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Wood You Believe The Profits In Timber!

April 16, 2009Article by Ray Withers

Investment is all about making your money grow – that’s why branching out in to an eco-friendly timber plantation is a great way of spreading your risk. Making money from forestry investment is all about the rules of supply and demand. Simply, the world’s forests are disappearing at a faster rate than they are being replaced, so a point will come when the balance tips and demand outstrips supply as the resource becomes scarcer. Add to that the ethical benefits of investing in woodlands – especially the off set of your own carbon footprint – then putting your cash in to saving the planet seems worthwhile.

Other benefits include creating jobs in poorer countries and cash for the local economy by profit sharing.
Of course, the return on your investment is worth waiting for as well. A typical investment is Sustainable Timber Hardwood, Anuradhapura, Sri Lanka , This package offers flexibility on harvesting trees. Harvests are recommended after at least six years growth. Crops are monitored for signs of pests and disease. Crop thinning makes sure the strongest and most healthy saplings are given room to grow. Investing in just 300 trees can grow in to profits of at least £40,000 at harvest.

Projections are based on a conservative yield estimates from research carried out by the University of Minnesota regarding agar wood growth rates and the price of agar wood chips based on current and historical market values. A minimum investment of £10,000 buys 300 agar wood or teak trees and an extra £5,000-£6,000 is contributed 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

The cycle starts again by rolling over some of the income in to further tree investment and contributing towards maintenance giving further profits further down the line. If you are a UK resident, special tax rules apply to owning and farming woodlands, whether they are in the UK or abroad. Income tax is paid on the profits of selling the timber. Complex capital gains and inheritance tax breaks are applied to disposing of the unfelled timber that are best discussed with a professional tax advisor prior to signing a contract.

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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