Why Energy Royalties Belong in Every Real Estate Investor’s Diversification Strategy

[Erwin Baquirin]

Most of us on BiggerPockets love real estate because it gives us control and steady cash flow. But if your portfolio is only tied to rental properties, you’re essentially betting on one sector—and that can be risky.

That’s why I started looking into oil & gas royalties as a way to diversify.

Here’s why they caught my eye:

• Different Drivers: Real estate income is tied to local markets, tenants, and interest rates. Royalties are tied to energy production and commodity prices. They move differently, which balances things out.

• Cash Flow Focused: Just like rent, royalties pay out monthly. The operator covers expenses—you just collect your share.

• Truly Passive: No repairs, no calls, no property management. Once you own the interest, you sit back and collect.

• Inflation Hedge: Energy prices often rise during inflationary periods, which means royalty checks can actually go up when other parts of your portfolio feel the squeeze.

For me, royalties aren’t about replacing rentals—they’re about adding a second stream of passive income that works alongside them. It feels like owning a mix of apartments and dividend-paying stocks, but tied to something essential: energy.

Curious—has anyone here added royalties (or other “alternative” passive income streams) to your portfolio alongside real estate? How has it worked out for you?