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7 Deadly Sins People Make with Oil and Gas Royalties

In the uncertain world of oil and gas royalties, the worst thing you can do is nothing. Far better is to investigate if you should sell oil and gas royalties.

Have you ever asked yourself, "Should I sell my mineral rights?"

The following list details 7 deadly sins some people make with their oil and gas royalties. Why "deadly?" Because they result in inaction when a golden opportunity is slipping away or create future problems that are costly.

1. Hope that mineral prices will go up. Oil and gas prices may go up in the short term, but that is no guarantee for the long haul. Royalty payments may even go up from production enhancement projects, but even that is no assurance of continued increases. The entire industry faces an eventual dead end.

2. Hope that their property will pay royalties forever. Oil and gas reserves will eventually run out on all sites. Each one is finite. All wells are fated to be plugged and abandoned as worthless. Your royalty checks are destined to decline, eventually to stop coming altogether.

3. Leaving a title transfer burden to their heirs. Cleaning up your estate can prove to be complicated and expensive for your heirs. If you value their peace of mind, you owe it to yourself to eliminate this hassle from their futures.

4. Thinking that oil and gas is the safest investment. There are many far better investments than your limited oil or gas reserves. A diversified stock portfolio is likely to outperform your royalties. Even real estate is starting to look good again, with prices as low as they are.

5. Clinging to the chore of record keeping and paperwork. Not everyone enjoys bookkeeping and filling out forms—especially tax forms. Investing that kind of time in something that will accrue in value makes far more sense.

6. Missing out on the lowest long-term capital gains tax rate since the Great Depression (15%) while it lasts. For the last 78 years, the capital gains tax rate has never been this low. And soon the rate goes back up to 25%.

7. Keeping debt. Keeping some debt may be unavoidable, but high-interest debt, such as credit cards can be eliminated, giving you increased financial freedom. Lowering your monthly payments by paying off medical bills, car loans and mortgages could prove highly rewarding in the long run.

Advantages of Selling Now
– Eliminating the risk of losing on your investment because the well suddenly goes dry—and it will eventually.
– Saving your heirs the hassle of title transfer.
– Reinvesting in safer investments.
– Eliminating the burden of paperwork.
– Cashing in on the lowest capital gains tax rate in nearly 80 years.
– Paying off debts, lowering your monthly expenses.
– Having extra cash for important family concerns, like home improvement, college or even a much-needed family vacation.

If you haven't already, perhaps you should be asking yourself, "Who buys mineral rights and why?"

So, if you want to sell oil and gas royalties, now may be the best time to do it. Check with your financial advisor today.


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