Informational Guides & How-To Resources with specific types of property or business. Check our valuable guides on this page today at Ranger Land & Minerals.

oil and gas permits

What is unique in The United States of America? We are one of the few countries around the world that permit private citizens to own mineral rights. Within the borders of our country, rules, regulations, and policies differ. This is heavily from state to state on a number of issues. For oil and gas, this is no different as state permits will vary throughout different territories.

In this quick information blog, we will define what state permits for oil and gas are. We will also answer some of the most common questions.  This includes regarding who, what, and where oil and gas permits application happens. After diving into the basics for these terms, we will provide a few additional resources. Mostly information about local state permits and drilling permits.

What are oil and gas permits?

A permit is an application with the local government. An application to drill, complete, re-enter or complete a well. Permits are requirements in all states in which oil and gas drilling is permissible. The filing of permits is usually with the Land Office of a state government.

Who will submit a state permit for oil and gas?

State permits are issuable to oil and gas operators for active or soon-to-be active mineral rights. Mineral rights owners do not need to worry about filing a state permit. Submission of that paperwork is by the oil or gas operator.

Only issuable to American citizens, filling of state permits are from the oil and gas operator employees. They are legal to work on the project. More often than not, companies will have a landman to file permits. They don’t have direct involvement with any of the other parts of the overall oil and gas operation.

When to file these permits?

Within any organization, filing of state permits is typically soon as possible. Especially after the action is undergoing on an oil and gas lease. If the well is ready to be drilled or completed for the first, second, or final time. This is where a permit must be filled at every step along the way.

In typical instances, permits will last for one full calendar year before expiring. This may vary by the state or the nature of the permit as well.

Why is permitting a requirement for oil and gas?

State permitting is a requirement. This is to ensure the ongoing health of the earth and the success of an oil and gas operation. Unpermitted drillings may cause damage to the earth or reserves which could lead to catastrophic environmental and economic damage.

Oil and gas permits are required in order to ensure the health and safety of:

  • All mining operations
  • The quality of air, water, and earth
  • Well drilling
  • Use of roads
  • Resource storage
  • And more

Is it possible to file these permits on federal land?

Yes, in some parts of the country federally reserved land does not technically belong to any state in particular. This is even if found entirely within one’s borders. In states like Nevada, Arizona, and more it may be possible to file an oil and gas permit. Usually for the exploration or extraction of natural resources from federal lands. Information for outstanding federal mineral rights can be seen here.

Resources for filing State Permits for These Resources

Not every state has a dedicated mineral rights office. Most states in the Union have at least one main point of contact or center of information. This is where to file permits for oil and gas operations. Are you looking for a reference for your local state? We will include some of the most popular state resources below.

Texas: Please see the GLO energy business resource page for mining on state lands within the Lone Star State. Commissioned by George W. Bush, GLO provides resources and permits for prospecting, leasing, and mining operations.

Oklahoma: The Department of Environmental Quality is Oklahoma’s home for general oil and gas permits as well as specific applications for special operations and businesses.

North Dakota: North Dakota-based operators can make use of the Frequently Asked Questions page for the state’s oil and gas permitting processes.

Colorado: In the centennial state, oil and gas permits are issued by the Colorado Oil and Gas Conservation Commission.

Pennsylvania: Resources for the Keystone state’s oil and gas permitting process can be found on the PA Department of Environmental Protection website.

Nevada: Please see the State of Nevada Commission of Mineral Resources Division of Minerals page for current information on state permits.

Arizona: Since 1915, Arizona’s State Land Department has been the best resource for locating and filing state mineral exploration and drilling permits.

If you have more questions about these permits, feel free to ask us here.

mineral-rights-recorder-of-deeds

Like many different kinds of highly valuable property, a record of mineral rights is a must-have. This comes from a government official. Recorder of deeds is a must for legality. Similar to real estate or automotive purchases, mineral rights can transfer between owners. This is only possible once the official paperwork has been documented and signed.

There are many questions regarding any legal stipulations about land ownership. We’ve put together this guide to help clear some things up below the Earth’s surface. In this glossary and FAQ, we will define some of the most commonly used terms in official mineral rights records.  After that, we will provide additional resources to help localize your questions and answers.

What are mineral rights?

Are just getting up to speed with your purchased or inherited land? First, you must understand what it means to own mineral rights. Mineral rights entitle the owner to any valuable resources that are beneath the earth. This is available as part of a fee simple estate or purchased separately in a split estate,

Most commonly, mineral rights are about oil and gas used for energy. It usually includes manufacturing and more too. Mineral rights are not available in all areas. It is available only to Americans, Canadians, and residents of a handful of other countries.

How does the recording of mineral rights take place?

Officially, recording of mineral rights with a mineral rights deed. is the process If you own your land in a fee simple estate, then there may not be a separate deed for your subsurface rights. Rather, it will be a designation as part of your whole property. Knowing this, it is important to completely understand what property rights are conveyed. This is in the event of a sale or purchase.

Physically, mineral rights records exist in a government office or digital database. Usually, the local governments hold copies of deeds. This is to retain a record and solve any disputes about the property. A copy should also be on hand by the mineral rights holder. This way he or she can legitimize ownership before entering into an oil and gas lease.

