Belize Teak Plantation

Actually started this venture about 3 years ago. I might get some activities out of time sequence. Sit back and grab some popcorn.

I will chop this up into smaller segments, so each one isn't too long of a read and has a central theme.

Both Retiring and doing Self Storage, we hit the mark where we both had the funding and the time to invest overseas. My wife has never had a specific place in mind, so got to do my choice. Have always been interested in Aust, NZ, Brazil, India and Belize. Have travelled to South Korea, Mexico, France, Canada, Maui and Italy.

Decided on Belize. Currency pegged $2BZD to $1USD (low inflation issues), Official language is English since it was a British Commonwealth, Property rights and laws are basically the same as the US since English based, 2nd/3rd world thus still Rough which I like (has flavor), 2 hour flight from Houston/Dallas connections, land is relatively inexpensive. These all play into the "type" of investment we wanted to do.

We are in Iowa where December thru March can be cold and windy. Belize dry season (less humidity) is January thru May. Great overlap.

Labor for a great skilled worker is about BZD $30 to $50 per day or USD $15 to $25. Laborer is around USD $25 per day. This is good pay for them. Glad to have the work. They also have an illegal migrant issue. You could get workers for USD $3 per day to cut brush.

Local produce is relatively cheap. Rock crab for USD $3 per pound. Red Snapper, grouper, barracuda for USD $4 per pound. Anything imported is really expensive. Gas $10 per gallon. Can of Spam might be $8. Yep a Can of Spam can cost more than Rock Crab or Red Snapper. I actually like Spam though.

Health care is both very inexpensive and for higher end issues, non-existent. Most US prescription drugs can be bought over the counter from the Pharmacist. Broken leg $50. Cancer/heart need to fly home.

Over the course of this post will cover the following Real Estate angles. Teak, buying property, building house, few buyers, real estate "fronts", preppers, as an Expat "you" will move back at some point, and "Yes" sometimes means "I don't know".

Below is Ramon, checking on Teak trees. These are 11 months since transplanted, from about 10 inches tall.

***************** 10 01 2021

Now whatever I am about to say, you heard me right. This will be the first Real Estate point (1) to buy in Belize.

See the picture above. You see several Teak trees and Ramon. It is what you expect to see in the picture, because that is what I told you. What you don't see is:

a. All of the trees are the "Same" tree.

b. Ramon is 68 years old and the father of 58 kids. Not "Grand Kids". As I told him several times being Latin and with the name Ramon, of course he would have a lot of kids, but 58? He is also our Mayan Priest. I have him bless all of the major projects we do. Do I believe in Mayan Gods? No. Makes him know I feel he is important. He is in charge of the Teak trees. Which are more important to me than the house and land. We are compadres.

When you go to any overseas place on vacation, you are going to see what "you see". You have your Vacation eyes on. Recommend you vacation there several times. Get with different Realtors and see several properties. Stay at AirBNB's similar to what you would buy.

We made about 6 trips. Two of the trips were a week long each and we toured several areas and looked at many properties, around 50 to some degree.

Concepts:

1. All "Expats" will go home at some point. Divorce, cancer, heart problems, grandkids, the dream is not the dream, no retirement homes in Belize, etc.

2. There are basically no "Buyers". Belizeans don't have the money. Very few Canadians, US, English will ever buy in Belize. Don't plan to "Make" money. Making money should not be your objective. But hey, I'm a business guy, enjoyment and make a profit.

3. Money is "King". Use its power. If they say $500,000; you say $300,000 and move on to the next property.

4. Buy what is available and fix it, versus trying to build exactly what you want. Building overseas is totally different than the US. If you want a Curved Glass Shower door, you will need to custom order. If not scheduled correctly the contractors can only build around an item for so long. If the item gets damaged or lost, you have another lead time. Again, the contractors have to move on. You might end up with 2 or 3  different crews working on your project. If your doing this, do your really want to wait 2 to 3 years to build your dream house, or do you want to live here?

5. The Most important decision as you are buying a building or location is the "Caretaker". Do not buy a place unless it is a Gated Condo, unless you have the caretaker figured out. See picture at bottom.

