years approx. €485 p/ha
2nd thinning after 25 years €921 p/ha
3rd thinning after 30 years €1653 p/ha
4th thinning after 35 years €2197 p/ha
Clear-fell at 40 years €20632 p/ha

So if you intend to live for 40 years you should have earned €34428 from that ha. These figures are obviously at current prices but shouldn't change to much. I know the forestry companies will tell you there is nothing out of thinning and it will cost you to thin but surely the way fuel prices are going it will be profitable.

Insurance is around €20 per ha and replanting has to be taken out of that as well

I cannot see any replanting as next crop will take 60-80 years and will require fertlizer as well. Money is not huge until clear fell. In reality there is little or no income from year 20-30 averaging 150/year. From year 30-40 you are getting equivilent to grant money. You also have to remember I think that you have to take costs out of that. Even buying forrestry that is 10-15 years growing means 30 years before pay day with all risks associated. Tax regimes can change.

Replanting costs are about 3k/Ha but no grant and no premium at present so down the line I can see that to be an issue.

lstmd

Based on your figures above putting the money into a pension plan and availing of the tax credit on pension investment might be a better option.

Thanks

Muckit

If you farm parttime and have a pension in your fulltime job, is it possible to set up a separate pension for farm?

lstmd

I'm not sure but must investigate. I know a guy who works in pensions. I will ask him.

fepper

[QUOTE=Bass Reeves;996299

Replanting costs are about 3k/Ha but no grant and no premium at present so down the line I can see that to be an issue.[/QUOTE]

I think the dept are living in cloud cuckooland if they think private forest owners are going to carry the full costs of replanting to satisfy the government's environmental/climate change policies!!

jimmy G M

Muckit wrote: »

If you farm parttime and have a pension in your fulltime job, is it possible to set up a separate pension for farm?

Yes, it's possible with any self employed income stream, tax deductible, etc, etc, contact your local friendly independent broker or local bank for a free consultation.

White Clover

Muckit wrote: »

If you farm parttime and have a pension in your fulltime job, is it possible to set up a separate pension for farm?

Yes. It wouldn't be as good as the company pensions though.

Farrell

fepper wrote: »

I think the dept are living in cloud cuckooland if they think private forest owners are going to carry the full costs of replanting to satisfy the government's environmental/climate change policies!!

Agree with you, but I've recently be in the company of a person who inherited their parents farm, never did much when their parents we alive & farming & now are thinking about forestry, their in 40's they see the premium as their income, then the clear fell will be their children's & then the children can do with the land whatever they want

Bass Reeves

Farrell wrote: »

Agree with you, but I've recently be in the company of a person who inherited their parents farm, never did much when their parents we alive & farming & now are thinking about forestry, their in 40's they see the premium as their income, then the clear fell will be their children's & then the children can do with the land whatever they want

If it is good land it will reduce the value of the land by 4-6K/acre

Farrell

Bass Reeves wrote: »

If it is good land it will reduce the value of the land by 4-6K/acre

Yes but they don't care, they're going to be hit with a big tax bill if they sell, this way they make a good income with no work & have something to give their kids.
In reality it's not good for the land, but they don't care

Jack180570

Bass Reeves wrote: »

I cannot see any replanting as next crop will take 60-80 years and will require fertlizer as well. Money is not huge until clear fell. In reality there is little or no income from year 20-30 averaging 150/year. From year 30-40 you are getting equivilent to grant money. You also have to remember I think that you have to take costs out of that. Even buying forrestry that is 10-15 years growing means 30 years before pay day with all risks associated. Tax regimes can change.

Replanting costs are about 3k/Ha but no grant and no premium at present so down the line I can see that to be an issue.

Not sure where you are getting your information Bass Reeves but you are WAY OFF on your rotation lengths.

A typical 10% diverse plantation of YC 22 will have a rotation length of around 35 years from the day its planted until its cleafelled.
Thinning will begin at year 14/15 and will continue every 3 years until clearfell and all thinnings will leave the owner with a profit and after the poorest trees are removed in the 1st and 2nd thinning the remaining thinnings (20-30 years) will produce significant profits for the owner.

