Acquiring a pristine piece of untouched countryside isn’t just a dream for many successful landowners, it’s their reality. Owning and maintaining a sprawling rural oasis is just another day in the life of lucky individuals who get to enjoy the serenity that comes with a countryside sanctuary.

But what lies beneath?

Whether oil, natural gas, coal, metals, or water, subsurface resources are extremely valuable. Mineral rights represent a unique aspect of property ownership, providing the ability to directly benefit from these essential resources that are used by millions every day. When mineral rights are owned in strategic locations, there are tremendous advantages to be had.

For real estate investors keen on tapping into new sources of passive income, or landowners looking to exchange a property through a 1031 exchange into a like-kind asset, mineral rights investing provides accredited investors the potential to unlock lucrative revenue streams while simultaneously diversifying their investment portfolios. Mineral rights complement traditional land and real estate holdings by providing a hedge against market volatility and economic uncertainty as well as offering some distinct advantages and considerations.

Let’s take a quick look at the benefits and strategic considerations for investors interested in achieving long-term financial growth and stability through a dependable source of passive income.

What Does It Mean To Own Mineral Rights?

Where traditional real estate investments entail ownership of land and structures, mineral rights grant ownership of subsurface resources. Specifically, mineral rights refer to the right to extract a mineral—or receive payment for the extraction of minerals—from the earth. In the United States, mineral rights work just like property. They can be sold, transferred, or leased, and they can be separate from the surface rights. Minerals rights can be owned for an entire parcel of land, in fractions, for specific types of minerals, or to a specific depth interval.

We like to say: mineral rights are like real estate, flipped upside down. Instead of owning property above the surface, mineral rights investors own everything below the surface.

How Mineral Rights Work

So, how does this all work? Let’s say you own some 128 mineral acres in the middle of Oklahoma’s Anadarko Basin. If you lease your mineral rights to an oil company for three years, you could get $2,000 per mineral acre as a lease bonus ($256,000 total). On top of that, you could also receive 18.75% of all future revenue for oil and gas produced and sold from your 128 mineral acres. As wells are added to your drilling unit, you would get more revenue streams added to your net income.

As the mineral owner, you would pay $0 for exploration, $0 for production, and would be responsible for 0% of the liabilities.

Where traditional real estate investments rely on tenants to occupy their properties, mineral rights owners lease their rights to billion-dollar energy companies for resource extraction. Where managing rental properties requires regularly dealing with tenant turnover and maintenance, mineral rights ownership requires minimal ongoing involvement, with the energy company being the lessee and bearing the responsibility for exploration, drilling, and production.

Benefits of Owning Mineral Rights

While income from real estate holdings can be subject to larger market forces and tenant vacancies, mineral rights typically provide dependable monthly income that supplies investors with a reliable and passive income stream.

These benefits include receiving monthly royalties from the sale of minerals. These checks are ultimately paid by energy companies that have leased the rights to develop your minerals. Conveniently, mineral rights owners don’t have to pay for the cost of drilling, developing land, or maintaining equipment. In fact, mineral owners are not liable for any ongoing costs such as property taxes, environmental liabilities, management fees, or capital calls.

Another advantage to mineral rights ownership is being able to use tax code 1031. This lets you defer capital gains taxes on any real property sale by reinvesting the proceeds in mineral properties. A 1031 exchange is a powerful tool that allows for portfolio diversification, maximization of returns, and increased liquidity, and many investors aren’t aware that mineral rights qualify as a like-kind asset.

These are just a few of the benefits that make mineral rights ownership a low-risk, high-yield, and attractive source of passive income.

Conclusion

If you want to invest in mineral rights to generate passive income from real property but have limited time or experience, you could partner with an existing mineral rights investment professional. In this scenario, you need to be a high-net-worth individual or an accredited investor. You would have direct access to and ownership of tangible assets without the hassle of trying to untangle mineral rights laws or locate productive minerals at the right price on your own.

At Eckard Enterprises, our goal is to use our deep expertise in oil and gas to maximize investments and returns and to help our partners build and protect their wealth. We’ll provide you with the expert resources and background necessary to make insightful energy investments.

Contact Eckard Enterprises today to learn more about investing in mineral rights!