6. Make sure they actually own the land. Forget Title insurance. Had a guy show me a place. Told him how would we contract. He said his Dad would have to buy it first?????

7. Remember 1 above. When you go looking for a property tell the realtor you want to look at the "Oldest" listings first. It will take the prior owner about 1 to 2 years to come to the realization, there really isn't a market, but they have to go back to the US/England/Canada. Now they are ready to bargain. Don't look at properties that have just (6 months or less) been listed. Again, make an offer and move on to your next selection. Our property was on the Market for 15 years.

Remember Item 5 above. People used to live in this house.

***************10/07/2021

Why Teak Trees?

-Myanmar or formerly Burma is the major source of old growth Teak. They have basically shut down harvesting their forests.

- Primary markets are India, China, South east Asian countries. For me, this is a great risk management tool versus US investments. Both India and China are both growing economically and in terms of people, China is kind of flat.

- This is a product which is easily raised, harvested and milled in Belize. But the market in Belize is almost non existent and very low priced.

- Resistant to price fluctuations. Demand is increasing as India/China economy is growing, while number of Teak trees are diminishing.

- Even if all of you reading this planted a 1,000 acres; that would not but a dent in the demand, and decreasing availability.

- If the world goes into a recession or depression. A Banana you have to sell. A Teak tree you keep growing and as it grows, it keeps adding value.

Teak tree overview: Below is the "Quantity" discussion, will do another post on the "Quality" side of the discussion:

1. Generally a 25 year investment unless you can buy land already planted and maturing.

2. For Belize the "delivered" log market is about $500 USD per cubic meter. Not "Standing Timber". Teak logs from Myanmar or former Burma might be $3,000 to $5,000 per cubic meter (for several reasons). Be careful when someone gives you prospective figures to understand what the data represents.

3. Measurements. International market usually uses Cubic meters. US usually will talk in terms of Board feet. A board foot is 1 foot square by 1 inch thick. A planed board is not a true 1 inch, it might be 7/8 inches, but still called a board foot.

4. 424 board feet make a cubic meter.

5. Yield lets say $50,000 per acre. Most foreign countries talk in Hectares which equals 2.47 acres.

6. Make sure you are converting correctly: Currency, Acres/hectares, Cubic meters/board feet, standing timber/raw logs/finished wood.

7. How much is a Tree worth? Use the following as a "Factor" for discussion and not as exact. This is for "Hardwood and not Softwood".

a. ($1) Standing Timber.

b. ($2) Delivered Logs

c. ($4) Sawn or dimensional lumber

d. ($8) Kiln dry

e. ($16) Planed

f. ($32) Molded Retail value.

8. As you can see the actual Standing timber has very little value relative to the Retail board. There is almost a doubling of value as you move up the Value add chain. Think of Shipping "Logs" to India, versus "Finished" boards. The same price per container/pounds either way. A large difference in Shipping cost versus Sales value.

9. The Standing timber also has less of a Comparative price to use for the land owner to sale. A timber buyer is going to adjust for: location to roads, distance to mill, terrain to log, unknown quality of wood, Owner lack of knowledge, etc.

10. Usually timber gets sold as "Standing Timber". The land owner wouldn't want to sell, after the trees are cut, because then they need to get to the mill and if the buyer backs out, they are stuck. Given that the Buyer doesn't really know the quality of the logs until they are cut and sawn. Thus the buyer won't want to give you the full $1 above. Because they are gambling.

11. Why would a Buyer not know what the wood is like until they cut it down? Lets say two of the exact tree, but on two different properties. Again this is Hardwood, and not Softwood. When the buyer looks, Tree 1 and 2 are both 15 inches on the "Small" end. Tree 1 however has "live wood" or the white growth wood of about 1/2 inch on the outer rim. Tree 2 has 1 1/2 inch "live wood" on the two outer rims. Normally this extra Live wood is caused by the tree growing too fast. They may have kept fertilizing. Tree 1 might get measured using a width of 14 inches, while tree 2 might be measured with a width of 12 inches. Now 2 less inches doesn't sound like a lot, but it is a lot less. Draw two circles with 14 and 12 inches and then measure the volume. Its a big difference. Hardwood, the value is in the "Heart" wood and not the "Live" Wood. Softwood, you use both.

