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Alternative Investments: Now You Too Can Invest in Timber
June 27, 2011Article by Ray Withers
The recent financial crisis will be remembered in history as one of the worst financial crashes in the history of mankind. The US crashed like it hadn’t since the great depression, the UK’s economy was worse than it had been since World War II and most other countries aren’t much better. Only now are we finally starting to see a recovery, one which is not artificially fed by government monies.
Property markets were hit among the hardest, and this led to one good consequence of the crisis; the emergence of alternative investments in the small-scale and private investment scenes. Carbon-offsetting and timber investments are the two most popular, and because they involve an asset that ownership is actually taken of, they are particularly popular with property investors, because the investment models are not that dissimilar.
These are emerging as new investments, but people have been investing in timber for centuries, in fact the British Empire was built largely on such investments. What is new — because of a combination of increasing environmental awareness, increasing need to invest in our own pensions and increasing desire to diversify property portfolios — is the ability to invest in timber plantations at the private-investor level, whereas previously it was only investment funds and large institutions that had access to such investments.
Leading the charge for diversification of property portfolios is award winning UK investment consultancy Property Frontiers. The firm has brought dozens of fantastic timber investment deals to the UK market, and the success of the investments can be seen in how quickly they sell, with many investors have bought into several deals, according to the firm.
“Our investors can’t get enough of timber investments, but who can blame them. We are talking about a commodity that we are constantly using more and more of, that grows nowhere near as fast as supply is growing, and that can no longer simply be cut-down at will because of the environmental costs. Thus, the new plantations that are being set up are becoming the best gig in town for timber supplies, because they are supplying timber in volume, but without the damage to the world’s forests,” said David Cox.
Timber plantations are a bit like a fish-farm, plantations of trees which are grown specifically to be cut down and sold as timber products. Investors buy a stock of trees, which are planted, managed, harvested and sold on their behalf. Where they beat property investments is the low buy in. In many of the deals currently on the market you can buy in for under £5k, and expect returns of up to 400% over 10 years. Obviously the higher the buy in, the higher the returns.