In 2008, as the U.S. and the world were facing a dramatic economic downturn, NuWire Investor developed a list of the top 5 recession investments. Number 2 on that list was timber.
One NuWire article states that, “Timber is one of the safest and steadiest growth investments available, protecting an investor in times of inflation, and providing returns that have beaten almost every other investment sector over the past 40 years. Teak in particular offers one of the best values and highest yields in the timber sector.”
I agree. One of my all-time favorite agricultural investments has been my plot of teak in Panama. I bought when the trees were already 15 years old and in just a couple of years, I will receive my first harvest payment… with a 500% ROI. This year, my wife also bought a parcel of teak that will be harvested in 12 years.
I now represent the company I bought from all those years ago and they are currently offering teak lots in both Panama and Nicaragua. You can find all the details on the Alternative Ag Investors website.
When most people think of investing in alternative assets, timberland doesn’t usually come to mind – probably because timber investments have been the province of the uber-wealthy for literally centuries. That has changed.
An article on TodayTrader.com notes that, “Relatively few investors venture into timber investments. That’s because timber has been considered to be a niche investment that is reserved for the ultra rich or for institutional investors.”
“In fact, investors like the $27.2 billion Yale Endowment Fund and the $37.1 billion Harvard endowment reportedly have large investments in forest land. But individual investors with lower investable amounts can also benefit from timber investments. It’s a mistake to think that this asset class is restricted only to high net worth individuals.”
An investment in teak doesn’t need to break the bank. You can buy a lot of recently planted teak for under $8,000 or 13-year-old teak for about $19,000. Either way, you’ll benefit from a high return on investment and the knowledge that your family will benefit in perpetuity from your purchase.
Teak is a luxury hardwood that takes roughly 25 years from planting to maturity. This is definitely a long-term play and one which creates generational wealth. Owning teak is also a
“green” investment and not just because of the color of the leaves; teak benefits from high rates of carbon sequestration.
Worldwide, the demand for teak is vastly greater than supply. Many Asian countries have banned harvesting teak in native forests due to over-logging and the alarming rate of deforestation. Teak is now primarily grown on plantations like those in Panama and Nicaragua.
The fundamentals are clear; there is a continuing supply-demand gap, there are limited growing areas, tropical rainforests are being destroyed at the rate of 35 to 50 million acres per year and there is diminishing international supply. All of these factors bode well for your teak investment.
I have a client who purchased a teak lot for each of his grandchildren. When the trees are ready for harvest in their mid to late 20s, it will be just in time to pay off their college loans or use as a down payment on their first house. Their next payment will help pay for their kids’ schooling, pay down their mortgage, make additional investments or maybe start a business.
Most literature on timberland investments focuses on lumber used for construction, but specialty hardwoods provide an even higher yield due to limited supply and the international market for a niche product, which includes teak.
Data from the National Council of Real Estate Investment Fiduciaries (NCREIF) is often cited to show the strong value of timberland. The 2022 estimate is a 12.01% annual yield. However, the NCREIF index is only for U.S. timberland, and teak commands even higher harvest prices and greater growth in the value of the land.
One of the great things about owning teak is that it’s not like other commodities in terms of harvesting. If the market is down you don’t have to harvest; you can wait 6 months or until next year – you’ll only end up with more teak when it is harvested because the trees keep growing. You can’t do that with fruits, nuts, vegetables or grains.
Buying teak timberland is an investment in a commodity that does well during recessions and stock market declines because is not correlated to the market. Your teak will provide long-term passive income and create generational wealth.
Contact me at Alternative Ag Investors today to see how buying a managed teak lot can augment your investment portfolio. I have negotiated a discount if you purchase 3 or more lots by the end of the year.
