Financing a forest estate purchase

Are you planning to buy forest land from your parents or the market, for example? We offer personalised financing for purchasing forest estates. Forests are a viable form of currency at OP, and the purchased estate is acceptable as collateral for the loan.

Forests are a safe investment. According to studies, the long-term real return on investment is 3–4 per cent and varies only a little. A forest as an investment can be compared with a buy-to-let home. Fixed assets are traditionally seen as a hedge against inflation, but compared to homes, managing and maintaining forest property is more straightforward and cost-effective. A forest is usually a long-term investment. When the investment horizon of a stock investor is 5–10 years, for example, a forest owner looks at things over a period of at least 10 to 20 years.

The expected return of forest land can be improved through forest management, correctly timed logging and forest improvement measures such as fertiliser. The return may vary due to changes in timber prices, restrictions on commercial use and forest damage. However, risks of damage can be mitigated with insurance. 

Purchasing a forest from the market

In recent years, forest estates have been in exceptionally high demand, with sales prices frequently rising above the forestry value. At the same time, supply has also increased. As a buyer, it's a good idea to consider what price level is suitable for your finances. Essential factors for determining a forest estate’s value include location, logging potential, soil quality and accessibility.

Selling a forest to the next generation

Selling is the most tax-efficient way of passing a forest property on to the next generation. In a sales transaction between two close relatives, the seller can be exempt from taxes on capital gains. The successor is entitled to a forest deduction in timber sales tax, which reduces the tax on timber sales proceeds. If the forest's logging potential is significant, you can in many cases use the income from timber sales to repay your loan.

You can finance the purchase of a forest estate with a bank loan in part or entirely