If you recently purchased a few empty acres of land, consider a tree farm.
This is one way you can make your land pay!
And in today’s blog, we have everything you need to know.
1. What is a tree farm?
A tree farm is a forest managed for timber production.
The term tree farm can also be used to refer to tree plantations, tree nurseries, Christmas tree farms, etc.
In 2019, it was estimated that just under half of U.S. forests are owned by families.
In the U.S., the American Tree Farm System (ATFS) is the largest and oldest woodland certification.
ATFS specializes in certifying private forests such as those held by individuals and families.
It currently certifies over 24 million acres of forestland.
The tree farm movement began in 1941.
It aimed to promote resources on private land and ensure plentiful fiber production for timber and paper companies.
With the realization that timber was in decline, the industry sought to promote forestry practices so there would be sufficient fiber production in the future.
Before 1941, most fiber came from industrial lands.
The name “tree farm” was selected because it was felt that the 1940s public understood farming as crop production and tree farming was focused on producing more timber.
Since then, the system has shifted toward a focus on stewardship rather than fiber production.
2. What is the best type of tree to grow?
Selecting the type of tree to grow is one of the most important factors when creating a tree farm.
Here are some ways you can decide the best route to go.
Existing trees
If you already have forested land, you may be eligible to become an official tree farmer with the ATFS.
Then, you’ll be able to sell parts of your woodlands in a sustainable way.
Trees native to your area
If you’re seeking to start a nursery (a good way to go if you’re seeking a profitable option), you should choose seedlings and trees that are native to your area.
You can find out which species will work best by visiting another local nursery and to see what they’re selling.
A hardy, native tree
If you want to start a Christmas tree farm, a hardy native tree is normally your best option.
These trees tend to be the most successful.
We recommend working with a local nursery to see what grows best in your area.
Here are some ways you can go about starting a Christmas tree farm.
- You could grow Douglas firs, blue sprues, or white spruces
- You could grow more than one variety of tree to see which performs the best and then double down on that one the following year
- You could look for a variety designated “late-breaking buds” (this means the buds will break later in the spring, avoiding being hit by frost and halting growth that year)
- You could buy plugs or bare-root trees, which are grown in fields and have the soil removed before they come to you
- Plugs are container-grown and arrive with soil
- They last longer, which means you can plant them later in the year if you need to
Loblolly pines for lumber
If you’re located in the south, low-maintenance trees like loblolly pines are a great option.
They are less expensive to plant, grow quickly, and can be sold for lumber upon reaching maturity.
The loblolly pine is native to 14 southeastern states in the U.S.
This means you can grow these types of trees without immense effort.
To give you a sense of how fast they grow, loblolly pines typically reach heights of 60 to 90 feet (although they can be as tall as 110 feet) at a rate of 2 feet per year.
Douglas fir trees for lumber
If you’re located in the Northern portion of the U.S., you should consider Douglas firs.
These trees are native to the area and tend to do well wherever they grow.
You can grow them as a lumber crop or as Christmas trees.
However, if you plan to grow them as a lumber crop, then you need to be patient as they can take 30 to 50 years to mature.
To give you a sense of how fast they grow, these trees typically grow at a rate of 1 to 2 feet a year.
Their overall height is normally in the 40 to 80 feet range.
3. How do you create immediate profits with a tree farm?
If you need immediate profits, your best option is to start a tree nursery.
Certain trees can take up to 50 years to harvest as a lumber supply, and Christmas trees will take around 10 years to have enough for your first season of sales.
For this reason, your best option is to consider structuring your business as a tree nursery (at least initially).
Begin by growing trees from seeds consistently.
In a year or two, you’ll have products that you can sell to nearby neighbors, homeowners, landscapers, and contractors.
4. How do you determine your tax structure?
When you start a tree farm, you start a business.
This means you’ll need to be appropriately licensed for the retail aspect of the business so you can legally serve customers.
Research the license you require in your state to ensure you’re compliant.
Keep in mind that tree farms often have orchards or plant gardens to help supplement your income.
