To learn about timber sales interested landowners can consult with the Consulting Forester, or qualified professional of their choosing. The following are suggestions to give you some knowledge of what to ask for when talking with a forester or potential timber buyer.
- General Tax Information- In the right situation landowners may be able to deduct the trees removed as a loss in real estate value and any other capital expenses off the income made from the sale of timber products. You will need to establish a depletion account with your accountant to do this. Further, when calculating income tax on timber sales make sure to claim the income as capital gains, not ordinary income to avoid paying the self-employment tax. Lastly, be sure to fill out a Form T, to ensure proper claim of timber income. A forester/accountant should be able to guide you on the details of these tax issues.
- Marking Trees To Be Cut- Before you sign any agreement to allow your timber to be cut make sure the trees to be removed have been identified. Having trees marked ensures the landowner two things; 1) You can verify and agree with the trees to be removed 2) You can solicit bids for the same trees to ensure you are receiving the best price possible. They are your trees, you should feel very comfortable with how and when they are going to be removed. Check the solicit bids link to see a bulletin about how much bids for standing timber can vary depending on the purchaser.
- Timber Sale Contracts – Contracts are needed when selling timber. Having a good contract, that your lawyer approves, will ensure you can be legally protected throughout the process of having your timber removed. There are many things a contract should include, a very small list of things to include is; a performance bond held against the contractor removing the trees, a clause requiring that the contractor and buyer are in compliance with Michigan’s Workman’s Compensation Statues, a stipulation about what will happen if more trees are cut then agreed upon and the exact method of payment and/or when payment(s) are due. To see an example of a good timber sale contract click here for Michigan State University’s bulletin about what should be in a Timber Sale Contract. Although this is a fairly good example we still recommend seeking legal counsel to ensure your specific timber sale contract matches what you need and it protects you, before you sign anything!
- Protecting your Standing Value – Leelanau County timber is some of the most valuable around, and landowners should be mindful of that. Standing timber is like an investment account that will increase in value if managed properly. You would not hand a person who knocked on your door $20,000-$30,000 of your hard earned money just because they said they were an investment specialist. The same thing should go for your valuable timber resource. Therefore get informed and do not sell your trees to the first person who knocks on your door! Contact a Consulting Forester to have your timber appraised before selling or get your trees paid for under a competitive bid system. At the very least get a few bids for your timber if you do not want to work with a forester to ensure you are getting a fair price. Additionally, check as many references as you need to to be assured of a job well done.
- Long Term Management- Besides not selling your trees to the first person who knocks on your door some thought to good forest management needs to be incorporated into the management of your property. Using the investment example again, although your most valuable stocks or trees have the highest standing value now, they may be the ones that will continue to provide further income potential if they are left there growing. Also the smaller trees that are growing quickly, and have good form, may not be to a point where their highest value potential has been met. Cutting these trees would be like selling your stocks that are rapidly increasing in value and show no signs of slowing down. Therefore we encourage you obtain professional advice about how to manage your timber resource over the long term. You could sell most of your value now and wait 40-60 years to get more value out, or you could manage the stand to favor, bigger, more valuable trees in the future and get perpetual income every 10-15 years. Ultimately, the second scenario is more sustainable and produces significantly larger income over the long term than one large cutting with no regard for future value retention. This long term value gain is not always easy to achieve and often requires substantial professional direction.
- Improve Future Income Potential – To achieve the best results we suggest doing at least two things to improve you future income potential in your woods. 1) Hire a Consulting Forester who is paid to care for your woods and advise you on how to do the right things. They also are hired to protect you during a timber sale to ensure you get a good price for your trees and the contractor is doing a good job when harvesting trees. 2) Improve your woodlot by removing the diseased, deformed and trees that are at risk for failure. This removal can be done commercially or by the landowner who is qualified and trained to safely remove these trees. This cut is called a timber stand improvement cut and is further described within that link.