What is a recorder of deeds?

A recorder of deeds in a government official, office, or entity that is responsible for the processing and maintenance of public record deeds. The physical or in-person recording is the usual way to record deeds. The practice of digital databases for mineral rights deeds has only become more prevalent since the turn of the 21st century.

How to Find your Recorder of Deeds

It is very easy to find your local recorder of deeds before entering into a property transaction. If you live in a city, check with the city office. If you live outside of town, which is much more common for mineral rights negotiations, then it is likely that your recorder of deeds will be at the county level.

Deed recording practices vary heavily from state to state. If you are in an area that is currently useable for oil, gas, or other resource production, then your local office may have a designation recorder of deeds solely for mineral rights transactions.

What does the recorder of deeds do?

Whenever a deed becomes recorded, the property owner can officially claim the rights to whatever is described in the document. Recording typically occurs during the transfer of ownership from one individual or entity to another. Recording deeds of mineral rights owners are then free to enter oil and gas leases to receive mineral royalty payments. This is for the valuable resources extracted and sold from the property.

Are recorded deeds public information?

Yes, more often than not, the recording of deeds is to be public information. While not just anyone can access them, deed recordings are necessary to be considered public information in the event of a legal dispute or future transfer of ownership.

Are unrecorded deeds valid?

Surprisingly, unrecorded deeds are still considered valid in many states across the country. So long as the buyer and the seller have agreed to terms, an unrecorded deed may still be valid if the new owner wants to pursue new ventures with the land itself. With public records, however, some difficult scenarios can arise if someone were to impersonate a deed owner.

When should I record my mineral rights deed?

We recommend recording your mineral rights deed as soon as possible after you purchase your new property. In doing so, the world will become aware of the new owner, and oil and gas companies may begin to contact you with lease offers. However, mineral rights deeds in some states may not be a legal requirement under any specific time period. Therefore, you can take several months or years before officially recording your deed.

If you have further inquiries about recorder of deeds especially for mineral rights, contact us here.

oil and Gas Revenue Checks

Oil and gas revenue checks are everyone’s favorite part about mineral rights ownership. Oil and gas revenue checks are a great way to earn passive income from an investment in mineral rights.

In this complete guide, we will cover some of the most frequently asked questions. It will be all about oil and gas revenue checks. This is to help current and future mineral rights owners understand what to expect. After defining a few terms, we will go into detail about some of the average statistics. These are statistics that surround oil and gas revenue checks.

What are oil and gas revenue checks?

First and foremost let’s define what we are talking about here. Oil and gas revenue checks are monthly states. They will give it to the owner or partial owner of active mineral rights. They call the Oil and Gas revenue checks “oil and gas royalties” or “oil and gas royalty statements.”

Today, they are still sending most oil and gas revenue checks in the mail. Typically, they show a full picture of the month’s operation, resource price, ownership percentage, and actual check dollar amount.

Who sends it out?

The operator or producer will send the Oil and gas revenue checks. In the largest oil and gas operations, companies will utilize either an in-house or third-party revenue distributor. Oil and gas revenue checks may be the only interaction between the actual extraction company and the person or entity. That person will receive the check.

How do you get it?

How to receive an oil and gas revenue check? One must have a stake in an active and producing oil and gas operation. Most commonly, this occurs when a mineral rights owner enters into an oil and gas lease agreement. This is for a company to locate, extract, and sell valuable resources from the owned property. They will mail the Oil and gas royalty checks via the US Postal Service in discreet packaging.

How often do they send these checks?

Across the United States, the industry standard for oil and gas revenue checks is a monthly recurring payment. Are you not a mineral rights owner? Then  have an overriding royalty interest in an oil and gas operation. With that, it may be possible that you only receive a one-time revenue check. This is after you participate in the process.

How much do you get with these checks as payments?

Technically, there is no limit on the amount of payment money.  The exact figure that you will receive is a predetermined amount. This is as defined in your mineral rights lease agreement contract. In most scenarios, they fix a percentage from the total sales revenue of an operation each month.

Most commonly, oil and gas revenue checks are payable to about 12.5% or one-eighth of the total monthly profit. More often than not, this is then divisible among multiple mineral rights owners on a large, active property. In some states, there are legal minimum oil and gas royalty compensation percentages.

What is the minimum amount of an oil and gas revenue check?

In most oil and gas leases, there will be a predefined amount of money. This must accumulate before a revenue statement is sent to a mineral rights owner. What if an operation has been slowed due to seasonality, weather, or other condition? Months in which production and sales do not meet the minimum threshold will generally cause producers to temporarily withhold payments.

What taxes are payable on these checks?

There are a considerable number of taxes that may be applied to any given oil and gas revenue check, with total value varying depending on your location. Most commonly, it is not unusual to see severance taxes, conservation taxes, state taxes, and more on a monthly oil and gas revenue check. Although it may not be significant, revenue checks may be taxed at rates up to 10% across the country.

Why are there deducted items from an oil and gas revenue check?