So the buyer might only offer you $.65 on the $1, due to rough terrain, distance from the mill and to cover if the Logs are poor quality.

If you invest in Teak or any timber, you want to reap the rewards as far up the Value Chain as possible. Your profitability increases and the accuracy of Market Value is easier to determine.

Don't worry, I like bananas, so I planted some of them also.

**********11/22/2021

Got back 2 weeks ago. Went down to check on trees, select doors, handrails and check out roof.

About 3 miles down the road is a premier welding shop. Stopped in and they happened to have the types of rail I want for the roof, second floor steps and second floor balcony. They will put an extra bottom rail about 4 inches off the ground. Didn't want to do wood, due to the maintenance. Thought about Stainless Steel wire, but tends to sag if people put their feet on. He also said it will rust. About 250 feet, will be about $10,000 USD installed and GST tax.

Below is the roof we put on. We are building off a pre-existing building structure. Did not really want a third floor, so decided to roof it and leave it open. Great views and cooler breeze. Worst case, a very expensive clothes drier. See prior picture, for before shot.

Below are the stairs from the 2nd floor up to the 3rd. Built on the patio our outside of the house to save interior space. Also any water will stay on the outside and run off. My contractor does great tile work. Can't wait to design. Will be one of the last things we do.

Went looking for Wood Exterior and interior doors. Also travelled 2 hours to find a security door design I saw in Orange Walk. The Wood door will be custom built, kiln dry Mahogany by some contractors in a village called Duck Run 2. Cost about $300 USD. This is an example. We need to get them the final design. It is a lot cheaper to buy locally than importing with about 70% tariff. The metal security door got some pictures. All of the security doors in Belize are custom built by welding shops. Will need 3 of them, they are estimating around $400 each. Will look similar to this. Although I want an antique copper green look. Searching for the medallions, or will get custom made down there. You have to do security doors and windows due to theft.

Visited the neighbors across the road, who were having a roping contest. Went a lot quicker with the ATV versus real calves. The Cowboy roping is from Banana Bank Lodge where I stayed this trip.

Having breakfast at the lodge and this parrot flew in. They raised it and it is in the wild. Visits every morning to say hello. This is an actual Belize parrot. You see them flying around all day, but this is the first time I have actually looked at one up close. The reason I stayed at the Banana Bank Lodge this time, is because the Lady is a world class artist, thus an artistic eye. Also her husband has 100 acres of Teak and I wanted to see their operation. Had them over and got their thoughts on the house we are building.

**********12/03/2021

See first picture above of teak trees. Same trees two weeks ago. Had them go through and knock off leaves as high as they can reach. Don't want the wind to make them grow crooked. This will slow their growth down, with less leaves. They are now 20 to 25 feet tall. This isn't photo shop. Incredible growth during the rainy season. Should turn dry in January, then they will go dormant for about 4 to 5 months and lose their leaves. Their growth upwards will slow down around 35 to 40 feet and then their girth or diameter will start to thicken. These particular trees are Clones. Will show normal seed sown trees next year to show the differences. The Clones cost about $.50 USD more per tree versus $1.00 USD. But they growth faster, straighter, and have less limbs.

********12/11/2021

@David Huffaker

Your "curious about the financials" note from a separate post. Also after you read the following, do you really want to invest in Timber? The quick answer is 99.9% of the world should not do this investment, they will lose money. Yes, I'm part of the 0.1% that can make money on this deal, because of my background and what I consider fun and interesting. Note, most of the profit we make off this and other Teak projects, will go to two of my Belizean workers. Showing them how to get rich. Both of them are worth about USD $1,000 combined. Have only "time" to contribute or lose. In about 10 years they should be worth more than USD $500,000 individually and more importantly have a business model and the knowledge to expand in Belize and other countries. I will get a lot of fun out of it, plus make money now and off their future efforts which I will not be involved with, other than as a Passive recipient.