If you choose to go this route, you may also require a secondary health license, specific equipment, or regular inspections.
If your wood is 6 years or older, then it will be classified as timber.
You could qualify for a reforestation tax credit depending on your circumstances.
5. How do you maintain a regular cycle of profit?
When you hear the term “tree farm,” you may assume that you can only plant one or two types of crops.
However, there are ways to structure your farm, so you have year-round profit.
For example, consider the following format:
During the winter, grow Christmas trees, stands for lumber, walnuts, etc.
During the fall, grow pumpkins for a pumpkin patch experience and market it to your local area.
During the spring/summer, add a vineyard to start a winery.
You can also have an orchard or several different types of trees growing year-round.
This way, you’re complimenting your tree farm with other products all the time.
When you don’t limit yourself to one type of product, you’re much more likely to make a profit faster.
6. How do you install a solid system of irrigation?
Unless you live in a wet climate (i.e., Pacific Northwest), you’ll need some way to water your trees when the dry season hits.
An irrigation system is obligatory for a large tree farm.
Otherwise, you’ll spend nearly all your time watering trees manually.
Wet land (although necessary for growth) can cause damage to your trees because they attract pests.
So, institute a pest control system along with an irrigation system.
7. How do you get your farm certified?
Various countries have their own organizations that certify tree farms and their systems of growth and sustainability.
Above, we discussed the ATFS, which is the system in the U.S.
Some states even require certain criteria to be eligible for their forest agricultural programs.
For example, Colorado requires the following:
Landowners must perform forest management activities to produce tangible wood products for the primary purpose of obtaining a monetary profile.
Tangible wood products include transplants, Christmas trees and boughs, sawlogs, posts, poles, and firewood.
Landowners must have at least 40 forested acres.
Landowners must submit a Colorado State Forest Service-approved forest management plan that is prepared by a professional forester or natural resources professional
Landowners must annually submit a request for inspection, an inspection fee, an accomplishment report, an annual work plan for the following year.
Furthermore, they must have enrolled property inspected by a CSFS forester.
The above is just an example of one state.
Be sure to check local guidelines for your state if you’re interested in tree farming.
8. Can you manage your crops alone?
The crops on your tree farm are trees, which require specific care such as trimming, pruning, and tying off the trunk each year to ensure the trees grow straight.
If you have more than a few acres of land on your hand, you’re going to require some help.
We recommend hiring independent contractors or filing for an EIN and hiring employees that can help you day-to-day.
Independent contractors can be great if you need help quickly, but you often aren’t able to exert as much control over how they do the job.
Building a team of hired employees is a great way to grow your business when you’re ready.
9. Should you get into the landscaping business?
Consider transforming your tree farm into a landscaping business.
This decision is often based on whether you have enough land.
Here are the steps you’ll need to take.
Choose a portion of your land to dedicate to topsoil harvesting
Secure contracts with bark, gravel and stone suppliers to sell at retail
Become a landscaping contractor if you have experience in the industry
Understand the tax and licensing restrictions in place for contractors
Keep in mind that these tax breaks can limit what grants are available for the tree farm part of your business.
10. How should you plant and care for your trees?
When you’ve decided to start a tree farm and selected the type of tree, here are the basic steps you should take next to plant and care for your trees.
Select a flat, well-drained piece of land
Purchase appropriate equipment
Decide the layout for planting your trees
Clear the area ahead of planting
Test the soil pH to see if it’s appropriate for planting
Conduct a soil analysis if you want to check nutrient levels
Amend your soil with nutrients and ingredients to alter the pH if needed
Make holes for trees 6 feet apart on all sides
Plant the trees in the holes
Mow and treat for weeds through the summer
Install an irrigation system (particularly in dry areas)
Fertilize spruce and firs twice a year
Shear Christmas trees in their third and fourth year
11. How do you create the business side of your tree farm?
When you start a tree farm, you must address two different sides of the venture.
First, you must create the farm.
Second, you must create the business.
The farm and the business work hand in hand.
You can have a farm without making it a business, but by creating a business around the farm, you can make it profitable.
