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1031 exchange texas

1031 Exchange Texas | How Much are Mineral Rights in Texas?

The state of Texas is home to the largest number of mineral rights owners in the United States.  With such a huge mass of land, mineral rights in Texas can be worth from as little as $50 per acre to upwards of $5,000 per acre.  Obviously, the amount of minerals on the earth is going to be the number one factor. Determining the value of minerals rights in Texas and elsewhere are usually the same.  However, In order to determine the mineral rights value of a plot of land in Texas, there are additional internal and external factors that come into play. Let’s talk more about Mineral Rights and 1031 Exchange Texas today.

Mineral Rights History

Unlike in home buying, past transactions for purchasing mineral rights are not public records.  This makes it difficult to track the value of specific mineral rights, and ultimately makes the value of mineral rights in Texas as much as the buyer is willing to pay. If the property is yet to produce mineral rights, a professional valuation must be done to determine the estimated production levels of the subsurface.

Exact Location of Mineral Rights in Texas

The location of your mineral rights within Texas plays a huge factor in valuation.  Oil and gas companies look at the accessibility of the land as well as the proximity to other resources, such as water, in calculating the profitability of extracting minerals.  Your mineral rights in Texas value will be influenced by which companies are operating in the area. Usually by virtue of their specific lease terms for your property.

Producing vs. Non-Producing Mineral Rights

Producing mineral rights generate oil and gas royalties on a monthly basis.  By already having an existing cash flow, producing mineral rights is going to be valued higher than non-producing mineral rights.  With that, non-producing mineral rights can still be worth a lot of value. It has the potential to produce oil and gas royalties in the future.

1031 Exchange Texas Overview

The basic premise of a Texas 1031 exchange is the same as it is throughout the country. Do you have the real property that you are using in your trade or business? Are you holding it for investment purposes and do you wish to sell it? You may be able to defer the federal and state income taxes. This is normally incurable by selling such a property. You just really need to make sure that you are fully aware of the 1031 exchange holding period.

To achieve this tax deferral, you would need to use a §1031 exchange, which essentially allows you to sell your property and use the proceeds to purchase a like-kind property within a set time period.

External Factors concerning

There are also many factors that extend beyond Texas’s state lines that affect the price of mineral rights.  Timing is by far the largest.  The price of oil varies just like any other commodity, so the current dollar amount per barrel plays a large part in determining the mineral rights in Texas value.  This is most apparent in producing mineral rights. Long-term industry trends also affect mineral rights from land that is currently not producing.

If you have further questions on 1031 exchange Texas, feel free to reach out to us here.

fee simple ownership

What Does Fee Simple Ownership Mean?

Fee simple ownership is most commonly referenced today when purchasing new real estate.  Fee simple is a legal term and is the most common and absolute type of property ownership in the United States.  If you are buying land or looking to sell, lease, or purchase mineral rights, understanding fee simple ownership is crucial.

What does Fee Simple Ownership include?

Fee simple ownership encompasses an entire personal estate.  By owning a fee simple estate, the property owner has control over the surface rights, subsurface rights, as well as the rights to the air above the property.  Each of these rights (or all of them together) can then be sold, gifted or bequeathed to another individual or entity by the property owner.  In some states, it is also possible to lease the surface or mineral rights of a property for an extended period of time.

Who Can Own a Fee Simple Estate?

In most of the world, any resources found beneath the Earth’s surface belong to the government in which the land resides.  The United States is one of the few unique countries in which fee simple ownership is possible, as property owners have the ability to own their subsurface and mineral rights. Owners of single-family residences most commonly have a fee simple estate, whereas those who share land or space, such as in apartments or townhomes, rarely have fee simple estates.

