How Do You Estimate Timber Volume?

I have had lots of interest and questions on this topic. Well obviously it takes a long time to become proficient in estimating the volume of timber on a tract of land and I can not cover the topic in depth on this blog. However it is worth talking about so you, the landowner has a general knowledge about the topic. Cruising timber is actually a statistical exercise. The forester must determine how many trees to actually count and measure to estimate the amount of timber on a given tract of land. The practitioner walks through the woods and takes sample plot at predetermined spots on the land. For the sake of simplicity we will only discuss fixed area plots here i.e. if the forester estimates how much timber is on that 1/10 acre plot, he simply mulitplies by 10 to estimate the total volume on that acre of land. Likewise this approach can apply to a hundred acre tract or a thousand acre tract.

Next, the trees he measures are converted to volume. Volume can be estimated in MBF (thousand board feet), tons or cords. The following link show the various volumes for comparison sake.

        http://warnell.forestry.uga.edu/warnell/service/library/index.php3?docID=333

This is a very simplistic approach to a complicated exercise, if you have specific questions, please comment.

For Information on Buying or Selling Land contact G. Kent Morris, ALC, RF at      (706) 457-0090

A Successful Strategy For Investing In Land!

I have often heard, I will buy some land when I win the lottery. Good Luck…you have about a 1 in 3,000,000 chance of winning your lottery.

Here are some tips to get you started and achieve your dream of owning land:

1)    Start Small – Buy a small tract of land and work up to a large tract over time. This will probably take years, but you will become a better buyer over time. If you buy the right parcel of land it will appreciate over time and produce intermediate cash flow along the way. Cash Flow comes from timber harvesting, hunting leases, farm rent etc. Your first purchase maybe 20 or 30 acres. After you have built up some equity in the property it may be time to look for a larger tract and now you are an experienced land buyer!

2)    Purchase Smart – Work with an experienced agent who understands the market. Sometime there is property for sale that is not listed and an agent may have knowledge of these properties. These are properties where the owner wants to reserve the right to sell the property to a friend or relative.  If you buy smart, you might have immediate equity in the property.

3)    Financing - Seller financing is a great tool when purchasing land.  Seller financing isn't always advertised when the property is listed.   With seller financing the more you have to put down often the more attractive it is to the seller and in addition, the seller is able to collect the principal and interest.   The advantage to the purchaser is that they don’t have to go through the loan process, appraisal, underwriting etc with a commercial bank. Sometimes it is necessary to offer options ! Seller financing used in combination with your own funds or bank funds often is the difference between being able to purchase or not purchase the land!

4)    Income –  Income from property is derived 2 ways. One is the appreciation of the property (difference in the sales price and your basis).  The second method is intermediate  cash flow. From farm land these can be farm rent or leases, if you are actually farming the land. Timberland can create cash flow from thinning, select cuts or final harvest. Recreational property can generate hunting lease income and some property can offer a combination.

5)    Timber – Although this was part of the Income section above, let’s go into a little more detail. With timber buyers running the roads, deals are becoming harder to find. I use to cruise timber for a large landowner in Alabama and frequently he would buy the property for the value of the timber. In other words, he would sell the timber and have no money in the dirt. This is not so common place any more, but if you look hard enough you might find a property whereby the timber would pay 25 – 50% of the purchase price. These timber tracts offer some really nice recreational opportunities as well.

With Land prices at the lowest they have been in over 10 years and interest rates at historic lows, now might be the time for you to buy that piece of property you have always dreamed of owning !!

 For More Information on Buying or Selling Land, contact G. Kent Morris, ALC, RF   at     (706) 457-0090

I Would Like To Know More About 1031 Exchanges

I get a lot of questions about 1031 tax-deferred exchanges, so let's kick the topic around. It is covered under Section 1031 of the Internal Revenue Code. It is not tax-free but tax-deferred exchange. Properties that qualify would be "property held in a trade, business or investment". Examples would be land, commercial properties or rental properties. This might include your lake or beach property if guidelines are followed closely. Property that does not qualify would be your primary residence or inventory, like lots in a subdivision (if you were a developer).

Here are some of the advantages:

• Capital gains tax is deferred because your basis is carried forward in the replacement property.

• Taxed-locked property freed up, this might be property that you purchased many years ago with little basis. If property is sold, there might be a high capital gains.

• Money available for reinvestment instead of taxes

There are Four Rules to keep in mind:

1. Property must be held for investment or productive use in

trade or business.

2. Property must be exchanged for like-kind property.

3. Replacement properties must be identified within 45 days

after the relinquished property is transferred.

4. The exchange must be completed (replacement property

received) by the earlier of 180 days or the tax return due

date.

For Information on Buying or Selling Land contact G. Kent Morris, ALC, RF at      (706) 457-0090

I Would Like To Know More About Easements?

I love to talk about easements for several different reasons. They are so important and critical to land ownership. I had an employee who worked for me and his sole responsibility was to procure easements (access) into our property. I was managing 85,000 acres of land and some of it had no access. As a landowner you must know that the type of access affects value. Typically property along a public paved road will have more value than property accessed by an easement. Easements can impact what you can do with the property and can determine the ‘highest and best use’ and therefore value. There are other type easements beside those that involve access or roads. Let’s look at different type easements.

1. Easement in gross-  In this type of easement, only property is involved, and the rights of other owners are not considered. For example, a public utility line easement would be an easement in gross and would be recorded in the public records. If for any reason the title insurer fails to disclose a properly recorded easement in gross, and which then causes a problem later, then the title insurer must either pay you the diminished value of your property, or have the easement moved.

2. Easement appurtenant-  An example of an easement appurtenant would be an easement allowing you to drive over your neighbor's property to in order to reach your property. The easements ‘runs with the land’. An easement by necessity can be created for a landlocked parcel that has no public road access. To create an easement appurtenant by necessity, the owner of the landlocked parcel must be able to prove in court that there was common ownership with one of the joining parcels that has public access.

3. Prescriptive Easement- A prescriptive easement arises if someone uses part of your property without your permission. A prescriptive easement involves only the loss of use of part of a property, for example a pathway or driveway. Payment of property taxes is not required, as it is to obtain title by adverse possession. Adverse possession of a prescriptive easement involves the loss of an entire property by open, notorious, hostile adverse and continuous use. The legal test to acquire a prescriptive easement of another owner is that the use must be (a) open, not secret, (b) notorious, clearly observable, (c) hostile, without the landowner's consent and (c) continuous, without interruption for the number of years required by state law. For example, the minimum hostile use varies from 5 years in California to 30 years in Texas. The most common prescriptive easement arises when a fence is erected several feet on the wrong side of a boundary line. If the hostile user meets all the requirements, after the required number of years, a permanent prescriptive easement results for the strip of land. Prescriptive easements can be shared, that is, the hostile use need not be exclusive. Use can be shared with the legal owner and/or other hostile prescriptive claimants.

To perfect a legal prescriptive easement, the hostile user must bring a quiet title lawsuit against the property owner and prove all the open, notorious, hostile and continuous use requirements.

For Information on Buying or Selling Land contact G. Kent Morris, ALC, RF at      (706) 457-0090