Earning Its Keep: Finding Sources of Income from Your Land

Earning Its Keep: Finding Sources of Income from Your Land

Ecophotography/MBC Design

There was a time when people who lived in rural areas and owned acreage made their living from the land. Subsistence living was neither an alternative lifestyle nor a quaint anachronism. It was what people did.

Today, the reasons for living out in the boonies are different. The peace and quiet of country life, the opportunity to regularly see foxes, turkeys, deer, and songbirds, and the opportunity to begin a hike from the back door has attracted many of us to buy a piece of rural land. The vast majority of landowners no longer depend on working that land for their livelihoods.

They earn their income the way people in suburbs and cities do: they have jobs.

That leaves the land in an unusual position. No longer producing income, its value can be largely intangible. In fact, when the property tax bill arrives, owning land can begin to seem more of a burden than a benefit.

Fortunately, there are a number of ways that your land can earn money for you without you having to quit your day job to make it happen. The opportunities break down into two possible streams: selling products that are part of the land, and/or leasing the land to someone for one of a number of different uses.

Timber sales

The most common way to earn income from forestland is through timber sales. Unless your holdings are relatively large, timber sales and the income from them will be intermittent. While it’s a time-honored tradition to pay for a child’s tuition or a medical emergency by selling some timber when the bill comes due, there are better and less reactive ways to do it.

To sell timber well, you need to keep in mind that since income is sporadic, it pays to time your sales so you sell to good markets instead of simply when someone knocks on the door with an offer to buy some wood. You need to understand the value of what you have now and in the future. Most importantly, you need to resist the temptation to try to cash in the woodlot’s value today, because by doing so you will most likely reduce the value of the remaining forest so drastically that you will not have another opportunity for income for decades.

If you don’t know the current value of different species and different grades, and if you wouldn’t recognize the difference between a good logging job and a poor one, you should contract with a forester to help you manage your land. Managing forestland is a complicated business, and having an agent represent your interests should be viewed not as an expense but as an investment. A good forester can help you generate periodic income while steadily increasing the value of the timber on your land.

As nice as income can be, it’s important to note that a timber harvest, no matter how skillfully done and how appropriate the silvicultural prescription, dramatically changes the look of the forest. The starkness is temporary because forbs, shrubs, and trees will begin to green it up in the first growing season, but the change is real.

Other products from the land

People may pay money for other things that grow on your land – mushrooms and medicinal herbs, for instance. In Maine, blueberries are a significant cash crop. Other saleable materials are those that have arrived courtesy of glaciers or volcanoes, such as sand and stone. Since we’re not looking for an active enterprise in which you are cultivating, harvesting, selling, and delivering, but rather sitting back and accepting payments, the possibilities are probably limited to mineral rather than vegetable.

Whatever the asset you are interested in selling, there are tradeoffs for entering the activity at a level serious enough to make it pay. Unlike trees, which grow back, removing bedrock or gravel is a permanent change.

If you can live with the appearance of a hole gouged out of the bank, there’s always a market for local gravel. Highway departments across the rural Northeast make use of many tons of sand per year for road safety in winter. They also may need gravel for road upgrades or new roads. Building contractors regularly buy gravel for new roads and driveways. You can enterinto an agreement with a trucking company to be paid by the cubic yard, leaving the responsibility for loading trucks to them . It’s not a get-rich-quick scheme – depending on local supply and demand, a payment of $5 per yard is in the ballpark, so a dump truck load of gravel could net you $50–$70.

As for stone, different parts of the region have different types of native stone or bedrock. New Hampshire has its granite, as does Maine, which also has slate. Vermont has both of these, plus marble, and there are also extensive slate deposits on the New York side of the Champlain Valley. Duchess County in New York is known for its bluestone. There’s flagstone, there’s fieldstone. In most areas, there will be native stone or bedrock that has been put to use locally. In general, stone of this nature is today used mostly for landscaping, with the better grades being finished for indoor uses in floors or countertops.

In centuries past, foundations, walls, and facings (as in New York City’s brownstones) were commonly made of stone, and that historical demand means that the most readily accessible and productive sites have been identified and perhaps long ago played out. Still, if your land is rich with stone that has value to someone within trucking distance, you can make arrangements to sell it.

Before you attempt to develop a sand pit or a quarry, you will most likely need to go through a permitting process. Depending on the state or local restrictions, you may decide it’s not worth the effort.

Leasing your land

Another way to earn money from what’s in the ground is to lease the mineral rights. In various pockets across the region, mining companies have leased or purchased mineral rights from landowners. Ask your neighbors or town officials if there is a history of leased mineral rights in your area.

While it’s probably unrealistic to imagine a small-scale limestone, salt, talc, iron, copper, garnet, emery, gypsum, nickel, or zinc mine on your back 40, if you live in the southern tier of New York state, a natural gas lease may prove to be a lucrative option. Natural gas has been produced in New York for nearly two centuries.