Unlike some products, oil, gas, and other natural resources must undergo a significant amount of modification and processing before becoming ready to market and sell. For this reason, oil and gas operations incur significant expenses between the extraction and sale stages. These process costs are divisible among stakeholders and credited to revenue checks based on actual expenses. Most commonly, deductions may represent costs associated with dehydration, compression, gathering, processing, and treating the minerals.

If you have further questions about oil and gas revenue checks, feel free to reach out to us here.

A “shut-in royalty” may sound like it is describing a member of high society that spends a little too much time at home. After all,” shut-in” is a term that is commonly useable to describe people. People who are either voluntarily or unwillingly confined to a home, room, or even bed.

In the context of oil and gas, the term “shut-in” is useable to describe wells, operations, and royalties. This is related to mineral rights production. Below, we will define the meaning of these terms and answer some of the most frequently asked questions surrounding shut-in wells for oil and gas production.

What does a shut-in well mean?

A “shut-in well” is a petroleum industry term meaning any gas and oil well that is under closure off for further production or is incidentally lowering its potential output. These oil wells come in two forms. First are those that have been shut down in an emergency. Second, are those that influence the supply of oil or another natural resource.

What causes shut-in wells within the oil and gas industry?

Most commonly, shutting in of oil and gas well is the result of unsafe or unusual conditions. Usually, in the environment and economy. Namely, natural disasters are the leading cause for temporarily shutting in oil and gas operations.

Natural Disasters

There are a few different types of natural disasters that may cause oil wells to be shut-in. These are in areas of the country where you can find oil fields under large flat reserves of desolate land.

Near the shores in Texas and Louisiana, shutting in and worker evacuation are often the hurricanes and other tropical storms. In Oklahoma and North Dakota, it is much more common for oil and gas operations to have emergency tornado protocols.

Lower Oil Demand

During the global coronavirus pandemic of 2020, stay-at-home orders caused the demand for petroleum to dramatically decrease overnight. The supply of oil began to stockpile in barrels and distribution centers across the country. This is due to passenger cars, work vehicles, and truck fleets off of the road,

In response to this, many oil wells began to shut in wells to combat the oversupply of oil. This is happening in high-producing states like Oklahoma and New Mexico. Things like this tend to happen on a smaller scale throughout the normal operation of an oil well. This is to combat fluctuations in local markets.

Project Delays

How many project delays one can expect in every unique situation? Everyone that has involvement with an oil production site knows it. From machinery and labor failures to governmental and weather-related delays. Projects rarely fall on the expected timeline set forth by investors.

Shut-ins from unexpected project delays can halt oil and gas production for hours. Mostly, it takes days or weeks depending on the severity of the challenge.

Shut In Royalty

Although an oil or gas well shut-in may not affect most people in the United States, those that own mineral rights may be a bit keener to pay attention to mineral production in certain plants. If you own complete or partial mineral rights of an active plot of land, then your monthly oil and gas royalties may instantaneously affect any operations shutting in.

What is a Shut-in Royalty?

A “shut-in royalty” is a placeholder royalty payment to a mineral rights owner while the operations are temporarily shut-in. Essentially, what this means is that these assure oil and gas owners that they will receive payment. This is during operation shutdowns causable by natural disasters, company delays, or government ordinances.

Shut-in Royalty Clauses

In an oil and gas mineral rights lease agreement, most quality contracts will include this clause to guarantee some form of shut-in royalty. Most commonly, this is expressed as a real dollar value but may also come in an amount more closely related to recent extraction and sale operations.

Shut-in Royalty Provisions

Aside from the compensation amount, provisions on an oil and gas lease should include a timeframe in which mineral rights owners can expect to be compensated. Depending on the conditions, shut-in royalty payments typically fall within a 90-day timeline.

How can I guarantee shut-in royalties?

Every oil and gas lease negotiation is different, and there is no standard contract throughout the fifty states of America. Before you agree to permit oil and gas drilling on your land, it is best to ensure that there is a shut-in royalty clause or provision directly stated on your oil and gas lease. Within the clause, payment and timeline considerations should be addressed.

To get the most guaranteed earnings out of your mineral rights lease, it is strongly recommended to work directly with a professional, specialized oil and gas intermediary.

If you have further questions, feel free to reach out to us here. 

We are all in this together, right? Sometimes bringing people together to operate as one can be a better overall solution. It is better than everyone fighting their own individual fight. This is especially true if everyone involved has one common goal. In this comprehensive guide, we will define and explain everything you need to know about oil and gas unitization, its consequences, and what to consider when pooling your oil and gas rights with neighboring tracts.

Oil and Gas Unitization

Unitization and pooling are useable to bring landowners and lessors together. This is applicable in the world of mineral rights such as oil and gas. It is to maximize the value of an oil and gas operation. Oil and gas unitization can be brought on by the landowners themselves, mineral rights operators, as well as local governments.

Oil reserves are below the earth. With that, it is very common that large crude oil supplies may span the jurisdiction. Usually of several property owners on the land’s surface area. In cases like this, gas and oil unitization is often necessary. This is for the resources to undergo extraction in a safe, fair, and efficient manner.

What is the Unitization of Oil and Gas?

