Timber Opportunity In Colombia Provides Residency And A Turnkey Double-Digit Return
Among the investment opportunities presented during our conference last week in Medellín, Colombia, was a new timber project in that country.
Timber investing has one of the best, if not the best, risk-to-return ratios you’ll find. Trees don’t have an expiration date. You can leave them to continue growing if for some reason the market isn’t with you at the time you originally planned for harvest. Trees also require much less maintenance than other more active types of agricultural investments.
Therefore, investing in trees suits the long-term investor.
This new project in Colombia is located in an area that has been targeted for plantation development by one of the biggest forestry management companies in this country. This group has already planted more than 7,000 hectares of trees and plans to plant tens of thousands of additional hectares over the next several years.
However, they can’t do it all by themselves.
That’s why they’re working with targeted development teams. One of these teams, which I invited to participate in last week’s Live and Invest in Colombia event, has put together a project to allow small investors to piggyback on the economies of scale being created. While a project of 900 hectares isn’t insignificant and could stand on its own, pairing their 900-hectare plantation with the much bigger group managing many thousands of hectares helps to reduce costs. It also provides for more marketing and selling power when the trees are ready for harvest.
Turn-Key Agro Investments - Profits With Upside
The plan is straightforward: 900 hectares will be planted with acacia and eucalyptus trees. The trees will be managed closely over the first few years as they establish themselves. However, once acacia and eucalyptus trees are three to four years old, they don’t need much attention. Thinnings and trimmings will be done periodically to make sure the trees mature in a way that maximizes their market value.
You can expect some cash flow from the thinnings, as the cuttings will be sold for biomass, a growing industry. After 12 years, the trees will be harvested, and that’s when you will see the bulk of your return.
It doesn’t get more turnkey than that.
This timber project has the added advantage of qualifying for Colombian government incentives that help boost the projected return from 12% to 15.5%. Additional potential return could come from intercropping with apiaries, though this upside has not been figured into the annualized projections. It’d be gravy on top.
Older investors may not want to wait 12 years for their profits. On the other hand, a timber investment like this one can be a great way to leave wealth to the kids or grandkids. For younger investors, timber can make sense as part of a long-term or retirement portfolio. Either way, a 15.5% annualized return isn’t to be sneezed at.
The minimum investment is 75 million Colombian pesos, which is about US$32,500 at today’s exchange rate.
With a low minimum investment, good double-digit IRR projections, and currency diversification, this timber opportunity checks all the boxes for someone looking to diversify his portfolio and his life.
“Lief, I moved to Cuenca, Ecuador, about 14 months ago and found the high altitude is not for me. I am now in Salinas on the beach wondering what to do next. I want to go to Cartagena, Colombia, but it seems difficult to rent an apartment long term. What do you think?”
No, it’s not difficult to rent an apartment long term in Cartagena. For help, you can get in touch here.
I’d suggest, though, that instead of or at least as well as Cartagena you also look at Medellín. Cartagena is touristy and among the most expensive options in Colombia. Santa Marta would be a more affordable coastal option, and, as you probably know if you’ve been reading these dispatches for any time, Medellín would be my top choice in this country. It’s become one of my favorite places in the world.