Cost- if you did traditional logging and sawmilling operations, you would need about $3,000,000 of equipment on the cheap to start out. I plan to only use $150,000. Thus our business model we can scale at a lower level of volume.

Throughout Central and South America and Africa, Teak planting was the rage about 15 to 20 years ago. So there are a lot of small plots all over, but no one has developed a localized market. That is where we come in. The normal production cycle is around 25 years, by buying or cooping with the land owners we will cut off about 5 to 10 years, and my basic model is to not put any money into the trees up front. As noted above the trees are the cheapest part of the value stream. So why are we planting Teak trees if that is not where the money is? For the fun of it and to also give us credence and for my team to understand what it takes to make quality lumber. You can tell people, but they learn better by doing.

Before we move on, lets ask why not Mahogany which is native to Belize? The wood door above is Mahogany.:

a. Stemborer- Mahogany is impacted by a moth, called a stem borer until it reaches a certain height, above 15 feet. The moth literally bores into the tree stem and lays eggs. This causes the tree to be deformed at that point and send out many limbs and the central trunk basically stops growing. You might get one log out of it. You can spray the trees, but how often with a rainy season and how many years. You just have to "miss" one time and the trees are ruined.

b. Belize and most 2nd and third world countries do not have a "long" view or a reforestration plan. Thus as Mahogany is cut, it is not replanted. Thus the forest is dwindling.

c. Market- India and China are both upcoming countries in both GDP and population size. Teak is a well known product and Status symbol there. Mahogany is more of an European or local market. The Local market is not what carries value.

Quality based on grade of wood.
We already covered general pricing above, based on Processing stage. Now let's look at Quality based on grade of wood.

There are primarily two different terminologies and methods to grade Quality. We will use the British or UK model which is primarily used in the India and China markets where we will be marketing to.

Quality grades: This is a general discussion, there are more detail determinants, I am not showing.

A- basically no flaws, generally 100% "Heart" wood. You can also have 1 sided "A" lumber, where a minimal knot is on the bottom of the wood not visible at the top, like a Table bottom.

B- minimal knot or two showing, more coloration variation in the wood.

C- can have "Live" wood and more knots, and dead knots or holes.

Rough- could have "live wood" or "Wane". Wane is missing wood or bark. As you make your preliminary cuts along the sides of the logs, the log generally will not be symmetrical. Could be 15 inches at the top and 20 inches at the bottom. Thus some portion might miss some wood.

"Rough" and "C" lumber might only be worth 1/10th or 1/5th the value of "A" lumber.

How do you "Make" Quality lumber?

You can grow quality lumber.

You can cut Quality lumber.

You can both Grow and Cut Quality lumber.

Last you have to Sell Quality lumber.

All of the above sound so basic, but until you have Failed or someone holds it in front of your face, you don't know. Thus you just wasted 25 years and received only 1/2 the money you could of.

Grow:

a. Seed selection or cloned teak. Some people save money by collecting local seed. Savings Pennies versus $100,000 more. Again, cloned teak are generally from the same mother tree source or a couple of trees. They are selected for fast growth, few limbs and to grow straight. The straighter a tree is, the higher it will Grade in Quality. Clones cost about $.25 more per seedling but worth far more in outcome.

b. Thinning- around years 7, 14, 20 you need to be thinning. Thin out deformed, curved, and slow growing. Also allows the remaining "Quality" trees to grow thicker, thus more Quality lumber. On a 10 foot x 10 planting grid on an acre. You would have 435 trees. Year 7 you would thin about 1/2 down to say 220. Year 14 you would thin about 1/2 down to around 110. Year 20 you might thin out a few more. Don't take the good ones. Year 25 you will have around 65 left to harvest.

Even at Year 25 these are still "baby" teaks. On a percentage of Mass basis, Teak grows the most from about year 5 to 12. Then the growth percentage starts to slow down. Keep in mind though you are after Quality lumber and value and not Mass wood.

As the trees get older the amount of "Live Wood" starts to shrink, thus more Quality wood.

Also from a percentage standpoint, say a 10 year old tree with a diameter of 10 inches grows 5%; but a 25 year old tree with a diameter of 20 inches grows at 3 %. Which one earned you the most money, for that year?