For all accounts and purposes, oil and gas unitization means forming and combining into one singular entity. Unitization is a mathematical term with many real-life examples. Most commonly, however, unitization is used in the combination of mineral rights or mineral leases.

What is an Oil and Gas Unit?

An oil and gas unit is the end product of unitization. Essentially what this means is that anything that has been unitized forms together to create a new, single unit. Examples are two different parcels of land.

At oil and gas drilling sites, a unit describes the legal boundary of the total consolidated land area.

Oil and Gas Pooling

What is Pooling of Oil and Gas?

Oil and gas pooling is another term for the unitization of land or leases. With this, units refer to as “pools”. Gas and oil pooling is useable in the sense of combining efforts into one whole. Such as in carpooling, rather than referring to crude oil as a liquid. An example is a swimming pool.

The Declaration of Oil and Gas Pooling

Officially, oil and gas units must be documented in a legally binding contract often referred to as “the Declaration of Pooling.” This document may have a different title depending on the location, but a detailed description of the oil and gas unitization must be submitted to local jurisdictions before they are taken into effect.

The Consequences of Oil and Gas Pooling

Just as a mineral rights lease agreement can be a very complicated document, a declaration of the oil and gas pooling agreement should also be reviewed in detail before signing on the dotted line.

We have explained several of the positive consequences of pooling that make the practice entirely necessary. However, there also may be negative effects of gas and oil unitization for individual property owners. Most commonly, this includes lesser oil and gas royalty payments. Another is a quick depletion of total resource reserves.

Compulsory vs Voluntary Pooling of Oil and Gas

Are you getting offers to pool your oil and gas royalties with neighboring tracts? Then the decision may or may not be up to you as to whether or not the unitization will happen. For this reason, it is entirely necessary to determine the nature of your oil and gas pooling agreement. Do this before jumping to conclusions.

Voluntary Pooling – Voluntary pooling of oil and gas is ideal because it only exists to benefit the stakeholders of the agreement. Are you given the choice to join a neighboring unit? This may lead to oil and gas royalty payments without any direct extraction from your property.

Compulsory Pooling – Compulsory pooling, also known as mandatory pooling, is the forced unitization of oil and gas rights generally brought on by local governments. Forced pooling orders are often put in place to limit the total amount of oil and gas wells that can be drilled on the surface of a county or state.

Oil and Gas Pooling Clauses

In most modern oil and gas lease agreements, operators will include a “pooling clause,” which outlines both parties’ rights through the duration of the contract. With this, expectations can be made at the beginning of the pooling agreement so as not to erupt any unwelcome surprise later.

If your oil and gas lease agreement has a pooling clause that allows operators to unite your mineral rights with neighboring tracts, be sure that you understand the consequences of this both for better or for worse. In some cases, pooling oil and gas is entirely necessary in order to receive mineral royalties, however, it is important to understand that you will now be “sharing” your oil and gas rights.

If you have further questions about Oil and Gas Unitization, feel free to reach out to us here. 

In order to start earning mineral royalty payments, you must first acquire mineral rights. Are you looking at your options? Then you may be able to purchase mineral rights as a part of a larger property transaction. Let simply say it is a standalone asset. Usually, there is a separation process of mineral rights from their surfaced rights. After that, the orphan subsurface is considerable a “split” or “severe”. In this article, we will outline everything you need to know about mineral rights severance. We will focus more on the United States.

What is Severance?

In the vernacular of today, severance is most useable to describe “severance pay”. Some call it “severance packages”. This is in which an employee continues to receive paychecks after the dismissal from an employer. But don’t worry we’re here to teach you about mineral rights.

The term severance means the act of ending a connection or relationship. Severance is useable to describe the end of a relationship. In this case, the separation of a property into two different owners.

Fee Simple Estates

A fee simple estate is the highest level of property ownership in the United States. Fee simple estates are also commonly referred to as “unified estates” or “unified tenure”. Those that purchase their property in a fee simple estate acquire the land’s surface. Moreover, it includes the subsurface, water rights, buildings, and other features.

Severed Estate

A severance estate, or a “split estate,” is a property that has division amongst multiple owners. In this sense, the land has been “severed” or “split”. The purpose is to best use its resources to fit the needs of separate parties.
Severed estates are very common in mineral rights and water rights transactions in which local regulations prevent new owners from acquiring shared resources. Existing fee simple owners can also sever their estate at any point in order to sell off their mineral rights.

Severed Mineral Rights

Severed mineral rights exist independently of surface property owners. When in possession of mineral rights severance, individuals and companies typically have permission to perform any reasonable action. This is in order to explore and extract minerals from the property. With this, severed estate owners must work in conjunction to find the best solution.

What’s next after the severance of a deed?  A  creation of a separate mineral deed takes place to accommodate the new property owner. The new deed can outline full or partial ownership of the property’s mineral rights, depending on the conditions of the contract.

Fragmented Mineral Rights

If there is a division of split-estate mineral rights among multiple owners, it is a bit redundant. Redundant refer to them as “severed severed” mineral rights. Instead, mineral rights divided among multiple parties are called fragmented mineral rights.

