Mineral rights and investment proprety

12 Replies

Hello,

I am in the process of purchasing a 4plex in Midland, TX. It is on a small residential lot. The sellers want to keep the mineral rights. I am wondering if it is worth the battle to try and keep them and potentially lose the deal or just let the sellers have them? I can't imagine a tiny residential lot's mineral rights are going to be worth much in the overall scheme of things. Thoughts?

Thank you!

Adam

Unless they want to dig up the whole property looking for minerals , what could go wrong ? 

https://www.trulia.com/voices/Home_Buying/If_the_seller_retains_the_mineral_rights_do_they_r-335701

Two of my sisters just sold the mineral rights to their land for 1.8 million dollars in Big Spring, TX.

Oil is the main issue. Horizontal drilling

The minerals under these lots are probably more valuable than any other city in America.  Many of these residential lot mineral owners are receiving lease bonuses in the thousands with significant potential royalty payments from the horizontal wells being drilled.

Maybe you could negotiate a small percentage of the mineral rights? Say, 5% or something. I'm not sure how those things work but I would inquire if you are able to own a portion of the mineral rights. Tell the sellers you want a small stake in any future mineral payments so that you can "subsidize" rents if they go putting in an eye-sore of a pump, which might make it harder to rent.

The majority of home owners here do not own their mineral rights, so it's not an uncommon thing. This is a good article to check out just as a reference: https://www.nolo.com/legal-encyclopedia/who-owns-the-minerals-under-your-property.html

Are you buying the 4plex on Illinois that had an interior renovations? Just being nosey, haha

@Rachel Rendall thanks for the info. What you say is what the realtor has told me too. I am not buying the one on Illinois. Is it an off market deal? I don't see it on realtor.com or loopnet. Thx!

Originally posted by @Adam Macy :

@Rachel Rendall thanks for the info. What you say is what the realtor has told me too. I am not buying the one on Illinois. Is it an off market deal? I don't see it on realtor.com or loopnet. Thx!

I think it was Craigslist, but I can't find the listing anymore. I was asking because we tried to negotiate with the Illinois seller and he literally said "We are not motivated sellers"--haha! I was hoping you had had luck and nabbed it. Anyway, sorry to derail your post and best of luck with your property here! 

In many states big industry bought the mineral rights to anything promising years ago. In Southern Illinois much of the land (not in a flood plain) sits atop underground coal mines. No big deal unless they start collapsing.

When the roof of an underground coal mine collapses it works like an hour glass. Everything comes through a small opening and spreads out but the ground above shifts like the sand in the top of an hour glass.

This is known as "Mine Subsidence" (Sub-Side-ence) and it can cause a basement floor to drop three feet straight down but leave the walls in place but damaged. I have walked down steps that were no longer anchored to the floor. Mostly you will find vertical cracking in bricks where the brickwork is sheared in half going up the wall. Also corners drop and the mortar joints separate.  It all depends on where in the circle of damage the property is located.

You can buy mine subsidence insurance with the home owners policy for events that are undiscovered. After that no dice.  Have a mine subsidence survey done if you see something suspicious.

Thank you all for the input. I really appreciate it!

Not uncommon for sellers in Midland to reserve their minerals. 

The last 4 deals I’ve done all had the sellers reserve the mineral rights. 

Oil companies drill wells on the outskirts of town and then go horizontal to get the oil under the neighborhoods. 

Owners of a residential lot can get a lease of a few thousand dollars & then some small royalties later. Up until a decade or so, no-one cared really about minerals since oil companies were not going to put a rig in the back yard of a home in the middle of a city. 

It matters now since they can be miles away & still get there horizontally. 

I wouldn’t fuss about the minerals or you are likely to lose the deal. Either that or raise your offfer by about 20k and include the mineral rights as a contingency for the higher offer. 

Good luck. 

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