If you’re looking for ways to make money then you might want to consider how to buy mineral rights.
They are a great way of ensuring you have a steady stream of income over a number of years and – some might argue – they are just as sound an investment as property or land itself.
If you are wondering what mineral rights are or how you obtain them then look no further. Here is our guide to what they are and how to get the best deal.
What are mineral rights?
These are the rights that allow you to drill below the surface of your home or land and extract whatever mineral – usually a natural gas such as oil – that is lurking beneath the surface. It can also refer to another commodity such as uranium or indeed even gold or silver.
They are lucrative and one of the major disadvantages of modern land ownership is that private companies and property companies selling land have become aware of how much money can be made from mineral rights.
They often, therefore, sell the mineral rights separately from the ownership or surface rights. This means you could own the property and the land on which it is built but not the right to access the material underneath your home.
A lucrative ionvestment
But if you do own the mineral rights to your home or land then they could be a great way of recession-proofing your home, as you could sell them off if the price of your property ever collapses.
Thinking about whether to sell or keep the mineral rights to your home when you sell it could also be a great way of maximizing the property returns.
Protecting yourself from horizontal drilling
Understanding the difference between ownership rights and mineral rights is very important. It could mean there is a possibility that a private company could have the power to drill under your home and extract whatever valuable goods are lurking beneath the source.
Tactics such as horizontal drilling have become very popular lately. This is the practice of drilling from an 80-degree angle. This enables you to drill beneath the surface of a home without drilling under it directly.
What this means in practice is you could own the surface rights to your property but the lot next door or further down the road could be seemingly empty and owned by a private company. They could then drill underneath your home or sell or rent it on to an oil company using special drills that bend.
Do you actually own mineral rights?
This is a fundamental question for which there is straight forward yes or no answer. If the answer is no then you can be assured that anyone approaching you to sell up is trying to scam you or mistaken.
If you are trying to buy mineral rights, particularly ones that are included with a property, then you are going to want to make sure that what you are buying is a strong business venture and that they actually exist.
The easiest way to do this is to check the property records. Get in touch with the Property Appraiser’s office to start this process and consider purchasing a property lien.
Understanding the bank draft
If you have mineral rights included with the property you purchase and believe you are quite literally sitting on a gold mine then you might receive a bank draft – or a cheque written by the bank – in the post.
You might be able to deposit it, with an agreement to discuss the selling of mineral rights later. However, bear in my mind that if you do decide to do this you will be legally obliged to sell your mineral rights on the agreed terms at some point. You cannot sell to someone else.
Be sure to make sure you are content with what is being offered in the contract, reviewing it several times and then being sure that there isn’t a better option waiting around the corner before you deposit the draft. And remember you can refuse.
If it seems to good to be true, it probably is
Oil companies have a bad reputation and unfortunately, there are a lot of people trying to take advantage of those who are ignorant about mineral rights and the value of what they own.
Quick sales in business are rare and so too is anyone approaching you to offer what seems to be a lucrative deal. There might be a catch further down the line and they might be trying to rush you into signing up for something so that you don’t so read the small print.
Remember there is no shortcut and no alternative to doing your research. If someone approaches you with a deal, it doesn’t mean they are definitely trying to scam you but it does mean you should ask lots of questions, as many as you want.
And it does mean you have the right to ask for the full contract, the time to review it and to consult both a lawyer and others who have successfully sold mineral rights. What were their experiences and how much money did they make?
How to buy mineral rights? Do your homework
If you want to buy mineral rights or a property that includes them then you are on to a potentially lucrative business proposition. However, the reality is that, as with many things in life, there is no shortcut. But we hope this article has informed you on how to buy mineral rights.
If you want to make a lot of money from mineral rights then the most important thing is to research thoroughly.
You need to understand the value of what you own and how much it could sell for compared to how much you are paying for it. You also need to make sure what you are buying is legitimate and not effectively worthless because of some loophole you weren’t aware of.
Finally, you have to know the market you are operating in and understand the patterns that could help you to maximize your profit.
If you are interested in reading more articles on business ventures then be sure to read more in our Earth and environmental sciences section.