There are currently as many as 14,000 active oil and gas wells operating in New York, some of them producing so little that they are supplying single houses. The easily tapped deposits have been exploited for a long time, but as demand for new energy sources has escalated, investments in technology to extract natural gas have proven fruitful. More advanced techniques for extracting it from deeper and formerly inaccessible pockets of shale have made the Marcellus shale a viable source. Exploration continues, and some owners of the land above the shale, which is as much as 7,000 feet beneath the surface, see their opportunity to become as rich as Jed Clampett. Drilling would most likely be in areas with depths of 2,000 feet.

But there are complications. The techniques of horizontal drilling combined with hydraulic fracturing (hydrofracking), in which the shale is blasted with bursts of water and chemicals, has raised cautions because of the possibility of contaminating water supplies. New York’s Department of Environmental Conservation is currently evaluating the environmental impact statement, and their actions will determine the extent to which there will be further exploration of the Marcellus shale. Check local sources for the most current information on the status of what amounts to a de facto moratorium on permits.

Wind turbines

Wind as an energy source is more widespread than natural gas deposits in the Northeast. Still, the potential for developing wind power sites is not uniform across the landscape.

Engineering studies have pinpointed areas of reliably steady wind, and wind developers have fine-tuned maps that identify areas where there is sufficient wind and access to the power grid to make investment worthwhile. Potential installations tend to be at high elevations or near large bodies of water, but in New York, productive sites have also been developed in open land formerly or currently cleared for agriculture.

Installations typically cluster 20 or more large wind turbines into a wind farm or wind park, so a considerable acreage is generally required, but the project can be in a collection of ownerships. One central New York wind farm, for instance, comprises 2,000 acres of leased land. The footprint of an individual turbine is relatively small, so the adjacent land can continue to be used for other purposes; agriculture and wind can go together quite compatibly. In some instances, single-turbine wind farms are viable investments.

In most cases, wind projects begin with a developer who has identified a location with sufficient wind, nearby transmission lines, and other factors that point to favorable possibilities. The developer then contacts landowners in the region to try to enter into agreements with them to lease the land.

Photo by Andrew Crosier/MBC Design.

The developer owns and operates the turbines, but generally doesn’t own the land. Instead, they enter into long-term leases – commonly 25 to 50 years, sometimes longer – for the use of the land. Developing a wind farm requires a tremendous investment on their part, so they need to secure long-term rights to the land. The contracts are complex legal documents, and if you are approached by a wind developer and are intrigued by the possibility, have a lawyer with experience in the field help you make sure your rights are covered. The terms, of course, are negotiable, and just as you want a forester to help you with administering a timber sale, legal advice is important in entering into an agreement that could outlast your own tenure. In any event, the lease will begin with an option period, typically five years. This buys the developer time to put the package together. If the developer doesn’t exercise the option to enter into the long lease and develop the project, either party can walk away with no future obligation at the end of the option period.

One other consideration is that of public opinion. Many people love the idea of wind power until a development site is proposed within their view, at which point the NIMBY (not in my back yard) impulse kicks in.

Cell towers

With cell towers come many of the same considerations for leasing as wind power, but writ on a much smaller scale. Similar to windmills, cell towers require engineering studies that show feasible locations. What a cell tower developer is seeking is a hole in the coverage that can be filled by the strategic placement of a tower. Again, they will find you. Again, leases are for a long period of time. Again, don’t enter into a lease without expert advice.

Rent payments can be substantial, but make sure the income more than covers the potential increase in property tax for developing it. Another caveat is to make sure you negotiate a percentage for additional users of the tower in the future.

Interestingly, it’s not necessarily ridgelines that are preferred for new towers. Cell phone coverage in many rural areas is presently relegated to areas near the interstate highways, so there is considerable build-out expected to happen in the next few years as coverage expands. If you are in a prime location, you can expect to be contacted. If not, there’s nothing you can do to make it happen.

Hunting or camp leases

Across the region, there is a long tradition of the large industrial owners of forestland leasing camps to individuals or groups who use the land for fishing, hunting, and other recreational pursuits. There are two models for the way those leases work, with the difference between them breaking down as clearly as Yankees versus Red Sox, New York versus New England.

In New York, the leases tend to be what is called a posted lease. The landowner leases the exclusive right to use a particular parcel of land. The lessee then posts the land to declare their exclusive right to its use. Often there’s a camp on the parcel that is owned by the landowner. The parcels can be as small as 40 acres or exceed a thousand acres.

In Vermont, New Hampshire, and Maine, the lease tends to be for an acre or so of land, traditionally on a lake or stream. On that lot, the lessee has the right to build a camp, which they own. The lessee also has access to the adjacent land, but not exclusively. That land tends to be open not just to the formal leaseholders in the large holding but to the general public as well.

