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HomePassive IncomeHow Real Estate Investors Can Benefit from Mineral Rights Ownership

How Real Estate Investors Can Benefit from Mineral Rights Ownership

In the investment world, mineral rights can take a back seat to traditional real estate assets. It makes sense: We all need places to live and work, and the buying and selling of those buildings occurs in plain sight.

But what about the ownership of oil and gas minerals underneath the structures? For medical professionals looking to form a well-balanced and cash-flow-focused portfolio, mineral rights investing is a good strategy. In fact, oil and gas mineral rights is one of the best vehicles for generating monthly revenue: It draws income from products that most everyone on earth uses every day (and will continue to use).

In today’s uncertain market, owning mineral rights can boost real estate portfolio diversification while adding truly passive streams of income to your net worth. Imagine collecting monthly income without any liability for the construction, maintenance, or occupancy for a building. Get one step closer to achieving financial freedom and breaking free from the daily grind, the hamster wheel of modern medicine.

Join us this week as we explore how mineral rights compare with traditional real estate. What we’ll learn is that mineral rights provide passive income without any additional effort on your part, allowing you to perform medicine on your own terms. We’ll also look at Eckard Enterprises, industry experts who have helped investment partners build and sustain life-changing wealth through the direct ownership of these assets.

What Are Mineral Rights?

Mineral rights are the ownership of minerals and other resources beneath the surface of a piece of property.

Instead of owning a building above the ground, ownership is below the surface—the coal, oil, natural gas, precious metals, and other minerals beneath the earth. Sometimes called subsurface rights, mineral rights are a real estate investment, just like regular property ownership. It’s a tangible asset that can be transferred, leased, or sold just like any other real estate asset class. Separated from the surface buildings, these holdings tend to be more liquid–if that’s important to your financial strategy—because leasing, selling, or transferring them doesn’t require as much red tape.

And you have the legal right to extract a mineral or receive payment for a third party to extract that mineral. By and large, mineral rights are among the most valuable assets in the oil and gas industry. That’s because investors become landlords for major oil and gas companies looking to develop oil and gas extractions. In terms of tenant quality, it’s difficult to do better than leading US companies that support millions of American jobs and ensure national energy security.

In the US, private ownership of mineral rights is possible, which means any investor has an opportunity to receive passive income from the valuable resources underneath the surface of their investment property.

The Benefits of Mineral Rights Compared to Traditional Real Estate

Completely Passive

Mineral rights may, in fact, be the most passive form of real estate investment. While rental properties can be passive, some choose to manage and maintain the property themselves. Although lucrative, that management might not be for everybody.

With mineral rights, there are no management fees, no repair or maintenance concerns, no operating expenses, no insurance expenses, no occupancy concerns, no holding costs, no environmental risks, and no capital calls. It is an investment with zero liabilities.

In terms of truly passive income, there are few assets in the real estate world as reliable and hands-off as oil and gas mineral rights. Like REITs or syndications, mineral rights are entirely passive. Once it’s up and running, you can sit back and collect your monthly income.

Monthly Checks

Just like collecting rent checks from tenants, mineral rights owners collect monthly lease payments from globally known operators. These come in the form of royalty payments made by the billion-dollar corporations leasing the rights from you. The payments are dependent on the lease contract but earn an average of 25 percent of the total revenue earned when the extracted materials are sold.

Like other real estate investments, mineral rights can work for investors looking to play the long game. The oil and gas industry uses long-term lease agreements that can ensure monthly payments for periods of twenty-five to seventy-five years.

When will you be paid? When oil and gas is produced and sold, mineral owners get paid first and before the oil company that invested so much in extracting the material. That’s how the contracts work. And what you earn is based on volume extracted and confirmed by multiple sources including the operators, state tax offices, and the buyers themselves.

Adding Wells is Like Adding Tenants

It’s a common goal in real estate investing to add doors, or rental real estate assets that provide income. Owning mineral rights gives you the opportunity to continue adding doors with one property. Think of it like a multifamily asset that you can add more apartment buildings to.

How does that work? Every new well drilled is like adding another tenant to the property. For each tenant, the monthly check you get for the property will increase, substantially increasing the passive income generated from one asset.

When it is determined that another well is appropriate for your property, you won’t have to work more or pay extra for overhead expenses when new wells are drilled. Further, you won’t incur any drilling liability. It adds value to you without the need for any more funds upfront.

Return Rates and Appreciation

Mineral rights offer greater-than-average returns, especially if the property has significant quantities of valuable resources. Make sure that you do your due diligence, such as ensuring you are buying property in proven basins.

What’s more, mineral rights appreciate in value similarly to above-ground real estate, helping owners grow their net worth over time. Wealth accumulation through real estate is a strong investment move for achieving your long-term financial goals.

Portfolio Diversification

Diversifying your income sources is essential to protect yourself as you grow your wealth, and oil and gas mineral rights provide a high-return asset class to add to your diverse portfolio. Additionally, diverse investments are the best hedge against inflation. As long-time readers of Passive Income MD know, when you don’t diversify, you rely on one income stream, making yourself financially vulnerable to the market that defines
that source of income. What if something were to happen to that income? What if there were sudden expenses or economic uncertainty? With a diversified portfolio, in that situation, other income streams will keep your financial health strong.

Tax Advantages

In some cases, mineral rights owners can reduce their taxable income through various deductions associated with the cost of extracting the minerals. That could include the cost for exploration, drilling, developing, and equipment. Work with your CPA for a complete picture of how mineral rights could align with your tax strategies.

When you sell your mineral rights for more than you paid for them, you’re eligible for a capital gains tax deduction, which can be used to reduce your taxable income by the amount of your gain on the sale. And like most properties, mineral rights can be acquired via a 1031 tax exchange.

Generate Passive Income Today with Eckard Enterprises

The demand for natural resources will only continue to grow, likely playing a significant role in the future of real estate investment. What’s more, owning mineral rights now can be a difference-maker in skyrocketing the value of your real estate portfolio. It’s a hidden
gem worth unearthing.

But mineral rights is a specialized market and requires the nuance of careful due diligence. That’s where Eckard Enterprises comes in. They provide two keys to investment success: expertise and experience.

Eckard represents a reliable and best-in-class industry experience for investors. Their expertise with mineral rights and the oil and gas industry serves them to achieve their mission: to help investment partners build and protect their wealth by providing them with direct ownership in oil and gas mineral rights. They have nearly 100 years of oil and gas asset management expertise and have developed a winning method of
acquiring only the very best mineral rights in the two major US Mineral Basins.

Their team has fine-tuned the skills necessary to deliver the best mineral rights experience for investors. Want to learn more about earning life-changing passive income through mineral rights investments? Fuel your returns by speaking to one of Eckard Enterprises’ qualified wealth managers today! Click on this link to schedule your free consultation or to receive an Investor Kit.

Thank you for taking time today to explore this topic with us. We here at Passive Income MD hope you continue to set financial goals and take the steps toward the life of your dreams. We hope to see you soon engaging in one of our many communities. And
until next time, keep investing!

Peter Kim, MD is the founder of Passive Income MD, the creator of Passive Real Estate Academy, and offers weekly education through his Monday podcast, the Passive Income MD Podcast. Join our community at the Passive Income Doc Facebook Group.