Mineral Rights & Royalties

Why investors use mineral and royalty interests

• 1031-eligible in most states. Subsurface mineral and royalty interests are generally treated as real property, so they can receive exchange proceeds as like-kind replacement property.
• Royalty income from production, without operating the wells.
• Diversification away from traditional building-based real estate.
• Can absorb an exact exchange amount alongside other replacement property.

Whether a given mineral or royalty interest qualifies as real property for Section 1031 can depend on state law and the specific interest. Confirm eligibility with your tax and legal advisors before relying on it.

What to weigh

• Commodity exposure. Income and value move with energy prices and production volumes.
• Depletion and variability. Royalty streams can decline as wells deplete and can be irregular.
• Valuation and liquidity. These interests can be harder to value and to sell.
• Operator dependence and state-by-state treatment.

How Baker 1031 helps

We help source mineral and royalty programs structured to qualify for a 1031, bring diligence to the operator and the underlying interests, and coordinate the exchange so the strategy fits within your overall replacement plan and deadlines.

Is this right for you?

It may suit an investor who wants to diversify exchange proceeds into income-producing subsurface interests and is comfortable with commodity-price and production variability. It is not a fit for an investor seeking stable, building-based income or liquidity.