Large landowners have found that recreational leases help offset the property taxes and other costs of owning working land. Is there an opportunity for a small landowner to participate in this activity? Yes, but most likely only if you live in New York. For one, rules for the current use programs in Vermont and Maine deny enrollment to a landowner who charges a fee for the right to hunt or fish on the land. The loss of that favorable tax treatment can be a significant drawback. In addition, you have tradition going against you: public access to private land is the cultural norm in New England.

Here are some considerations for a New York landowner, or a New Englander willing to buck the trend:
• You will need to purchase liability insurance because the favorable landowner liability protection laws that exist in the Northeastern states go out the window when you charge a fee for the use of your land.
• If you lease the land, you are doing so for year-round use. If it’s a 100-acre lot that contains your residence, you will be having close and regular contact with the people you lease to. Maybe that’s not what you’re after. On the other hand, if your woodlot is a distance from your residence, you might benefit from the peace of mind of having your lessees using the land on a regular basis. Absentee landowners have often found themselves the victim of timber theft or seen their land turned into a de facto dump. A steady presence on the land can reduce those risks.
• If it’s a small parcel with a camp, you are essentially a landlord. Is that a role you are interested in playing?
• Particularly near upstate cities, there’s a high demand for land for hunting, and it doesn’t necessarily need to have a camp on it. Annual lease payments for a 50-acre lot can reach $1,500, though the per-acre price for larger parcels is more likely to be less than $20. Land with a camp or other significant values will increase the potential income.

Maple tapping leases

Our examination of income opportunities began with selling trees, and now let us close by leasing trees. In sugarmaking as in other pursuits, larger-scale operations are often more profitable, and many sugaring operations are seeking nearby sources of trees to tap.

If your land has a substantial percentage of sugar maples, this could be a good opportunity for you. The going rate for a tapping lease is somewhere between 50 cents and a dollar per tap.

The perfect situation for a sugarmaker would be a hillside with adequate pitch that drops uniformly down to a good access road. The forest would be heavily skewed to maple – a wellstocked sugarbush, tapped conservatively, should have around 50 to 75 taps per acre.

In order to make it work, the sugarmaker will need to install tubing infrastructure, a network of trails to service the tubing, a gathering tank, and in all likelihood a vacuum system. That means real money, so they can’t enter into a short-term agreement. Most sugarmakers would want to have access to your land for a minimum of 10 years.

Another consideration is that the tubing should be considered permanent. The taps will be removed from the individual trees, but don’t expect that the laterals or the main lines are going to be rolled up at the end of each spring sugaring season. In addition, it must be noted that sugaring season and mud season are essentially simultaneous. You can expect that traffic in and out will result in ruts in the road each spring, and it should be made clear in the lease that the sugarmaker is responsible for road maintenance. This legally binding lease should also ensure that your trees are responsibly tapped and cared for.

These are not the only possibilities open to landowners. There are, for instance, cost-share programs administered by the Natural Resource Conservation Service. You might be able to lease your land to growers of biomass, or enter into an agricultural lease with a farmer. In the future, the carbon credit marketplace will sort itself out, and perhaps someday there will be payments or tax credits to landowners for providing ecosystem services, such as clean air and water, and providing wildlife habitat.

The best way to explore any of these income possibilities is by tapping into local networks by talking with your neighbors, your local town officials, or your county extension service. There may be opportunities specific to your neighborhood that don’t exist even 50 miles away.

Stephen Long is one of the founders of Northern Woodlands magazine.

 
Discussion
  1. Juan Ramon → in Sullivan County
    Apr 26, 2017

    Hi, I am interested in offsetting my taxes which are twice a year Sept. & Jan. I have almost 40 acres and am interested in keeping my forest natural and maintaining its wildlife habitat and protecting its environmental integrity, which is providing a ecosystem service. I have been doing it for 19 years now by myself and need tax relief to continue. How can I apply for this tax benefit?

  2. Northern Woodlands → in Corinth, VT
    Apr 27, 2017

    Hi Juan - this website should be very helpful in giving you everything you need to know about forest tax law: http://www.dec.ny.gov/lands/5236.html

    Good luck!

  3. Tom Wood → in Staunton, VA
    Jul 13, 2017

    Good for you, Juan. I applaud your wish to provide stewardship for your property and thus preserve it for future generations. I have 60 acres of woodlands and strive to do the same. My property taxes are very reasonable. The county in which my woodlands lie offers “Land Use” real estate tax. As long as it is maintained and managed well, the taxes are a very small fraction of what they would be for residential property. I need to apply for the Land Use right each year, but that is not difficult. It’s important that I maintain a management plan and have worked with private foresters and with the state’s Department of Forestry to develop and maintain my plan. Maybe there is something similar in your area.

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