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Client Reviews

Ward, TX

Rated 5 out of 5
May 6, 2022

The price I received after listing at Texas Royalty Brokers was shocking. I had multiple offers to sell, but I was not sure who to trust. I decided to list and let them walk me through the process. Our family was less concerned about the price and more concerned about not being taken advantage of. We ended up selling for over $600,000 more than the offers we were receiving. On top of that, they walk us through the sales process making sure we understood everything each step of the way. These guys are the real deal and our family is very grateful we found this company.

Sam L.

Winkler, Texas

Rated 5 out of 5
March 24, 2022

My family is extremely grateful that we found Texas Royalty Brokers. After receiving multiple offers to sell, we were ready to accept an offer and then found this company online. We decided to list and see if there were any better offers out there. We ended up selling over 40% higher. Had we simply taken the offer in hand, we would have left so much on the table. I highly recommend this company. They made the process simple and we walked away with more money.

Bethany A.

Glasscock, Texas

Rated 5 out of 5
February 4, 2022

We were trying to sell our mineral rights and getting overwhelmed with offers. We decided to list at Texas Royalty Brokers and let the buyers get into a bidding war. That’s exactly what happened! We ended up selling way higher than the offers we were seeing. Very happy we got a good price here.

Perry S.

Pecos, Texas

Rated 5 out of 5
January 28, 2022

We sold our ranch years ago but held onto the mineral rights. A few new wells were recently drilled and the royalty income was substantial. Once we figured out how much we would save in taxes by selling, it was an easy decision. The price we got was beyond our expectations.

Allen M.

Response from Texas Royalty Brokers

Thank you for the kind review Allen. It was a pleasure working with you and your family.

Midland, Texas

Rated 5 out of 5
November 23, 2021

When our family members sold their mineral rights, we were skeptical because they got a random offer in the mail. We decided to sell mineral rights at Texas Royalty Brokers and we are SO HAPPY that we did. We ended up selling our mineral rights in Midland County Texas for 30% more than our family members received. What they say is true. Competition go us a much better price. Highly recommend.

Ned and Anita H.

Blog Categories

Never Sell Mineral Rights

Never sell mineral rights?  This common advice is WRONG!

When you hear someone say “never sell mineral rights”, you should take it with a grain of salt.  Every person has a unique situation.  Deciding whether to sell mineral rights is a personal decision.

The phrase never sell mineral rights originated when families wanted to pass mineral rights down through the generations.  The idea of never selling mineral rights came from the fact that eventually those mineral rights would be worth a lot of money.

This advice completely ignores investing in other assets where you can get a better return on your money.   Let’s look at Oil vs investing in a total stock market fund (VTI).

Below is what oil prices look liked compared to VTI for the last 10 years:

Green = VTI (Total US Stock Market)
Black = Oil

Looking at the chart above, if you could have invested your money in VTI or kept your mineral rights (Oil), which one performed better?

Had you simply sold the mineral rights and invested in VTI, you would have made exponentially more money.   The advice to never sell mineral rights is costing you a fortune.

The chart above only looks at the last 10 years.   Let’s zoom out and simply look at what oil prices have done from 1970 to present:

Oil 1970 to present

Looking at the chart above, there are three important things to notice:

1. Volatility:  The price of oil is extremely volatile from 2000 to present.
2. Price Cap:  When oil prices hit $100, they don’t stay there for long.  Why?  When oil prices are high, tons of money rushes into the industry and tons of new wells are drilled. This quickly increases supply killing the price and leading to a rapid decline.
3. Overall Flat:  While extremely volatile, the general price of oil is pretty flat from 1970 to present.  It is increasing, but it is increasing at a very slow rate.

Let’s imagine you are sitting down with your financial advisor.  You have $1,000,000 to invest.  They put the oil chart above in front of you and recommend that you put all your money in.

Looking at the price of oil from 1970 to present, is this where you want your money sitting?  Absolutely not!

Never sell mineral rights is absolutely terrible advice that has been costing mineral owners millions.  The opportunity cost of holding mineral rights vs investing in the stock market is simply not worth it for 99% of mineral owners.

When you also consider the fact that you will save money in taxes and be diversified, selling mineral rights makes a lot of sense.

To put it simply, the advice to never sell mineral rights is wrong.  Dead wrong!

If you can answer YES to BOTH of the following questions, you might consider holding onto your mineral rights:

1.  Diversification:  Is your mineral rights ownership less than 5% of your net worth?
2.  Taxes: Do you have a low basis in the mineral rights OR are you in a low tax bracket (15% or below)?

If you can answer yes to both of the questions above, holding onto your mineral rights might make sense.  If you answer no to either question, selling mineral rights should be strongly considered.

When we Recommend Selling Mineral Rights

Above, we debunked the popular myth that you should never sell mineral rights.

However, there is a lot more that goes into the decision on whether to sell mineral rights.  Selling is a personal decision.  There are many personal reasons you may decide to sell mineral rights or hold onto mineral rights.

We can’t tell you whether selling mineral rights is the right or wrong decision. However, there are two situations where we highly recommend selling mineral rights.

Taxes:  If you inherited mineral rights, we strongly recommend selling mineral rights.  Why? If you inherited mineral rights you will likely owe a very small amount of taxes when you sell due to stepped up basis.  In addition, when selling mineral rights you get capital gains tax treatment.  This means you are paying 20% federal tax rate at most.   You will save money in taxes selling mineral rights vs collecting royalty income.

