Do you own property and wonder how to make more money off of it? One obvious way to do that is to rent out the land, but what if you discover that the land you own is even more valuable. Depending on where you live, you could have very valuable substances underground – such as gold, copper, or more commonly, gas and oil. But if you’re not in a position to mine them yourself, did you know that you can still make money from these substances? Read on for how to make money from mineral rights.
What are Mineral Rights?
Mineral rights are the ownership rights to underground resources, including oil and gas, metals and ores, and mineable rocks like limestone and salt. These are different from surface rights, which is the right to use the surface of the land and build upon it, farm it, etc.
In many countries, owners of land only have surface rights, and the government retains all the mineral rights. In the United States, when you own property, unless your deed says otherwise, you also own the mineral rights, and that means you can sell or lease those mineral rights to private companies for a fee.
How Do You Sell Your Mineral Rights?
There are different ways to make money from mineral rights. You can outright sell the mineral rights in your property to another person or entity, allowing them to do what they want with the resources under your land. You can also create a lease agreement to the resources under your land. These are done in different ways. Sometimes, there is a single upfront payment allowing the lessee to explore the land and then mine whatever they find, other times there is an upfront payment along with royalty fees based on the number of resources mined from your land.
The easiest way to sell your mineral rights is to work with a company that works with you to find a buyer for your mineral rights. While you will pay a bit for this service, you will also be working with a company that will work to find you the best price for your mineral rights. After all, if they are taking a percentage, it’s also in their best interests to find you the best price. They also have connections in the industry.
Quite often, people find out they have valuable resources under their land when another company contacts them via mail or door to door. After all, if it’s determined that your neighbor has resources under their land, the odds are very high that you do as well. Companies will try to get you to sell or lease your mineral rights to them. You can absolutely take these offers, but they are likely to be lower than the actual amount you can get.
You can also try to sell your mineral rights yourself, but without knowledge of the industry, it’s likely to be a challenge to find the right buyer/lessee.
But How are the Minerals Accessed?
This is one of the big questions when selling mineral rights. If a company has rights to the resources underground, how can they access them? When a company has mineral rights on land, they generally have the right to use as much of the surface as is reasonably necessary to access those minerals, and they don’t have to ask your permission to do so. That could mean that you suddenly have oil wells visible on your property, for example, which may mar your view or prevent you from using the property exactly as you want. This is absolutely something you should consider when you’re selling mineral rights – is it worth it to you to have that kind of equipment on your property? Generally speaking, when you’re selling mineral rights, it’s when you own a large piece of land, so the equipment might not cause too much interference, but it’s absolutely a consideration.
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Megan is a 40-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:
In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.
While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.
Except that’s not what an emergency fund is for.
So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.
I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.