Mineral Rights 101: Is Selling Better Than Leasing?

by | Nov 10, 2014 | Business & Economics

When it comes to managing your assets, both selling and leasing your mineral rights are viable options. In the long run of estate management, however, you may find that selling your resources is much more beneficial than leasing. Finding the right buyer will release you from having to manage everything from day-to-day. In addition, you will be able to spend or invest the resulting payment on your own terms.

Freedom from the Estate

Perhaps you have been managing your estate and royalties for a long time, or you recently gained them due to an inheritance or liquidation. Either way, there are numerous benefits to selling, rather than leasing, your mineral rights. Managing an estate can be stressful and complicated, thanks to the array of state regulations and legal jargon. By selling your mineral rights, you will never have to worry about yet again going through the process of choosing and negotiating with a potential buyer.

Bulk Payment

In addition to being freed from the regulations and everyday management of the estate, selling your mineral rights will allow you to spend the estate’s assets however you would like. You can use the extra cash to purchase more land, renovate your property, or find another investment opportunity.

One of the main issues with leasing your mineral rights is that the resulting monthly royalty amounts can be extremely variable. Fluctuating oil and gas prices can severely impact your financial standings, as can slowed production or limited resources. By selling your mineral rights instead, you will avoid unwanted stress and financial inconsistencies. You will also avoid become entangled with a company that chooses not to drill, leaving you trapped in a lease with very little income. Since you maintain ownership while leasing, this can be a risky endeavor.

Above all, most of the time selling your mineral results carries a much higher monetary value than leasing them. This quick cash influx is one of the main reasons that individuals choose to sell their mineral rights rather than leasing them.

No More Negotiating

Leasing your mineral rights involves extensive negotiations and complex contracts. It is very easy and common for individuals to get trapped in a bad lease or attacked with legal disputes. There are also many complex laws and state regulations that must be understood and navigated. These include a variety of mineral extraction, production, and ownership laws that vary from state to state. Finally, lease agreements can be variable, and your resulting monthly royalties may be inconsistent. In addition, you will still be responsible for income tax on the estate. If you are tired of carrying on complex accounting operations, selling your mineral rights will eliminate that stress.

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