With oil fields and fossil beds taking up massive amounts of space below the surface of the earth, mineral rights can be split among an essentially infinite number of separate owners.

What is Severance Tax?

Although they share the common root term of “sever,” severance tax is not applied at the time when severed estates are established. No, instead, severance tax actually gets its name for when natural, non-renewable resources are “severed” from the earth.

What this means is that severance tax is applied at the time of mineral extraction, rather than when an estate is split. All national and state severance taxes are unavoidable, whether or not the operation ends up turning a profit.

Who pays severance tax for minerals?

At the time of extraction, severance tax is applied to the energy production company as well as any individuals or entities that hold mineral interests in the operation. Most commonly, severance tax is applied to crude oil, natural gas, and coal operations.

The severance tax is highly variable at rates for different materials and different parts of the country. Today, nearly all of the states that produce oil or gas have applied some sort of severance tax for operations within the state borders.

What is the severance tax on oil?

In 2021, the current national average severance tax on oil and gas is typically around 5 to 6% of the production’s gross value. Many states have tiered severance taxes that apply different rates for operations of varied magnitude. Severance taxes are payable directly to local governing bodies.

Throughout the country, they define severance tax by a few different terms. However, the most common of which is “production value tax.”

Wrapping Up

In conclusion, it is very easy to get terms confusing. This is when considering estates severance and severance taxes are payable on active mineral rights. We hope that this article is helping you define these terms as it provides information on ways in which severance works in the realm of mineral rights and oil and gas royalties.

If you have further questions about mineral rights severance, feel free to reach out to us here.

Long before the discovery of oil, gold, and other precious materials in America, mineral ownership has always established wealth. There are energy-generating coal and natural gas alongside other precious metals and resources. That’s why mineral ownership can be extremely valuable and thus vary hard to acquire. That’s also why looking for a qualified buyer has been a trend.

How about here in the United States? Individuals holding mineral rights to a plot of land are entitled to valuable resources below the surface of the earth. What about in both fee simple ownership and split estates? Basically, mineral rights owners are free to enter into an oil and gas lease agreement. This is to find, extract, and sell their valuable subsurface resources.

Valuable mineral rights purchases may be out of reach for many people and businesses. This is happening in a world with a lot of prospective buyers and much fewer qualified buyers, Below, we will outline what constitutes a qualified buyer for mineral ownership.

What is a qualified buyer?

For any large financial transaction, a qualified buyer is a person who has expressed an interest in a purchase that meets the expectations of the seller. Qualified buyers are common in the sale of homes, businesses, and other large properties.

When assets are limited and negotiations begin, well-qualified buyers are typically put at the top of the list for sales of highly desired properties. A well-qualified buyer is characterized as exceeding seller expectations for transaction financing.

Who can buy mineral rights?

Internationally, the United States and Canada are two of the few countries that allow private parties to purchase mineral rights. Here in the states, mineral rights is purchaseable by:

  • Individuals
  • Shared groups of people
  • Non-profit organizations
  • Business entities
  • And governments

Qualified Buyers for Mineral Rights

Active and untapped mineral rights have the potential to generate a fruitful stream of mineral royalty payments. Knowing this, valuable mineral rights are rarely cheap by anyone’s standards. However, both independent smart investors and business entities have the opportunity to become qualified buyers for mineral rights properties.

Qualifications for Individual Buyers

Individuals can purchase the full mineral rights of a property or even just a small fraction of the total subsurface area. Regardless of whether they are aware or not, many people who purchased their home in a fee simple estate own their mineral rights. Of course, a small suburban plot is rarely going to be suitable for drilling and production, and thus most individual mineral rights have little value.

In most individual investment mineral rights transactions, the following qualifications are typically true of qualified buyers:

  • An annual average income of >$200,000 for the past 2 tax years
  • A joint spousal income of >$300,000 per year for the past 2 tax years
  • Or a total net worth exceeding $1 million

Qualifications for Business Entities

Organizations looking to earn mineral interests have the opportunity to purchase mineral rights if their business is qualified. No matter their motivation for the acquisition, today it is possible for most types of businesses to purchase mineral rights.

Of course, like in the case of the individual, businesses have to have a considerable amount of wealth to acquire mineral rights at the scale of their enterprise. Generally speaking, a business entity can be considered a qualified mineral rights buyer if its total assets are in excess of $5 million.

Of course, wherever there are contract negotiations, there are always loopholes. Mineral rights transactions are famously lenient as well, with buyers and sellers looking to always find the best solution for all parties. Businesses that are formed specifically for the purpose of acquiring mineral rights may be able to more easily navigate the qualifications of a seller if their intentions are directly laid out in business plans.

Am I Qualified to buy Mineral Rights?

Are you wondering if you are qualified to buy mineral rights? If your next asset is going to be in a valuable mineral rights property, we recommend working with an industry intermediary to make the process easier and maximize your investment.

Oil and gas mediators, legal professionals, agents, and brokers can help you determine what sort of mineral rights properties you are qualified to purchase.

How to find Qualified Buyers Mineral Rights

If you or your company is currently receiving offers to have your mineral rights purchased, then you may use our qualifications outlined above to quickly narrow the field of candidates. Once you’ve got a select group of buyers, you may vet the suitors however you feel is necessary.

