If you're looking for counter-cyclical real estate investments -- those that defy the general downswing underway in the housing market -- you've heard us here at Realty Times talk about farmland, which is tied to global commodities demands and the biofuels boom.

But there are other niches out there in land, such as timber property that you buy for its wood-product commodity value, but that you can later turn around and sell for its potential recreational or second home development value years down the road when those markets bounce back.

Curtis Seltzer, a Virginia-based land investment consultant and author, says carefully-selected rural land is showing solid appreciation in dozens of markets around the country, especially acreage that has timber or energy-related value.

According to data compiled by Timber Mart-South, a research foundation at the University of Georgia, rising global demand for certain timber products pushed prices for hardwood pulpwood up by 33.6 percent from the third quarter of 2006 through the third quarter of 2007.

U.S. pulp exports -- turned into paper and other products -- jumped by 21 percent last year, a 10-year record gain.

High demand for pulp, in turn, has made hardwood timber acreage more valuable -- even in the face of declining demand for the softwood timber used in housing construction.

Dr. Seltzer says another attraction for investors in timber tracts is that they may be acquirable at a commodity-based price -- that is, purely for its timber value -- but then resold years later at he calls its "B-H-U" value -- its "best and highest use" as recreational or second home development acreage.

For example, say you pay $1,000 an acre for a well-located timber tract, and hold it for a number of years while you harvest the timber at $500 an acre income in selective cuts.

Then you turn around and sell the property at a price pegged to its best and highest use -- subdivision into second home or recreational acreage -- at $3,500 an acre.

That's likely to provide you a total return that beats most stocks, bonds or residential real estate, says Seltzer, who works with investors to locate and analyze the economics of such deals.

Is investing in raw land a sure thing? You know it's not, especially for investors who don't have a clue about hardwoods, softwoods, saw timber or pulp.

As with any real estate, you've got to do your due diligence. And it's essential to bring in experts.

But for a countercyclical market play right now, timber acreage is definitely worth a look.

Published: March 21, 2008

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consumer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.