Owning Surface Rights Without Mineral Rights

It is entirely possible to purchase land without a fee simple estate.  In some cases, the mineral rights of a property are owned entirely by a different person than the surface rights.  In this scenario, you can still purchase the surface rights in order to build and live in a home on the property, however, you will not own the minerals below the surface of your land.  Although the law varies from state to state, you may be entitled to compensation for damages to your property’s surface through the extraction of minerals.

producing and non-producing mineral rights

Producing and Non-Producing Mineral Rights

If you are purchasing mineral rights or an oil and gas lease, one of the first things to know is whether or not the mineral rights you are purchasing are currently producing or non-producing.  In this article, we will both define and help you understand the value and differences between producing and non-producing mineral rights.

What are Producing Mineral Rights?

Producing mineral rights can be defined as minerals that are currently under production, being extracted from the land’s subsurface and creating monthly revenue.  When evaluating the purchase of producing mineral rights, it is easy to see their value by analyzing the existing cash flow reports as well as the property information (such as development plans and engineering reports) in order to make a well-informed decision.

What are Non-Producing Mineral Rights?

Non-producing mineral rights can be defined as mineral rights that currently have no cash flow associated with them.  The value of non-producing mineral rights is generally determined by a price per net acre multiplier.  With constant shifts in the market, the value of net acres of non-producing minerals rights is determined by factors like production history, proximity to producing wells, and the overall geography/geology of the area.

Which Kind of Mineral Rights are More Valuable?

In general, producing mineral rights are valued higher than non-producing mineral rights.  This makes perfect sense if you equate the mineral rights as if they were an apartment building.  Obviously, it would be much more valuable to purchase an apartment building full of monthly-paying tenants, rather than an empty building which will be filled with renters in the future.

Should I Buy Producing or Non-Producing Mineral Rights?

Depending on your individual circumstances, buying currently producing or non-producing mineral rights could be a good investment. Non-producing mineral rights are usually viewed as an option for the future, whereas currently producing mineral rights come with an undeniably valuable immediate monthly cash flow.  If you want to learn more about proven revenue streams through mineral rights and oil and gas royalties, contact Ranger Minerals today.

surface and mineral rights

Surface Rights vs. Mineral Rights: Understanding the Difference

If you are looking into buying or selling oil and gas royalties, it is very important to know the difference between surface rights vs. mineral rights. Land in the United States is very unique, as the US and Canada are the only countries in the world in which the government does not automatically own the minerals or resources located beneath the surface of an individual’s property.  Whenever land is bought in the United States, the new owner will typically acquire both the surface rights and the mineral (subsurface) rights of the property, unless the two have already been separated and noted in the property title.

What are Surface Rights?

Surface rights can be defined as the ownership rights of a parcel of real estate that is limited to the Earth’s surface.  This does not include the air above the surface or the land within the subsurface.  Surface rights entitle the landowner to all superficies, which is a Latin legal term referring to anything placed upon and attached to the ground, such as existing buildings.

What are Mineral/Subsurface Rights?

Mineral rights are the property owners’ rights to the minerals found in the soil below the Earth’s surface (in the subsurface). Mineral rights and surface rights can be owned by two different parties, if the mineral rights have been sold to another person or entity.

The Intersection of Surface Rights and Mineral Rights

Obviously, in order to extract the minerals from the earth, the surface will need to be punctured.  If the owner of both the surface rights and the mineral/subsurface rights is the same person or entity, then no negotiations are necessary for the placement of drills, oil wells, pipelines, and other extraction materials.  If the owners of the mineral rights are different than the owners of the surface rights, then things get a bit more complicated.

Negotiation Between Surface Rights vs. Mineral Rights Owners

The laws governing mineral rights owners ability to override and extract the minerals from below the surface of a parcel of land by any means necessary varies from state to state.  In some cases, surface rights may be overruled entirely in order for the extraction to take place.  In other cases, the surface rights owners may have the power to approve the drilling location or may be entitled to compensation for surface damage that affects the landowner’s livelihood.

factors affecting oil prices

Factors Affecting Oil Prices

Factors affecting oil prices are widely fluctuating which makes it tough to speculate what the price per barrel will be year over year.  Aside from simple supply and demand, oil prices are affected by trends in geopolitics, weather, and technology.  So how does the day-to-day price of oil affect mineral rights and royalty owners?  In this article, we will explain the different scenarios. Learn how the price of oil affects mineral rights and royalty owners.

