Should you Sell Royalties
Should you Sell Royalties
If you’re receiving royalties, the decision to sell your royalties can be a difficult one. Royalties can provide a steady income stream for many years. If you’re on the fence about selling your royalties, we’ll help walk you through some of the factors to consider when deciding to sell royalties and how to make the right decision for you.
Meet a Cash Need
When many royalty owners decide to sell their royalties, they do so because they need the cash immediately. You may need to save your house from foreclosure or be dealing with an illness in the family. Regardless of your reason for wanting to sell, it’s important that you get the highest price possible by selling royalties the right way. It may be tempting to accept the first offer and get the cash quickly but doing so can cause you to sell your royalties below market value. When you decide to sell royalties to meet a cash need take your time and get the highest price possible by listing your royalties online with a reputable company.
Fund a Long Term Goal
Another reason why owners sell royalties is to fund a long term goal like a vacation, house remodel, or funding a retirement account. While it’s your personal decision on whether to sell, consider the cost of giving up your royalties and what future income you may lose out on by not having the income from your royalties. Whether you are selling to meet a long term goal or selling quickly to meet a cash need, make sure you get the highest price possible by selling your royalties the best way.
Sell a Portion
One option you should consider when selling royalties is whether selling a portion of your royalties will meet your needs. Many royalties owners believe they need to sell their entire royalty income but that’s not the case. You can sell just a portion of your royalty income and get up front cash today while retaining some of the royalties so you still get checks in the future. This is the option we recommend for most royalty owners because it allows them to get some cash today and still benefit from the production of the well in the future.
If you also own the mineral rights in addition to the royalty income you are receiving, there may be potential for future drilling on your property. Selling your royalties may be giving up the future income in the producing well but you can retain your mineral rights and still get a share of any new wells that are drilled and the income from those properties. You may need to sell your royalties today but if you retain these mineral rights you may receive more royalties in the future once a new well has been drilled.
Some royalty owners choose to sell royalties for estate planning purposes. Rather than divide an interest among heirs, you may elect to get a lump sum cash amount today so that you can distribute the cash however you determine is best. Selling royalties for estate planning purposes is done frequently to ensure that money is divided exactly as intended. In addition, this relieves some of the administrative burden on heirs who would have to account for the royalty income.
If you have questions about whether selling royalties is right for your situation, fill out the form below and we’ll help answer your questions and guide you in the right direction.