If you have further questions about mineral ownership, feel free to reach out to us here.

Nursing homes are a critical part of our society. However, that does not mean that everyone is capable of running one. Despite their crucial role in the life cycle of humanity, nursing homes are rarely profitable businesses. This is due to their ongoing expensive upkeep. This is when 1031 Exchange Nursing Homes come in.

Are you a business owner of a nursing home? Selling may become a more attractive option in each year of operation. Today, there are more resources than ever available for nursing homeowners. This makes it easier to find a buyer and sell their property for a large sum of money. Of course, that sale is taxable, so don’t start celebrating too early.

In this quick guide, we will show you how to maximize the sale of a nursing home. We will share it step by step with a 1031 exchange.  A 1031 exchange is useable to minimize capital gains taxes paid when investing in a new property asset. This is whether you are an individual taxpayer or an operating business entity.

How to Sell A Nursing Home

To start, selling your nursing home is likely going to be the most difficult part of the 1031 exchange process. It is very rare that individual investors will approach a nursing homeowner in order to acquire the property and business. This is even while some businesses don’t go a day without someone asking to buy them out. Nursing homes are sellable through outbound marketing techniques. This usually includes the help of an intermediary or private equity firm.

Selling a nursing home is typically not a quick process. Most nursing homes remain on the market for months and sometimes years, depending on the location. While some property developers may be able to convert the nursing home into a profitable entity, there are also many local restrictions that prevent nursing homes from changing forms so as to ensure the health of seniors in the area.

Determining the Value of Nursing Homes

You can determine the initial selling price that is likely by a third-party intermediary. Still, there are a few things to consider when trying to find the approximate value of a nursing home. In most cases, nursing homes change hands while continuing to operate as a business and residence for those living onsite. While you can’t put a price on human life, the following should be considered when determining the initial value of a nursing home:

  • Building size and condition
  • Property size, condition, and zoning laws
  • Number of current tenants, and/or waiting list
  • Pay, ownership, or leasing structure
  • Asset quantity and condition (furniture, appliances, etc.)
  • Strategic vendor partnerships
  • And more

In many ways, selling a nursing home is like selling an apartment building, community center, and hospital all at the same time. With this in mind, nursing homes are typically sold for over a million dollars in most major cities. Today, nursing homes are much more likely to be sold B2B rather than to an individual taxpayer.

Taxes Paid on Selling Nursing Homes

Upon selling a nursing home for a considerable amount of money, large taxes are applied to both individual sellers and businesses liquidizing such a large asset. In fact, total taxation is likely to reach up to 40% of the initial selling price in some parts of the country. Once sold, the following are typically applied to nursing home transactions:

  • Federal Income Taxes
  • Capital Gains Taxes
  • Sales Taxes
  • Local Taxes
  • And More

Of course, smart investors know a few ways to minimize taxation with completely legal methods offered by the IRS. For instance, 1031 exchanges can be utilized to completely defer capital gains taxes that would otherwise be applied to the sale of a nursing home.

Selling Nursing Homes with a 1031 Exchange

A 1031 exchange makes it possible to lower taxes on the sale of a nursing home with the acquisition of a new like-kind property. If the new property is of equal or greater value than the nursing home, all capital gains taxes will be deducted. In the same vein, lower-valued assets make it possible to mitigate a portion of the capital gains taxes otherwise paid.

Nursing Homes Like-Kind Properties

When it comes time to explore new properties, taxpayers and businesses have a lot of freedom to choose many different types of assets to purchase in the 1031 exchange. The IRS has designated in the 1031 exchange code that new properties must be of “like-kind,” however arguments can be made for most personal property types. Both physical and intangible assets like the following can be purchased after the sale of a nursing home in a 1031 exchange:

  • Mineral rights and royalties
  • Water and ditch rights
  • Apartment buildings and condos
  • Hospital equipment
  • Office furniture
  • Farmland, livestock, etc.
  • Wetland mitigations credits
  • And much more

Of course, highly-valued assets like nursing homes have an enormous amount of potential when considering the tax-free acquisition of a new large asset.

Nursing Homes 1031 Exchange Timeline

Like we said earlier, nursing homes can take a considerable amount of time to sell. Once the deed of sale has been signed, however, the clock begins ticking on a [person or entity’s eligibility for the 1031 exchange. In order for the new acquisition to be valid in a 1031 exchange, a new asset must be purchased within 180 days (approximately 6 months) of the sale.

1031 Exchange Intermediaries for Selling A Nursing Home

With pressing deadlines and endless paperwork (most of which we are afraid to mention), most nursing home sellers use a specialty 1031 exchange intermediary to facilitate the sale and tax process. In doing so, investors can spend more time and less money on their business transition.

Why Purchase Mineral Rights and Royalties?

Despite only being available in a handful of countries, many American investors are unaware of the unique opportunity they have in owning mineral rights. By purchasing mineral rights in a 0131 exchange, former nursing homeowners can develop a steady stream of passive royalty payments in exchange for leasing their rights to an oil and gas company. As a drastically different business model than a nursing home, mineral rights are a great way to retain the most from a sale while paving a path for ongoing financial freedom.

