The Pros and Cons of Selling Mineral Rights
Mineral rights are an extremely valuable asset to own in the United States. Whether your mineral rights are currently producing oil and gas royalties or they have the potential to become a highly profitable extraction site, it is often difficult to make a decision as to should you sell your mineral rights or not. In this article, we will define mineral rights and explore the benefits and drawbacks of selling your mineral rights.
What are Mineral Rights?
Mineral rights refer to the ownership of the subsurface of a property. Mineral rights owners are entitled to accessing, extracting, and selling the resources below the surface of the Earth. The surface rights owner can be entirely different than the mineral rights owner, which can be both one person, several people, or a larger entity. The United States is one of the few countries in the world in which mineral rights can be bought or sold.
Should I Sell My Mineral Rights?
If you own producing mineral rights, then you are probably very familiar with the income owning mineral rights can provide. Although you will no longer receive your monthly oil or gas royalty check, selling producing mineral rights can also be a great decision.
Perhaps you bought a fee simple estate in which you own both your surface rights and mineral rights, and someone has approached you with an offer to sell your mineral rights which are currently not producing. In cases like this, there are also many pros and cons of selling your mineral rights.
Pros of Selling Mineral Rights
Selling mineral rights has the following advantages:
- Instant Cash Lumpsu in Your Pocket
- Less Taxes to be Paid Each Year
- Eligible for a 1031 Exchange
Cons of Selling Mineral Rights
Drawbacks of selling mineral rights include:
- No More Monthly Income (if your rights are producing)
- Loss of an Asset that Could Increase in Value
Alternatives to Selling Your Mineral Rights
If you are interested in earning money from your mineral rights but do not want to sell them, you can consider leasing your mineral rights to an oil and gas company. In a mineral rights lease, you will still own the mineral rights of the property and may receive oil and gas royalties from the third party’s production. Mineral rights can also be gifted or bequeathed to another individual or entity.
Ultimately, the decision of whether or not to sell mineral rights is up to the mineral rights owner. If you are considering selling your mineral rights, then it is always best to consult an expert to help you earn a fair price and ensure that you earn as much as possible off of the sale.
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