Yes you will have costs that will include insurance and management but these are modest and to be fair every enterprise has costs. Yes you will have to set aside the cost of replanting but at around €1100/1200 acre it is not a huge sum out of the €7/9k that should be netted from the clearfell.

Well managed forestry on productive land can be an exceptionally profitable enterprise.

Bass Reeves

Jack180570 wrote: »

Not sure where you are getting your information Bass Reeves but you are WAY OFF on your rotation lengths.

A typical 10% diverse plantation of YC 22 will have a rotation length of around 35 years from the day its planted until its cleafelled.
Thinning will begin at year 14/15 and will continue every 3 years until clearfell and all thinnings will leave the owner with a profit and after the poorest trees are removed in the 1st and 2nd thinning the remaining thinnings (20-30 years) will produce significant profits for the owner.

Yes you will have costs that will include insurance and management but these are modest and to be fair every enterprise has costs. Yes you will have to set aside the cost of replanting but at around €1100/1200 acre it is not a huge sum out of the €7/9k that should be netted from the clearfell.

Well managed forestry on productive land can be an exceptionally profitable enterprise.

2nd rotation is totally different to first rotation. After the first crop of trees are taken the land will be drained by nutrients. The second rotation length will be much longer. You may speed up the rotation by fertlizing the land. I think in another thread a contributor put it at about 3-5 tons of 10-10-20/acre over lifetime of crop to have it again within the 35-40 year rotation. That is about 1.2-2K euro/acre(3.5-5 euro/HA). As you have to remember that there will be no premium after replanting unless government changes tack.

If you include thinning you looking at an income stream of 12-13K including thinnings. However the big pay day is 60-80 years away after first crop. Hard to seen people reinvesting after first crop.

Good loser

Jack180570 wrote: »

Not sure where you are getting your information Bass Reeves but you are WAY OFF on your rotation lengths.

A typical 10% diverse plantation of YC 22 will have a rotation length of around 35 years from the day its planted until its cleafelled.
Thinning will begin at year 14/15 and will continue every 3 years until clearfell and all thinnings will leave the owner with a profit and after the poorest trees are removed in the 1st and 2nd thinning the remaining thinnings (20-30 years) will produce significant profits for the owner.

Yes you will have costs that will include insurance and management but these are modest and to be fair every enterprise has costs. Yes you will have to set aside the cost of replanting but at around €1100/1200 acre it is not a huge sum out of the €7/9k that should be netted from the clearfell.

Well managed forestry on productive land can be an exceptionally profitable enterprise.

Do not agree. You're over optimistic on many of those figures.

After clearfell you have drain cleaning/repair, weed control (spraying and hand cleaning), beating up, weevil spraying (more than once!), deer control?, possible fertilizing. And then wait 20 years for a first thin.

viztopia

i see people are talking about not replanting after the trees are harvested due to costs and poor returns. i didnt think that you had an option in that once land is planted in trees it will have to remain in trees for ever or am i wrong?

Jack180570

Bass Reeves wrote: »

2nd rotation is totally different to first rotation. After the first crop of trees are taken the land will be drained by nutrients. The second rotation length will be much longer. You may speed up the rotation by fertlizing the land. I think in another thread a contributor put it at about 3-5 tons of 10-10-20/acre over lifetime of crop to have it again within the 35-40 year rotation. That is about 1.2-2K euro/acre(3.5-5 euro/HA). As you have to remember that there will be no premium after replanting unless government changes tack.

If you include thinning you looking at an income stream of 12-13K including thinnings. However the big pay day is 60-80 years away after first crop. Hard to seen people reinvesting after first crop.

The poorer performance of second rotations you refer to above occurs on very poor sites (generally YC 12 and less) or on poorer sites (YC 14-16) where whole tree harvesting was undertaken at clearfell.
Therefore it is clear that it is important to get good advice when investing in forestry so as to ensure that you purchase sites that are productive (YC20+) and that are then managed properly to ensure that the site reaches its full potential and is profitable for the owner.
You are correct that you have to replant after you cleafell and that there are no premium payments in the second rotation. This is the law under the Forestry Act and I do not believe that either of these two conditions will change going forward.
The takeaway message here is that poor forestry sites (and poorly managed forestry sites) produce poor returns, this is one of the reasons why the Forest Service will not grant aid plantations that are under YC 14.