Diversification:  If mineral rights make up over 5% of your retirement / net worth, we strongly recommend selling.  Why? Let’s say you have mineral rights valued at $500,000 today, and $500,000 in stock market.  You have $1,000,000 for retirement.   Your $500,000 in mineral rights is like owning just one stock in the stock market.  If that stock tanks, your retirement plans will too.  You are much better off selling the mineral rights and putting that money to work in the stock market where you can get diversification.  A well diversified ETF like VTI will return over 8% per year historically.

For most mineral owners it make sense to sell and save substantial money on taxes and get diversification.

There are very few mineral owners who did not inherit the mineral rights (they purchased them with property) AND they also have significant assets / retirement accounts that means the mineral rights make up a very small 1% to 3% of their net worth.  In this situation, it make sense to keep the mineral rights as they are a good source of diversification for your retirement planning.

MINERAL RIGHTS VALUE IN TEXAS?

Contact us to find out how much your mineral rights are worth.

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Common Reasons to Sell

Below are some of the most common reasons to sell mineral rights in Texas.

Remember that each situation is unique.  Deciding whether you should sell is personal.  Never let anyone put pressure on you to sell mineral rights or to hold mineral rights.  Take a look at your situation and make the right decision for you.

Common reasons for selling mineral rights in Texas:

Taxes: The number one reason to sell mineral rights in Texas is to save money on taxes.  Let’s look at three examples:

1. Inherited Mineral Rights:  Let’s assume you inherited mineral rights.  These mineral rights were inherited in 2015 when the inflation adjusted price of oil was $48.43.  Let’s assume you sell them today when oil prices are $75/barrel.  Let’s assume a sales price of $500,000.  Due to stepped up basis, you will only pay taxes on 35.4% of the total sales price (difference between when you inherited vs current price of oil).  This means that even though you sold for $500,000, you only pay taxes on $177,133! In addition, you only pay capital gains tax rates!  This means you will only pay 20% tax rate on the $177,133 sales price, or owe $35,426 in taxes on a $500,000 sale.  Incredible! This means you paid only a 7.0% tax rate selling for $500,000!!!  Note:  Texas does not have a capital gains tax if you live in Texas!

2. Capital Gains: Let’s assume you did not inherit mineral rights, but instead you received them with land you purchased (not common).  Let’s assume you have $0 basis in the mineral rights (worst case scenario).   If you sold the mineral rights, you would owe capital gains taxes on the $500,000 sale.  This means you would pay $100,000 in taxes on a $500,000 sales or 20% of the total.

3. Collect Royalty Income:  Let’s assume you collect $500,000 in royalty income over a 10 year period.  Royalty income is taxed as ordinary income.  This means that any royalty income you receive is like getting paid more at your job.  While everyone has a unique tax situation, in most cases you are going to be paying between 22% and 24% in federal taxes.   This means your $500,000 in royalty income is going to cost you $120,000 (24%) in taxes compared to simply selling the mineral rights and saving $20,000.  More importantly, when you sell mineral rights you get all of that money TODAY as compare to waiting 10+ years to collect $500,000 in royalty income.  Would you rather have $400,000 TODAY or wait 10 years to collect $380,000 over time?  Obviously you want $400,000 today.  If you inherited mineral rights, the savings for selling is even more extreme.

Check our are mineral rights taxes article for more information.

Diversification:  If you have more than 5% of your net worth / retirement savings in mineral rights, you should diversify.  It simply doesn’t make sense to hold mineral rights that wildly fluctuate in value.   Sell the mineral rights and put them in a diversified ETF in the stock market.

Simplify your Estate:  A very common reason to sell mineral rights in Texas is to simply your estate.  Mineral rights are complicated.  They create a tax burden on your heirs and dividing mineral rights decreases the value.  Over time, as generations pass, mineral rights get further and further divided.  Eventually they become so small the value goes down.  We frequently help multiple family members who sell as a package to get a better price.

Qualify for Medicaid:  You can only have $2,000 in assets to qualify for medicaid.  It’s very common for mineral rights to be worth more than that and disqualify someone from Medicaid.  Selling mineral rights to qualify for medicaid is very common.

Medical Expenses:  If you are in a situation where you need funds to pay for medical expenses, it makes sense to sell mineral rights and use those funds today.

Pay off Debt: If you are paying 20%+ interest rates on credit card debt, there is no reason you should continue holding your mineral rights.  When you consider the tax savings of selling along with paying down high interest debt, there is no question you should sell the mineral rights and pay down the debt.

Pay for School:  School is an investment, and unfortunately it’s expensive.  Take a moment to look at how much money you will make after going to school vs how much money you royalties will generate.  Paying for school, or paying down school debt, is an excellent reason to sell mineral rights.

Starting a Business:  When you start a business, it takes capital.  Selling mineral rights to fund a business start up can make a lot more sense than taking on high interest debt.

Helping a Family Member:  There are always situations that come up where a family member needs help.  If selling mineral rights will give you the ability to help a family member in need, it can make sense to sell.

There are many other reasons to sell mineral rights in Texas.  We recommend taking some time to figure out what your mineral rights are worth and then deciding whether selling makes sense for your situation.

Questions about mineral rights?

Whether you have questions about whether selling makes sense for you, what the value could be, or anything else related to selling mineral rights, we can help.

Our team is standing by to help answer your questions.  When you get a free consultation with our company there is no obligation and no pressure.  We’ll simply help answer your questions and guide you in the right direction.

To get a free consultation, simply fill out the form below and we’ll be in touch shortly.

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