Mineral Rights and The Impact on Property Values

The Real Estate business is one of the most chosen businesses around the world, and there’s no denying the fact, if the right investment is made at the right time, this business can generate an ample amount of income for you. However, numerous factors can affect property values such as location, construction, and mineral rights. There are a few countries around the globe where private real estate owners can cherish subsurface mineral rights. Yet, there is a majority of countries where the mineral rights are only owned by the government. Here’s what you need to know about mineral rights and how they can impact property values.

What Are Mineral Rights?

You must have heard about many rights, but if you have a little knowledge about real estate then you might have an idea about it. The right to explore, extract, and develop minerals hidden in the subsurface of a property is known as a mineral right. There are different types of minerals in the subsurface of the earth.

There are numerous types of mineral rights for sale, but you need to have good knowledge about them before you make any decision. The most commonly referred minerals are oil, natural gas, and coal. However, there are also minerals in the shape of precious metals such as gold and silver. Moreover, there’s another category of metals that are non-precious such as copper and iron. Yet, mineral rights are different in every state.

Valuation Parameters For Mineral Rights

There are some parameters that you need to be aware of to evaluate the mineral rights accurately;

Types and Quality of Minerals

There’s no doubt in the fact that the type of mineral can certainly affect the valuation, it can increase or decrease the value of your mineral rights. For example, natural gas, coal, and oil are in high demand, no matter where you go around the world. The same is the case with precious metals such as gold. Not only this, but the quality of the minerals also plays a pivotal role in the overall valuation. Good quality minerals can surely enhance the value of your mineral rights.

Forecasts

Once you have determined the type and quality of the hidden minerals. It’s important to calculate the future cash flow from the project you are about to initiate. You need to analyze the production levels and potential recoveries. Better production levels lead to more valuable mineral rights.

Exploration and Production Cost

Sometimes the subsurface is filled with an astonishing amount of reserves in terms of oil, natural gas, or even gold, but the exploration and production cost is hard to afford. The exploration and production cost is calculated with the cost needed to produce one ounce of any mineral.

Moreover, depth and type of location can also impact the exploration and production cost, there are areas where extracting minerals is beyond imagination. You also need to consider the environmental damage before taking any steps. Numerous other key factors can affect the value of your mineral rights, but these are the most important ones.

Impact of Mineral Rights on Property Values

No matter wherever you live, whether it’s a big city or rural land, mineral rights can impact the value of your property to a certain extent. If you live in an area where minerals are abundant, then the effect of mineral rights on your property is maximum. If an individual owns both mineral rights as well as surface rights, they have complete control over the available resources on their land, ultimately increasing the worth of their property.

One of the best options they have is to lease the property to any extraction company and earn while sitting at their homes. In countries where citizens are allowed to buy and sell mineral rights, the property values are dependent on this factor for sure. However, numerous factors determine the value of your mineral rights.

If you are a buyer, you need to conduct proper research on who owns the mineral rights of the property you are about to buy. You won’t love getting surprised one day that you don’t have the mineral rights of the property you bought. The best option is to buy land that includes mineral rights as well. So that you live stress-free on your property.

Conclusion

Buying and selling mineral rights is one of the finest options if you have ever been into real estate. You need to check the value of the mineral rights you are about to buy and once the research is done, you are good to go. You can sell mineral rights whenever you want if you are in a financial crunch where you need to pay student loans for your children or want to reinvest your money into new projects.

Similar Blogs