What is a Qualified Buyer for Mineral Ownership?
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:
- 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.
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