Thus at year 25 with 65 trees; you might decide to leave the best 15 trees and let them grow to 35 years old.

Cutting for Quality:

a. Log Magic- sometimes less is better and sometimes more is worth a lot more. I will have to get you some log cutting pictures to show you the Magic. But can you imagine the loss of money if someone didn't understand this Magic?

1. So you have a 12 foot log worth say $100; but I say cut it into an 8 foot log and make it worth $200.;

2. You have a 16 foot log that you could cut two 8 foot logs worth $250; but I say cut one 10 foot log worth $400.

3. Two 5 foot logs are worth $80; One 10 foot log is worth $400.

b. "Cutting" the tree down. So all of us cut the same tree down, at the exact same spot. Which tree is worth more? It is amazing the amount of pent up force in a falling tree. If you don't cut the tree correctly, as it falls part of the tree might not be cut all of the way through. A one to three foot piece of the tree could be pulled out of the bottom and leave a hollow spot in the bottom log. This cuts the grade down. You can also crack the bottom log if it isn't cut correctly.

c. So you have the tree cut down. You have cut it into logs. Did you "Paint/Seal" (to be more descriptive) the ends of the logs? When you cut a tree down it immediately starts to dry out. It dries way faster at the cut portions than through the Bark. This sped up localized drying causes the log to both Crack at the ends and to build up "Tension" inside the log. When you go to mill the log, the lumber can twist and come out wavy due to the tension in the log.

d. Dimensional lumber-

1. So you have a log on your Sawmill bed. It has 360 degrees of side. How do you determine which sides to start cutting first so you get the most value out of it? Picture a log with a big limb knot on one side. You could cut the log cross way with the limb, but then all of the boards on that side would have a knot in it. Or you could cut the log with the large limb knot, say vertical, so the knot only shows in one or two boards.

2. Kerf- Generally all Sawmills use a band saw. The one I will use has a Circular blade, just like a Skil Saw you would use at home. The Band saw blade is significantly Thinner than the Circular blade so you keep more wood. On one board you wouldn't care. But over many boards, you might end up with 10% more lumber. The Band saw blade has many small teeth, whereas the Circular blade might have 12 big teeth. The Band saw blade will produce a smoother surface. This means less wood is lost when you go to "Plane" the lumber to size". Again more quality lumber. Then why am I going to use a Circular Blade? Another story.

e. Cut to random lengths- Let's say your logs are to 8 foot lengths. Let's say the price per Square board feet is "A" $10; and for a "C" is $2 at this processing stage. If the knots in the "C" board are in the last two feet of the board, then you cut off two feet and now it is an "A" quality board.

f. Joining- You're "Rough" grade lumber, is it even worth it to ship it to India/China? Either sell it into the local market as construction lumber; or trim/Join it. Cut or trim all of the bad wood or open pieces out of the board. Then trim into standard small lengths. Then "Join" and glue them together into any size board you want. You could make 4 inch wide joined boards. Or you could join the 4 inch widths into 8 inch widths or greater thicknesses.

Selling for Quality:

a. Selling for Quality lumber requires Sorting. If I bake you a cake and you find a piece of paper in one slice. Is the rest of the cake bad? If your the customer or buyer the whole cake is bad, and you will only pay me for a bad cake. When dealing with overseas buyers you want to Sort to their Specs within the price range you are selling. Any deviation and they will want a price concession and its to late, the product is overseas.

b. When to Sell? Teak is a tropical climate tree. It is really hard to cut and deliver timber during the Rainy season. Then get it to the sawmill for processing. Sell your lumber right before the next Rainy season, when supply of lumber is Short, "hopefully", or you will need to sell at a lower price or carry for a year.

What does this have to do with Real estate? Timber land is a great investment. As mentioned before a Banana, you have to sell immediately. Timber you can let grow and it gains value. Whether Teak or Southern Pine, the above items or concepts will need to be applied to determine the value of your property or purchase price.

**************01/09/2022

There are several objectives on this investment: A. Lifestyle addition, B. Real Estate- Land, C. Real Estate- House, D. Real Estate- Timber, E. Real Estate- Timber management.

