Borrowing vs. Selling: Which Should Mineral Rights Owners Consider?
Howdy folks! Welcome back!
Are Your Mineral Rights Valuable?
Producing mineral rights are incredible assets to have. If you own land with oil and gas reserves beneath it, you already know the value of these rights. When an oil and gas well is drilled, mineral owners receive royalty payments based on the hydrocarbons produced and sold. These payments are typically made monthly and can continue for as long as the well produces.
However, there’s one downside to oil and gas royalties: they're paid out in monthly installments. But what if you need immediate cash? Whether it's to cover an unexpected medical bill, fund a child's college education, or prepare for retirement, you might need access to liquidity. Historically, the only way to access a lump sum from your mineral rights was by selling them.
The Pros and Cons of Selling
Selling your mineral rights could be the best option, depending on your needs. A lump sum payment for your rights could help you clean up your estate, invest in other assets, or simply cash out of the volatile oil and gas market. I help mineral owners all across the country make this decision daily.
However, selling comes with a significant downside: you're giving up future production and the potential upside from future wells. Once you sell, you're no longer receiving those monthly royalty payments, and you lose the opportunity to benefit from new wells drilled in the future.
What About Borrowing?
So, what about borrowing against your mineral rights? While oil and gas assets are valuable, they can be difficult to leverage through traditional banks. Consumer banks generally don’t understand these assets, and you’ll likely struggle to secure a loan against them.
In the past, there were companies that offered private loans to mineral owners, but finding a trustworthy lender can be a challenge. Many lenders in the mineral loan space may not have the best intentions, and there are some with predatory practices—looking to take advantage of mineral owners who miss a payment.
Additionally, these loans often come with extremely high interest rates, making them a risky choice for many mineral owners. Until now, I’ve been hesitant to recommend borrowing against mineral rights because of these issues.
at time to sell if the conditions are right, but only if you fully understand what you’re holding.
Introducing Frontlands: A Better Option for Mineral Owners
However, things are changing. Just as I’ve worked to shed light on the mineral acquisition industry, Frontlands is doing the same for mineral loans. They offer a new and improved option for mineral owners who want access to liquidity without selling: the Mineral Line of Credit™, or MLOC™.
An MLOC™ works similarly to a home equity line of credit (HELOC), which is already familiar to millions of Americans. The key advantage here is that you only borrow what you need, and you're only responsible for paying back what you borrow.
How the MLOC™ Works
Let’s say you’re earning $2,000 per month from mineral royalties on a property in Texas, and you have a child heading off to college. With an MLOC™, you might be able to access up to $50,000 in a line of credit. On the other hand, if you choose to sell your mineral rights, you might receive a lump sum of $100,000 from a mineral buyer.
While selling gives you access to the full value of your minerals, borrowing through the MLOC™ lets you continue to own your mineral rights and receive ongoing royalty payments each month. Both options offer benefits depending on your financial goals.
Which Option Is Right for You?
Both selling and borrowing against your mineral rights are valid choices depending on your situation. If you need immediate cash and are ready to part with your mineral rights, selling might be the best option. However, if you want to retain ownership of your minerals and continue receiving monthly royalties, the MLOC™ offers a viable alternative.
It's always great to have options, and if you're ready to explore these choices, I’m here to help. If you’re interested in learning more about Frontlands and their MLOC™ offering, I've included a link to their website below.
For those who are looking to sell, I can assist you in getting a legitimate offer for your mineral rights. Feel free to reach out to me anytime for guidance.
Conclusion
No matter what path you choose, it’s important to consider your financial needs and long-term goals when deciding whether to sell your mineral rights or borrow against them. Make sure to work with trusted professionals who have your best interests in mind, and take the time to explore all available options before making a decision.
For more information about Frontlands and the MLOC™, check out the link below!