If you have further questions about 1031 Exchange Nursing Homes, feel free to reach out to us here.

Senior housing is a critical part of our society. On the other hand, that does not mean that everyone is capable of running one. It has a crucial role in the life cycle of humanity. However, senior housing is rarely a profitable business due to its ongoing expensive upkeep.

Are you the building or business owner of senior housing? Selling may become a more attractive option in each year of operation. Today, there are more resources than ever available for senior homeowners. Mainly these resources help them to find a buyer and sell their property for a large sum of money. Of course, that sale is going to be taxable, so don’t start celebrating too early.

In this quick guide, we will show you how to 1031 exchange senior housing in order to maximize the sale. Are you an individual taxpayer or an operating business entity? A 1031 exchange is useable to minimize capital gains taxes paid on the sale of senior housing.

How to Sell A Senior Housing

Before you can 1031 exchange senior housing, you will first need to sell it. Selling your nursing home is likely going to be the most difficult part of the 1031 exchange process. Some businesses don’t go a day without someone asking to buy them out. It is very rare that individual investors will approach a senior homeowner. In order to acquire the property and business, there is a process. Senior housings are sellable through outbound marketing techniques. This usually includes the help of an intermediary or private equity firm.

Selling senior housing is typically not a quick process. Most senior housings remain on the market for months and sometimes years, depending on the location. Some property developers may be able to convert senior housing into a profitable entity. There are also many local restrictions that prevent senior housings from changing forms. This is to ensure the health of seniors in the area.

Determining the Value of Senior Housings

To determine the initial selling price, it is likely through a third-party intermediary. There are a few things to consider when trying to find the approximate value of senior housing. In most cases, senior housing change hands while continuing to operate as a business and residence for those living onsite. You can’t put a price on human life. However, the following are considerations when determining the initial value of senior housing:

  • Building size and condition
  • Property size, condition, and zoning laws
  • Number of current tenants, and/or waiting list
  • Pay, ownership, or leasing structure
  • Asset quantity and condition (furniture, appliances, etc.)
  • Strategic vendor partnerships
  • And more

In many ways, selling a nursing home is like selling an apartment building. it is also like selling a community center, and hospital all at the same time. With this in mind, senior housings are typically sellable for over a million dollars in most major cities. Today, senior housings are much more likely to be sold B2B rather than to an individual taxpayer.

Taxes Paid on Selling Senior Housings

Upon selling senior housing for a considerable amount of money, large taxes are applicable to both individual sellers and businesses liquidizing such a large asset. In fact, total taxation is likely to reach up to 40% of the initial selling price in some parts of the country. Once sold, the following are typically applied to senior housing transactions:

  • Federal Income Taxes
  • Capital Gains Taxes
  • Sales Taxes
  • Local Taxes
  • And More

Of course, smart investors know a few ways to minimize taxation with completely legal methods offered by the IRS. For instance, the 1031 exchange can be utilized to completely defer capital gains taxes that would otherwise be applied to the sale of senior housing.

How to 1031 Exchange Senior Housing

A 1031 senior housing exchange makes it possible to lower taxes on the sale with the acquisition of a new like-kind property. If the new property is of equal or greater value than the senior housing, all capital gains taxes will be deducted with the 1031 exchange. In the same vein, lower-valued assets make it possible to mitigate a portion of the capital gains taxes otherwise paid.

Senior Housings Like-Kind Properties

When it comes time to explore new properties, taxpayers and businesses have a lot of freedom to choose many different types of assets to purchase in the 1031 senior housing exchange. The IRS has designated in the 1031 exchange code that new properties must be of “like-kind,” however arguments can be made for most personal property types. Both physical and intangible assets like the following can be purchased after the sale of senior housing in a 1031 exchange:

  • Mineral rights and royalties
  • Water and ditch rights
  • Apartment buildings and condos
  • Hospital equipment
  • Office furniture
  • Farmland, livestock, etc.
  • Wetland mitigations credits
  • And much more

Of course, highly-valued assets like senior housings have an enormous amount of potential when considering the tax-free acquisition of a new large asset.

Timeline For a 1031 Senior Housing Exchange

Like we said earlier, senior housings can take a considerable amount of time to sell. Once the deed of sale has been signed, however, the clock begins ticking on a person or entity’s eligibility for the 1031 exchange of senior housing. In order for the new acquisition to be valid in a 1031 exchange, a new asset must be purchased within 180 days (approximately 6 months) of the sale.

For additional requirements, please see our 1031 Exchange Rules and Requirements Page.

Using an Intermediary to 1031 Senior Housing

With pressing deadlines and endless paperwork (most of which we are afraid to mention), most senior housing sellers use a specialty 1031 exchange intermediary to facilitate the sale and tax process. In doing so, investors can spend more time and less money on their senior housing transition.

What’s the Best 1031 Exchange For a Senior Housing?

