1031 Exchange Texas | How Much are Mineral Rights in Texas?

1031 exchange texas

The state of Texas is home to the largest number of mineral rights owners in the United States.  With such a huge mass of land, mineral rights in Texas can be worth from as little as $50 per acre to upwards of $5,000 per acre.  Obviously, the amount of minerals on the earth is going to be the number one factor. Determining the value of minerals rights in Texas and elsewhere are usually the same.  However, In order to determine the mineral rights value of a plot of land in Texas, there are additional internal and external factors that come into play. Let’s talk more about Mineral Rights and 1031 Exchange Texas today.

Mineral Rights History

Unlike in home buying, past transactions for purchasing mineral rights are not public records.  This makes it difficult to track the value of specific mineral rights, and ultimately makes the value of mineral rights in Texas as much as the buyer is willing to pay. If the property is yet to produce mineral rights, a professional valuation must be done to determine the estimated production levels of the subsurface.

Exact Location of Mineral Rights in Texas

The location of your mineral rights within Texas plays a huge factor in valuation.  Oil and gas companies look at the accessibility of the land as well as the proximity to other resources, such as water, in calculating the profitability of extracting minerals.  Your mineral rights in Texas value will be influenced by which companies are operating in the area. Usually by virtue of their specific lease terms for your property.

Producing vs. Non-Producing Mineral Rights

Producing mineral rights generate oil and gas royalties on a monthly basis.  By already having an existing cash flow, producing mineral rights is going to be valued higher than non-producing mineral rights.  With that, non-producing mineral rights can still be worth a lot of value. It has the potential to produce oil and gas royalties in the future.

1031 Exchange Texas Overview

The basic premise of a Texas 1031 exchange is the same as it is throughout the country. Do you have the real property that you are using in your trade or business? Are you holding it for investment purposes and do you wish to sell it? You may be able to defer the federal and state income taxes. This is normally incurable by selling such a property. You just really need to make sure that you are fully aware of the 1031 exchange holding period.

To achieve this tax deferral, you would need to use a §1031 exchange, which essentially allows you to sell your property and use the proceeds to purchase a like-kind property within a set time period.

External Factors concerning

There are also many factors that extend beyond Texas’s state lines that affect the price of mineral rights.  Timing is by far the largest.  The price of oil varies just like any other commodity, so the current dollar amount per barrel plays a large part in determining the mineral rights in Texas value.  This is most apparent in producing mineral rights. Long-term industry trends also affect mineral rights from land that is currently not producing.

If you have further questions on 1031 exchange Texas, feel free to reach out to us here.

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