Jack180570

Good loser wrote: »

Do not agree. You're over optimistic on many of those figures.

After clearfell you have drain cleaning/repair, weed control (spraying and hand cleaning), beating up, weevil spraying (more than once!), deer control?, possible fertilizing. And then wait 20 years for a first thin.

Which figures do you believe are over optimistic?
Yes, some or all of the tasks you mention above are part of the replanting process. Unless the site is quite poor then you would not be waiting until year 20 to thin it

Jack180570

viztopia wrote: »

i see people are talking about not replanting after the trees are harvested due to costs and poor returns. i didnt think that you had an option in that once land is planted in trees it will have to remain in trees for ever or am i wrong?

You are totally correct... once a tree is over 10 years old it is covered by the Forestry Act which requires in the first instance that you get a felling licence and secondly, when you are granted the felling licence a condition of it will be that you must replant the land.

fepper

If you get felling licenses for thinning out forestry over a number of years,you don't have a obligation to replant at these stages but at clearfell there is,so if you left trees Standing while the rest are clearfelled,they cant compel you to replant then that's why I made sure Oak was planted as a diverse species interspersed within the plantation

fepper

The takeaway message here is that poor forestry sites (and poorly managed forestry sites) produce poor returns, this is one of the reasons why the Forest Service will not grant aid plantations that are under YC 14.[/QUOTE]<br />
<br />
In fairness most forest companies bloat up the yield class of first time forestry land on the applications for grant aid as most yield class determinations are made after 6-7 yrs of actual growth

Jack180570

fepper wrote: »

If you get felling licenses for thinning out forestry over a number of years,you don't have a obligation to replant at these stages but at clearfell there is,so if you left trees Standing while the rest are clearfelled,they cant compel you to replant then that's why I made sure Oak was planted as a diverse species interspersed within the plantation

Thats damn clever Fepper... would never have thought of it...
Having said that to be fair, after felling, what else would you do with the land other than replant it?

Then again are you thinking that it might be possible in the future at the 30-35 yr stage to remove all the conifers and just have a couple of oak trees per acre standing and then to either let the land revert to grazing (would be rough), or reclaim and reseed it (if it was originally good land) and graze it away?

Would the dept then say that it isnt a 'forest' by their definition, whatever that currently is?

Jack180570

fepper wrote: »

The takeaway message here is that poor forestry sites (and poorly managed forestry sites) produce poor returns, this is one of the reasons why the Forest Service will not grant aid plantations that are under YC 14.

<br />
<br />
In fairness most forest companies bloat up the yield class of first time forestry land on the applications for grant aid as most yield class determinations are made after 6-7 yrs of actual growth[/QUOTE]

Yep I guess your right, especially if its land that is for sale and they want you to buy it and get them to plant it for you... or if it is very poor ground that might not really be YC14...

Yes it takes something like 12/14 yrs before you can measure top height and put it on the forestry commission yield class tables...

fepper

Jack180570 wrote: »

Thats damn clever Fepper... would never have thought of it...<br />
Having said that to be fair, after felling, what else would you do with the land other than replant it?<br />
<br />
Then again are you thinking that it might be possible in the future at the 30-35 yr stage to remove all the conifers and just have a couple of oak trees per acre standing and then to either let the land revert to grazing (would be rough), or reclaim and reseed it (if it was originally good land) and graze it away?<br />
<br />
Would the dept then say that it isnt a 'forest' by their definition, whatever that currently is?

<br />
<br />
jack My thinking at the time was silvopastural after 25 years if dept allowed in the distant future for next generation as I will be getting older

lstmd

Would you not consider a long term lease on the land which would be tax free. Not sure how much grazing land is making but a long term lease might yield as much income as forestry. Retain land in current use.

fepper

Have the land planted since 07 and it's fine while I get the subs on it and maybe in the future I'd be hoping that agroforestry would be considered by dept instead of replanting the whole lot with trees as another option