Should I Buy Land Without Mineral Rights?
If you are planning to purchase land without mineral rights, conducting extensive research is critical and working with an attorney experienced with both surface and mineral rights is advisable.
Many buyers seek rural land for recreational activities and use, such as farming, hunting, or raising livestock. Others may be seeking mineral rights as an investment option.
1. Value
Before purchasing land without mineral rights, it’s essential to evaluate its location and intended use in order to make an informed decision. Doing this will prevent time being wasted evaluating properties that might not be worth your investment. During property inspection, it’s also crucial that any drilling or mining operations on site be discussed with the owner as soon as possible and find out their plans for the future – it isn’t unusual for owners to sell surface rights while keeping mineral rights. This information should help make your decision an informed one.
If the property in which you’re interested has a history of oil and gas drilling or coal mining, you may have an accurate idea of its mineral value. But if there has been no mining activity whatsoever in that location in recent times, chances are slim that there would be any useful minerals underground worth extracting from an extraction company.
Note that mineral rights’ values fluctuate frequently, so conducting an in-depth search to ascertain their true value is necessary to avoiding surprises in the future. A reliable title company can conduct one quickly and affordably – an approach which will help avoid unpleasant surprises later.
Note that your mineral deed and lease often lists gross acres instead of net acres; this could mislead you into believing you own more land than is actually the case. Therefore, working with an attorney who specializes in mineral rights calculations is vital if calculating true acreage is your aim.
2. Appreciation
Assuming you do not possess mineral rights can be less of a risk than you realize, with surface owners typically protected against extraction setups that would disturb their property’s surface due to laws against extraction setups that disturb it unless there are oil or gas deposits under your land which would need accessing in ways which disturb its surface; additionally, many extractors must mine horizontally in order to preserve surface owner ownership and avoid damaging its surface.
Be mindful that mineral rights can be purchased or conveyed independently from land ownership, making your land even more valuable if its surrounding are rich with minerals or oil and gas deposits. Furthermore, lease your mineral rights out to interested parties for royalty interest or working interest collections depending on your preference.
Before purchasing land, it is wise to do research to ensure full ownership. You may do this by searching title records or conducting an in-depth mineral rights search – both can help ensure full ownership. Consulting an experienced land attorney with this process could prove invaluable.
Land is an attractive investment option for both homeowners and investors, but it’s crucial to understand the difference between mineral rights and surface rights before making your final decision about a piece of property. If you need assistance or guidance during this process, speak with an expert who can guide you through this journey and prevent costly mistakes from being made.
3. Taxes
As with any land purchase, conducting adequate research is key to making an informed decision. This holds particularly true if you are purchasing property featuring mineral rights. Mineral rights can be sold separately from surface property rights; just because you own the surface doesn’t mean you own what lies below; this can impact profit potential as well as spending capacity when considering purchasing mineral-rich parcels of land.
Mineral rights can be leased or sold to parties looking to explore and extract resources beneath the surface, making your land potentially an additional source of revenue. Depending on what goals are set forth for the land, this could either be beneficial or detrimental depending on how it’s used.
One way of identifying whether mineral rights have been severed from land is through conducting a title search; however, this process may require professional assistance. An alternative option would be asking the seller for a royalty deed which will give some clues as to who owns what rights.
However, just because a property does not contain minerals doesn’t mean it is unsuitable for investment. You could still cultivate crops, raise livestock or hunt on it and potentially make significant profit – just weigh its advantages and disadvantages carefully to determine its profitability in terms of costs, complications and potential future profit. Ideally consult a knowledgeable real estate professional in order to get their advice; they may conduct title searches to ascertain who owns mineral rights so you avoid unpleasant surprises down the line.
4. Leases
Land without mineral rights may seem attractive as an affordable real estate purchase option, but one must first carefully consider any such transaction. A key concern with purchasing unprotected land without mineral rights is that someone else could hold onto these mineral rights and use extraction companies to extract minerals without paying you anything – this could particularly pose problems in areas where mineral exploitation occurs commonly – for instance oil and gas drilling or coal mining for instance.
Finding out who owns mineral rights to a property that has been divided up can be difficult if its surface and mineral rights have been separated in the past, since land owners will typically only sell surface rights while leaving mineral rights with another party. If no mineral rights were separated at some point in history, searching through county records to see if anyone registered their ownership may help as an alternative or asking your local title company for help is an option as well.
Mineral rights come in two varieties, working interest and royalty interest. While working interest allows the owner of mineral rights to take full advantage of any resources in their area, royalty interest allows only for collection of a percentage of revenues generated from minerals extracted. Depending on which minerals exist in your location, one may be more suitable than the other option.
Consideration should also be given to royalty taxes when buying land, as these vary according to state but can add up over time. While you cannot avoid them completely, it is worthwhile investigating their impact as part of your purchase price and be wary of unexpected additional expenses that might pop up later.
5. Access
Land ownership in the US can be divided into two distinct types, surface and mineral rights. Mineral rights refer to resources beneath a property and may be sold or leased separately from surface rights. Some property owners opt to sell just surface rights while keeping all mineral rights – this process is known as severed estate – but whether this approach suits you depends entirely upon your goals for purchasing land.
Minerals are an invaluable asset that can be exploited for oil, gas and other forms of energy sources. Minerals may be sold or leased and their owners have the option of collecting royalty interest or working interest payments from their share. Mineral rights may be taxed as state, county and federal royalty taxes make recouping initial investments difficult.
No matter if it’s for hunting, outdoor activities, farming or any other reason – buying land without mineral rights could save money and eliminate royalty taxes altogether. Before making such an important purchase, though, due diligence must be conducted; title records checked, surveys ordered and inspection conducted as measures to assess its condition before signing a contract; make sure the seller agrees to sell or lease back any rights; read and understand every contract thoroughly to protect yourself against future issues that could arise; hiring an attorney would help make sure everything runs smoothly!
