Every wondered how to buy royalties or what they even are?
Let’s say you have just bought some property and you’ve been told it has royalties attached. What does that mean and what is a royalty?
A royalty is a payment made to you when a company finds something of value under your property in the form of oil, natural gas, or other valuable minerals needed to power or supplies the basic materials our world runs on or built from.
In addition, it is something most people do not think about when they buy land and they are missing a potential windfall in terms of royalty income.
People want to pay you for the mineral rights to your land.
You in fact could, as well as many others have, make a fortune by buying property just for the wealth buried under it.
Today you’ll learn a bit about how to buy royalties and then sell those rights and start getting those royalty payments for yourself.
Find the land that has the wealth under it and then sell it to a broker
This is often your best bet when dealing with oil or mineral companies. A Minerals broker is another option as they have the names and contact points you need to make the deal work right.
You only have to concern yourself with the location of and acquiring the land to get the mineral rights.
For this, you will need to learn about maps and geology to be able to decide where such minerals might be located.
Loving to travel in the west is a plus as most of the untapped resources are in the western states where much of the land is unexploited and can be surveyed and searched only with difficulty. This is why you can still make a fortune, as most people would prefer to stay home to get rich.
Once you have found a piece of land that looks suitable you need to file a claim or if it is already owned, purchase it. There are still vast tracks of land that you can claim or possibly even homestead on as a way to gain ownership of both the land and the minerals that lay beneath it.
Should you desire to market and sell the mineral rights yourself you should hire a lawyer that is familiar with the subject at the very least as the documentation can be voluminous and can run 50 to a 100 pages of detailed agreements.
Some people have gone so far as to put their mineral rights for sale up on Craigslist.
However, if you want to get the most out of the land and sell your royalty payments you should hire a pro to help you.
A Pro can help you by doing the paperwork for you and even find the buyers for your mineral resources.
However, they also can help in other ways.
They can show you the proper way to file you paperwork as well as how to deal with the 1099 issues of royalty payments.
However, they can go even farther by dealing with geological surveys and mapping out where the work can be done and how to go about restoring your property after the gas, oil, or minerals have been extracted.
This is a growing concern among environmentalist and the government these days.
Tax Liability on Royalties
For you the tax liability can be a killer so you need to understand that royalties are treated as ordinary income and the scale of how much is coming in annually can raise your tax bracket considerably.
Therefore, this is why you may wish to become a Limited Liability Corporation (LLC).
In this way, you have your taxes lowered and everything becomes much simpler book keeping wise as your personal assets are separate from your royalties coming in from your personal possessions and home.
You might also be in for some tax breaks that are not offered to ordinary taxpayers as well.
If structured correctly your car, computer, and office spaces in your home may be considered tax deductions on your taxes as well.
However, all this all depends on how you structure the LLC and which is why you need professional help.
Done properly your land’s mineral resources can be your ticket to a more prosperous and happy life for years to come.