The Price of Oil’s Impact on Active Mineral Royalties

Are you currently receiving mineral rights royalties from an active operation? Do you own some of the mineral rights of oil production? Now, you will see the direct impact of the price of oil on each one of your royalty payments.

Let’s say you own mineral rights that produce roughly 200 barrels of oil each month. Moreover, let’s say you receive 1% of net profits.   If the price per barrel is $75, each month’s revenue would be $15,000 (200 x $75). With that, you would receive $150.  If the price per barrel drops to $60, each month’s revenue would equal $12,000, of which you would receive $120.  In this instance, your royalty payment is directly related to the rise and fall of the price of oil.

The Price of Oil’s Impact on Non-Active Mineral Rights Owners

If you own the mineral rights to land that is not currently being drilled, the daily price of oil will not directly affect your income but will play a factor in determining the value of your mineral rights.  If you are looking to sell your mineral rights, incoming offers will likely be based on the current and predicted future price of oil and may be lower than usual during periods in which the price of oil is also low.  Obviously, the value of your mineral rights is composed of many different factors, with the price of oil playing a small part in the overall valuation.

The Price of Oil’s Impact on Non-Oil Mineral Rights and Royalties

If you own mineral rights or royalties that are not pertaining to oil, such as natural gas, coal, or uranium rights, the price of oil is unlikely to directly impact the value of your rights or the number of your royalties.  Although some studies have shown that an increased price of oil will lead to an increased demand for natural gas, and therefore more natural gas production, the correlation between the price of oil and non-oil mineral rights and royalties is not strong enough to reach any sound conclusions.

selling mineral rights

How to Buy Mineral Rights & Royalties in the United States

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Mineral rights are defined as the property rights to exploit an area of land for the minerals that it harbors.  Buying mineral rights or royalties is a highly profitable investment if done correctly. We’ve created this quick guide to help you understand the purchasing process, however, the best way to learn about how to buy mineral rights or royalties in the United States would be to talk to an expert at Ranger Minerals.

Find Potential Mineral Rights Sellers

Finding the right seller for mineral rights or oil and gas royalties is often the hardest part of the process.  There are few resources, such as Mineral Owners, specifically for Texas that break down land by county available for oil and gas investment.  At Ranger Minerals, we have a strong portfolio of cash flow properties,

Make Offers

Once you have calculated the percentage of the royalty you would like to own, what’s next? Now you can begin to contact the mineral rights owner with offers to purchase.  Buying mineral rights can require a Marlon Brando-like proposition of an offer that cannot be refused. This is eue to the highly profitable nature of oil and gas royalties. If the acquisition is particularly high, the purchasing process may start with a declaration of interest, rather than a valued offer.  You can skip the hassle of finding and bargaining with mineral rights owners by working directly with Ranger Minerals.

Verify and Strike a Deal

The response rate for mineral rights and royalty offers is very low.  However, once you begin speaking with an owner, it is best practice to verify the revenue stream by asking for the past few months of royalty stubs.  Of course, if you are working with Ranger Minerals, you will not have to worry about a low response rate or verification, as each property is pre-vetted and our process is fully streamlined. If all looks well and good, draw up the contract and sign the agreement.

File the Paperwork

Once the deed is signed, the paperwork must be filed both with the local courthouse and the existing oil company.  If you are buying mineral rights independently, it is crucial to have the appropriate legal counsel to approve and verify the legitimacy of all of the paperwork.  Once everything is official, you should begin receiving royalty payments in as little as three months.

If you have further questions on how to buy mineral rights, feel free to reach out to us here.