Your Next Investment Lies Underground”

The latest Taylor Sheridan TV series, Landman, has created a lot of buzz about the oil patch. What most Americans don’t realize is that this show would not exist except for one incredible fact – The U.S. is one of a few countries in the world where private citizens can own mineral rights (“minerals”). In most countries, citizens are allowed to own the surface of the land, but the state government or crown exclusively owns the minerals below the surface.

Citizen-owned mineral rights have led to an entire sub-surface industry unique to the U.S. With industry comes investment, and accordingly, the U.S. offers mineral investment opportunities not found anywhere else in the world. Currently it’s estimated there are somewhere between 12 and 15 million mineral owners.

Historically, however, mineral and royalty investments have not been easily accessible to those outside of the oil and gas industry. Properties can be difficult to source, expensive to evaluate, and tedious to manage.

Finding The Right Oil Patch For Your Investment

Companies like Dallas-based Resource Royalty LLC, are changing that narrative with innovative investment opportunities, especially for real estate investors who take advantage of 1031 exchanges.

Beth Good, Resource Royalty CEO, explains, “Minerals are real property, which means they are ‘like-kind’ to traditional real estate assets and qualify for 1031 exchanges. Our offerings provide a unique and innovative opportunity for investors looking to diversify their investments, defer capital gains taxes and receive income at the same time.”

Their strategy to marry real estate investments and minerals portfolios has created a clever investment vehicle for sophisticated, accredited investors. Each portfolio brought to market is turnkey ready for 1031 exchanges. With zero debt used or accepted, the properties are aggregated by the company into a mineral portfolio which qualifies as replacement property. This strategy makes it a convenient and desirable option for investors to comply with the 45-day identification period as required in a 1031 exchange.

Resource Royalty’s model also offers transaction size flexibility for 1031 exchanges. Whether an accredited investor sells a property for $100,000 or $5,000,000, the capital gains can be deferred via the 1031 exchange option and rolled into a mineral portfolio. Additional tax advantages are gained throughout the holding period of the investment. Royalty income receives a 15% tax depletion allowance, meaning 15% of the gross income received can be tax-sheltered annually, subject to a taxpayer’s annual position

Another benefit unique to this investment model is investor independence. Each investor has the property deeded and titled in their name, meaning they are free to exercise control over the holding period and exit strategy to suit individual objectives. When ready to exit, the asset can be exchanged again into any other like-kind asset.

Managing Your Oil Patch Investment

As an investment, owning minerals is attractive with its cash flow and tax-advantaged income. Less attractive is managing the investment. Depending on the number of properties and the number of oil and gas companies operating wells on those properties, a royalty owner could receive dozens of royalty checks for hundreds of wells every month. Resource Royalty solves this issue for clients by offering professionally managed portfolio services, similar to institutional-grade investments.

“Resource Royalty Property Management handles all aspects of mineral ownership on behalf of our investors. Our goal is to eliminate the burden of managing royalty interest portfolios completely,” says Beth Good. Her team, comprised of seasoned oil and gas accounting, land management and title experts, provides this service seamlessly. This includes recording deeds, monitoring drilling activity, year-end tax reporting (Form 1099), and consolidating monthly royalty checks into quarterly distributions.

Investing in mineral rights provides a unique opportunity to generate income from the energy industry without direct involvement in drilling or extraction. The ability for private citizens in the U.S. to own underground minerals has created an investment market that does not exist in most other countries. Companies like Resource Royalty LLC have made these investments more accessible, particularly for those utilizing 1031 exchanges to defer taxes and diversify their portfolios.

Mineral rights offer a passive income stream while professional management services handle the complexities of ownership, including royalty distributions and tax reporting. As the oil and gas industry continues to evolve, mineral ownership remains a valuable asset with long-term potential. With its combination of financial benefits and expert management, investing in mineral rights presents a compelling opportunity for those seeking alternative investment strategies.

Securities are offered through Arkadios Capital. Member FINRA/SIPC. Advisory services are offered through Creative Capital Wealth Management Group. Creative Capital Wealth Management Group and Arkadios are not affiliated through any ownership. This material was created for educational and informational purposes only and is not intended as tax, legal or investment advice.