We’re living in uncertain times … and that always sends investors out in search of stability.
Bonds usually fit the bill … but now the currency wealth is denominated in is being called into question … and investors are looking to get even more REAL.
Today we’re exploring how to invest in the real power of Mother Nature to preserve, grow, and pass on wealth.
In this episode of The Real Estate Guys™ show, hear from:
- Your pandemic-proof host, Robert Helms
- His anemic co-host, Russell Gray
- Agricultural hardwood investing expert, Rachel Jensen
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Investing in hardwood
The pandemic has changed the demand, the structure, the appreciation, the cash flow, and even the tax benefits of real estate … but not everywhere.
Today, we’re going to talk about a real estate investment that has been virtually untouched by the pandemic.
No matter what political party is in office, no matter what crazy things happen around the world … it just performs. And that’s pretty rare.
Agriculture is the oldest use of real estate that there is. Before people even had houses, they were working the land.
The really unique angle of agriculture is that it tends to be less affected by many market factors. What we’re talking about today hasn’t really been … or can be … hit by COVID-19.
It’s a product that everybody needs, and it has been used for hundreds and hundreds and hundreds of years.
There is far more demand than there is supply … which is a pretty good recipe.
We’re talking about hardwood.
A proven commodity
Hardwood is a proven commodity that is useful no matter what the economy is doing. So much of the world shut down in March … but the trees kept growing.
They don’t pay attention to news or social media … they just keep growing and growing. Hardwood can take from 3 to 60 years to produce depending on the type of wood.
There are a variety of woods available. It’s not all the same.
There are woods that are standard industrial material. There are specialty woods. There are trendy woods that fall in and out of favor in design … so many niches, just like real estate.
Another unique angle of this investment is that it doesn’t pay dividends this quarter. This is a long-term game much like many real estate investments.
It’s not an immediate cash flow game. You have to be patient and let it happen over time.
This is something you invest in during, say, your 30s or 40s and plan to reap the harvest in your 50s, 60s, or 70s.
And, once you harvest trees … guess what you can do again? Replant!
This can be what we call a “legacy investment.” It’s a one-time investment that could go on and pay for a long, long time.
The challenge with agriculture is that it’s a hard game to play on a small scale. It’s difficult to go out and buy two acres of land and have a productive farm.
It’s hard to go out and buy a single grove of trees and be able to have the ability and efficiency to harvest and reap the benefit.
But there are ways around this challenge.
Money does grow on trees
Rachel Jensen is a hardwood investing expert. She says that over the past few months, investors have started looking closely at their portfolios and thinking about what they want to accomplish in the long term.
“I challenge everyone to think generationally,” Rachel says. “When you own timber, you are doing it for you, for your kids, for your grandkids, and for many more generations.”
This is a tactic and a model that some of the ultra-wealthy have used for a very long time.
You keep this asset in your portfolio … and the trees grow.
It’s very different from the traditional real estate model. You’re not going to get a monthly rental income check … but trees will be some of the best tenants that you’ll ever have.
Investing in hardwood provides diversification to your investment portfolio in terms of time and location.
In this case, money does grow on trees.
Teak, specifically, is often referred to as the gold of the timber market.
There is a very, very low supply and a very high demand for teak.
The two countries that are the biggest importers of teak are India and China. When you look at the projected populations of these two countries by 2100, these two are predicted to be the most populous.
So, there is a good chance that demand will continue.
There is such high demand for teak because of its remarkable qualities. It is a very, very hard wood. It’s extremely durable.
After three years of growing, teak becomes resistant to fire, rot, termites, bugs … anything that you may consider to be an agricultural risk.
Teak is used to build a lot of boats, in outdoor furniture, and in high-end construction.
This isn’t a new wood by any means. Teak was used to build the deck chairs and some of the decking on the Titanic … chairs still intact when researchers found the wreckage after years and years underwater.
People who care about value and longevity are going to buy teak products … and keep buying teak products … because they know that those products are going to last a very long time.
Teak has a 25-year harvest cycle. You’ll still see some income from the thinning conducted at years 12, 18, and 20. Then, the bulk comes at the year 25 harvest.
Then, you replant … and do it again!
It’s important to have a partner who knows how to care for hardwood. Rachel and her team take care of the entire process for investors, working with a professional management team onsite that knows teak.
They have various farms in Nicaragua and Panama.
A newborn tree parcel starts at around $7,000. You can also look into purchasing older “teenage” parcels that are 15, 18, and 20 years old. Those parcels start around $17,000.
“What we want folks to realize is that you don’t need to be a mega-millionaire and own thousands and thousands of hectares,” Rachel says. “Start small. We’ll help you with payment schedules and financing options.”
To learn more about teak and hardwood investing … listen to the full episode!
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