Here are the steps you need to transition your farm into a business.
Get funding for your farm
Create a business plan to see how much you’ll need to start a farm.
This plan should include land costs, seedlings, tools, equipment, labor costs, etc.
You can then present the plan to a bank to get a small business loan.
Choose a business name to register your business under a name and license
Register your business with your city or county.
You may need to change your name depending on whether a business is already registered under yours.
If you do have to change your name, don’t worry as you can do public business under your existing name.
Form a corporation for your business
A good option for a small farm is an LLC as it protects you from being personally liable.
If you’re not sure where to begin, get a lawyer to help you.
Register for an Employer Identification Number (EIN)
An EIN identifies you to the U.S. federal government.
While you don’t technically need one unless you have employees, it can be good practice to get one early on in the process because it can be used in place of your personal Social Security Number.
Set up a business bank account and keep track of your expenses
Separate your personal money from your business money by creating a specific business bank account.
Use a spreadsheet or accounting software to keep track of expenses and revenue for tax season.
Hold onto your receipts.
Hire an accountant for tax season.
Have a forest management plan set up by a professional
Although this isn’t strictly necessary, it can be a good idea to help you maintain a healthy farm for years to come.
You can also personally create a plan using www.mylandplan.org.
Request an inspector from the ATFS to visit and certify your land
This is a great certification to have as people are interested in purchasing from sustainable growth farms.
To qualify, you must meet the sustainable standards laid out.
Market and sell your trees
1. Hire a forester consultant to help you sell your timber.
A consultant can help you determine how much your trees are worth, how many you can/should sell, and who you should contact to sell them.
2. Mark the boundaries of your land and set limits for your loggers.
Before you let loggers on your land, you should physically mark the corners of your land so that loggers know exactly where to stop.
3. Have your forester create an advertisement for buyers.
This advertisement is called a timber sale notice, and it normally includes your contact information so people can call and make bids.
4. Decided on a buyer and make a contract.
Accept a bid ad have them sign a formal written contract that states exactly what you want to be done (and where the boundaries are).
5. Layout out the boundaries again on harvesting day.
Make sure you meet with the loggers on harvesting day to ensure they know where the boundaries are and where you don’t have anything cut.
12. How does tree farming impact climate change?
Forests remove carbon dioxide from the air as the trees grow and then return it to the air as trees die and rot or burn.
If timber is regularly removed from the forest and turned into last wood products, then those products continue sequestering carbon.
The replacement tree farm will absorb more carbon dioxide and continue to reduce greenhouse gases.
Tree farms are managed to enhance rapid growth and thus tend to sequester carbon more quickly than an unmanaged forest when considering only the sequestration side of the equation and not the carbon release due to rot, fire, or harvest.
Keep in mind that tree farms can absorb large amounts of carbon dioxide.
However, the long-term sequestration of this carbon depends on what is done with the harvest materials.
Forests will continue to absorb atmospheric carbon if left undisturbed for centuries on end.
If you’re interested, you can use the online USDA calculator for how much carbon is sequestered in various types of forests.
Final Thoughts
Creating a tree farm can be a great use of your land.
Follow the steps above to build your business and nurture your farm.
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Disclaimer: we are not lawyers, accountants or financial advisors and the information in this article is for informational purposes only. This article is based on our own research and experience and we do our best to keep it accurate and up-to-date, but it may contain errors. Please be sure to consult a legal or financial professional before making any investment decisions.
Prior to starting Gokce Capital, Erika received a Bachelor of Architecture from the University of Southern California and a graduate degree in Urban Policy from Columbia University. She worked as both an architectural designer and engineer in New York before joining the New York City Department of Housing Preservation and Development.
Erika currently lives in the New York Metropolitan area with her spouse, daughter and cat. She is originally from Chicago and still considers herself a midwesterner at heart.
Erika also loves to read, write and travel (fun fact, she has visited all 50 states and more than 30 countries!). Her new book, Land Investing Mistakes: 11 True Stories You Need To Know Before Buying Land, is now available on Amazon.