Lesson 1 of 6 · 12 min
Raw land, farmland and timberland
Raw land, farmland and timberland are unique, illiquid, location-bound assets like real estate, but their value comes from the land and what grows on or lies under it, not from buildings, and only farmland and timberland add an income stream to price appreciation.
In short
- Natural resources cover soft commodities (grown: crops, livestock), hard commodities (mined or extracted: metals, oil, gas) and the land that produces them: raw land, farmland and timberland.
- Like real estate: unique assets with a fixed location, illiquid, few buyers and sellers, and an equity-style claim on residual cash flows.
- Unlike real estate: value depends on soil, climate or geology, not physical improvements; financing choices are narrower (mostly bank loans or private debt); and specialist knowledge is essential.
- Raw land earns only from price appreciation (and possibly lease income); farmland and timberland also earn from selling their output.
- Ownership: raw land mostly via direct ownership or partnerships; farmland and timberland also via REITs, and timberland via TIMOs that manage holdings for institutions.
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