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Six Ways For Growing Money With Trees

April 9, 2009Article by Ray Withers

Budding entrepreneurs looking for ethical investments can go green by putting cash in to forestry investment, to offset their carbon footprints. These investments in sustainable hardwood forests have lots of benefits for investors as well as the communities they are supporting in several ways:

1. Creating well paid, lasting jobs in poorer areas of the world
2. Generating wealth for families that allows them to improve their communities
3. Generating wealth for the investor
4. Offsetting the carbon footprint of the investor and his/her family
5. Saving the rainforests by creating sustainable hardwood plantations
6. Giving UK investors special tax breaks for owning woodlands

Branching out in to woodland investment
The strategy is simple – put your money in to timber investment management , with a partner in Sri Lanka.

  • You pay for the trees and contribute towards maintenance costs
  • Your partner looks after your investment by planting, thinning and harvesting your trees
  • You and the partner split the profits

Generally, a UK family of four produces 18 tonnes of carbon emissions a year. Investing in 300 trees would more than offset that carbon footprint.

Where to put your roots down
A typical investment is Sustainable Timber Hardwood, Anuradhapura, Sri Lanka, offered by UK consultants Property Frontiers, of Oxford. Projections are based upon a conservative estimate of yield from research carried out by the University of Minnesota regarding agar wood growth rates, in conjunction with the price of agar wood chips based on current and historical market values.

For a minimum investment of £10,000, the investor buys 300 agar wood or teak trees and contributes £5,000-£6,000 towards maintenance costs.

  • Agar wood trees are harvested after six years, producing a gross harvest value of £60,000, deduct the timber company’s profit share and the investor’s net profit is £41,000.
  • Teak trees are harvested after nine or 15 years, when the gross harvest value is £246,450, leaving the investor with an anticipated net profit of £271,540.

A shorter-term option is available for teak

These projections are based on a lumber price of £0.72 per board foot for the first thinning, increasing at an annual rate of 6% for the subsequent thinning and final harvest. The 5% profit share is retained as a harvest fee. The timber company has allowed a generous 10% for harvest and processing costs, which covers the milling the trees.

What about the tax breaks?
UK resident taxpayers owning woodlands pay income tax on the commercial farming of the woodlands, but might have inheritance tax and capital gains tax benefits, depending on their personal circumstances.

Going green is a growth industry
With the current poor performance of other medium to long-term investments, like stocks and shares, the benefits of going green with timber investment management could be a growth industry.

For more information contact Property Frontiers on +44 (0) 1865 202700.

Author

Ray Withers

Ray has over 17 years’ experience in the international property market and bought his own first international property investment back in 2002. Aside from running Property Frontiers, Ray has been involved in residential, hotel, student and commercial property investment and development in both the UK and overseas and co-wrote "Where to Buy Property Abroad - An Investor's Guide". As Founder and Trustee of the Frontiers Foundation, Ray is directly involved with many of its projects to ensure they have a direct and tangible impact in individual communities across the globe. He is passionate about property, travelling, scouting out new opportunities and finding time to spend with his young family.
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