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Watching Your Money Grow As Your Children Grow
May 6, 2009Article by Ray Withers
Putting aside the cash to fund children through university is a big problem for families with savings rates and property prices so low. An alternative way to fund education– and increase your green credentials at the same time – is investing in sustainable hard forestry management. Putting money in to trees is like watching your money grow as your children grow.
Putting £10,000 in to a forestry management investment is good asset to invest for children – because teak tress grow at about the same rate as they do, so you can reap the benefits when the trees are harvested 15 – 20 years down the line when you need the cash the most. Of course, if you have no children, the same strategy works for funding early retirement. Only 1% of global teak production comes from sustainable forests, like the timber hardwood plantations at Anuradhapura, Sri Lanka.
The rest comes from natural rainforests, most of it illegally logged. More and more countries, and most recently the European Union are outlawing the importation of unsustainably harvested wood. The sustainable timber has to be supplied from somewhere, so maybe now is the time to get to the root of the problem with your 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
- 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.
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.
For more information contact Property Frontiers on +44 (0) 1865 202700.