Despite only being available in a handful of countries, many American investors are unaware of the unique opportunity they have in owning mineral rights. By purchasing mineral rights in a 1031 exchange of senior housing, former senior homeowners can develop a steady stream of passive royalty payments in exchange for leasing their rights to an oil and gas company. As a drastically different business model than senior housing, mineral rights are a great way to retain the most from a 1031 exchange while paving a path for ongoing financial freedom.

No matter what industry you are in, starting a successful business is rarely easy. Although the world is becoming increasingly digital every day, many businesses still require a physical office space to host staff, meetings, and daily business administration. On top of a lease or purchase, a successful office space also requires a significant amount of capital sunk into furniture, equipment, and other small assets.

If your business has decided to liquidate, selling office furniture and equipment is a great way to earn cash outside of ordinary company operations. Whether the capital is used to keep your business afloat or simply to recoup losses, the bulk sale of office furniture and equipment is likely to come with a large cash inflow.

For large businesses with a significant amount of office space, pricey equipment sales are likely to warrant capital gains taxes, even through bankruptcy. In order to defer capital gains taxes, businesses and individuals can utilize a 1031 exchange with the purchase of a new property. In this article, we will break down the 1031 exchange process when selling your office’s assets.

How to Sell Office Furniture and Equipment

First, let’s look at the office furniture sales process. If you only have a handful of desks, some old computers, and a copier, then it will be very easy to find a buyer through traditional peer-to-peer marketing channels. Both physical and digital, this includes:

  • Word of mouth/networking in the building and nearby
  • Or local listing sites like Craigslist, Facebook Marketplace, etc.

For small sales, a few hundred dollars will not warrant any capital gains taxes be applied. In large office downsizes, moves, and liquidations, however, a large sum of assets can quickly reach price tags of tens of thousands of dollars. Today, many large companies utilize consulting agencies and assert intermediaries to facilitate an easy and quickly profitable sales process.

Determining the Value of Office Furniture and Equipment

To keep it simple, the total value of an office overhaul sale is just the sum of all of its parts. Although many things cannot be sold (like the coffee machine that should have been replaced years ago), a lot of furniture and equipment within an office retains its value quite well. While the true value of your furniture and equipment is simply what the buyer is willing to pay, you can get a baseline valuation by totaling your sellable assets. This includes:

  • Desks, chairs, and tables
  • Computers, phones, and other electronic devices
  • Cabinets, bookshelves, and misc hardware
  • Copiers, printers, shredders, and other appliances
  • Any diminishing assets on hand (printer ink, paper, stationery, etc.)

As ordinary wear and tear are minimal, office administrators with assets less than 10 years old can typically earn back over 50% of their initial investment. If you are working with an agency, they may ask for your proof of purchase receipts as well as any maintenance history for large appliances.

Taxes Paid on Selling Office Furniture and Equipment

If you are selling your office furniture and equipment as part of a large corporate takeover, then all of its value will be bundled with the overall deal. However, if you are selling the office assets to a private party (business or individual) as a one time deal, then federal and local taxes will be applied. This includes sales tax and capital gains taxes.

Selling Office Furniture and Equipment with a 1031 Exchange

Thankfully, every penny of capital gains taxes applied to the sale of office furniture and equipment can be deferred by purchasing an equal or greater valued asset through a 1031 exchange. For many businesses strapped for cash, 1031 exchanges are extremely valuable for both maximizing the sale and investing in new businesses assets for future growth. It is also possible to invest in assets that have a lower value than your sold equipment, however only partial capital gains taxes would be deferred in these instances.

Office Furniture and Equipment Like-Kind Properties

The key element of a 1031 exchange is the investment in a new “like-kind” property. The IRS views most property assets (both physical and non-tangible) as like-kind properties for office furniture and equipment. For example, a large liquidation of office assets can be sold in a 1031 exchange if a company were to subsequently purchase:

  • Other kinds of equipment
  • Cars, trucks, vehicles, etc.
  • A new office building or manufacturing facility
  • Private property investments (apartments, new construction, etc.)
  • Mineral rights and royalties

Office Furniture and Equipment 1031 Exchange Timeline

Once your furniture and equipment are sold to the new buyer, an entities’ eligibility for a 1031 exchange begins. In order to remain valid, the taxpayer must submit at least one of three plausible new assets within 45 days of the sale. Ultimately, the company must purchase a new asset (or multiple bundled assets) within 180 days of the sale of office equipment in a 1031 exchange.

1031 Exchange Intermediaries for Selling Office Furniture and Equipment

As we have alluded to earlier, there are many consultants and intermediaries that specialize in the liquidation and sale of office equipment and furniture. In order to meet deadlines and maximize the value of your transition, it is strongly recommended to sell office furniture with the help of a third party.

Why Purchase Mineral Rights and Royalties?

Although it might be a bit of a left turn for most individuals and companies, investing in mineral rights and royalties is actually one of the best ways to maximize the value of a 1031 exchange. When selling office furniture and equipment, a reinvestment in mineral rights is a quick way to liquidize while setting up a new potential value stream.
Once purchased, mineral rights can then be leased to oil and gas companies in exchange for ongoing mineral royalties. Oil and gas leases are designed to compensate mineral rights owners over time as successful operations are able to find, extract, and sell natural resources to help fuel today’s world.