No matter how good the "pictures" look, no matter if it is 0 degrees where you are at, no matter whatever; don't do this type of investment. I'm having fun, but there are a lot of other reasons, I'm doing this investment that you probably don't have, can't get, or can't take the potential loss. I will have more failures than successes on this project. But in total it will be fun and profitable.

Lifestyle: My wife and I never plan to live there permanently. Our son this week just went to Navy Bootcamp for submarines, 15% drop out, so have to see how he does. He should do good. Iowa 9 degree high and -5 low last week. Belize 85 and going into low humid and bug period for 4 months. Can't wait to pick our own Pineapple and Banana.

RE Land- Belize has one of the lowest population per square feet in Central and South America. Less pressure on land price. I will use the next 25 years as a time frame. 51% of the people are 24 or younger. Land at key locations along roads or recreational areas is still readily available. If you want land next to a river or the beach you can readily purchase it. In the next 25 years the population of 400,000 will probably double due to the young having kids, bette health care, migration from poorer countries and Expats. More people, higher prices. We are in at $4,000 per acre. Going with current day dollars and not inflation, this land will go for about $20,000 in the future, in today dollars. Actually, if you saw my Subdivision post, if we subdivided this land today it would go for about $10,000 per acre today if sold in partials due to the location, Creek/River, Electricity and water access.

RE House- Bad investment up front. There is not much of a Real Estate market. Right now you should not expect to build or buy and make money. Belizeans $5 BZD or $2.50 USD per hour for a laborer; don't make enough to be in the market for the types of houses you would be thinking about. Thus your market is fellow "Expats". So why am I building?- We built next to a clean/nice river and also a creek. In a great geographical location. Took someone else's dream, and built upon it. Found a great contractor and developing a long-term business relationship with him. Over a 25 year time frame the combination of the location and the house will grow faster than other properties, due to location/location. We will have about $100,000 into this building furnished. Might have to wait 3 years to sale, but would expect $350,000 to $500,000; house with 2 acres. Again, due to the location, creek/river access and the fruit trees planted.

RE Timber- takes 25 years till harvestable Teak trees. Not counting the land which was discussed above we will have about $40,000 NPV into the Teak trees over the 25 years as standing timber, not harvested.

Value of Trees:

435 per acre x 20 acres= 8,700 trees

At 7 years thin 1/2= 4,350

At 14 years thin 1/2= 2,175

At 20 years thin ??= 1,085 Some of the thinning's are saleable.

At 25 years harvest 1,085 trees.

You measure at the small diameter end of the log. Since we are properly managing these logs, we will get at least 3 clean logs of 8 foot each.

Diam. Doyle BF

Log 1 diameter- 20 inches 128

Log 2 diameter- 15 inches 61

Log 3 diameter- 8 inches 8

Total board feet per log= 197

Number of trees= 1,085

harvested BF= 213,745 BF

Use $1USD/BF today= $213,745

NPV today= $ 49,802

So we plan to invest $40,000 in today dollars and have timber worth $49,802 in today dollars? Why would you ever plant Trees? It's not worth the risk or effort over a 25 year time span. Look up above at the Value stream from Standing Timber to planed lumber. A 16 multiplier. So the $49,802 x 16= $796,000 in today dollars. Wait though, there is the cost of taking a standing tree all the way to Planed lumber. We will do it very inexpensively in Belize due to the cheap labor and the scalable equipment I will use. The major point to take away from this, it's not worth growing Trees for lumber, unless it's just for fun.

Plus, we have a problem. I'm 62 and 25 years from now, I will be 87. Already told my Wife and Financial Planner to count me out at 80. So, I will be too old and I already noted it's not worth just growing trees. See next section.

RE Timber Management- So above, it's not worth "growing" trees and I will be too old. Setting up a partnership with our Belizean contractors to teach them the Lumber industry. They are about 40 and 18 years old. Should make it another 25 years. Plus, my son is only 20. Will contract out with small Teak property owners to manage and harvest their trees.

Heading down in a few weeks. Will grab some more pictures and continue the story.

Hope one of our Pineapples is ready.