Gas and oil royalties are a very smart investment for investors who are looking to start small. The reason is an investor has the potential to make between 15-30% on returns. It is simple for an individual investor who has some extra cash and understands the market to get involved. If you have the financial backing, that is great. You can check that off of your list. However, making sure you have the facts about oil and gas royalties before you dive in is the first step. Below I have prepared a quick list of steps that can be used as a how-to reference guide for oil and gas royalty buyers.
Networking to Meet Potential Sellers
As an investor, you may ask where you should be looking to find potential sellers. This is the most challenging part of purchasing oil and gas royalties. This is because most people that own oil and gas royalties have no interest in selling due to the consistent cash flow. Even though it can be difficult, you can still find leads in a couple of different places. If you have a division order from previous royalties, occasionally these will have the names of all of the owners. This will give you a few people to contact. Another way is to look through the Blackbeard Data Service in Texas. This database has all of the owners in Kansas and Texas. These are both excellent options for oil and gas royalty buyers.
Make Some Offers
It is now time to make some offers, which means if you have completed the first step above. You need to begin sending offer letters to these potential sellers. It is recommended that if you are individual buyer, you send a letter as well as a bank draft. Most oil and gas royalty buyers do not need to send a back draft if they are a large corporation.
Sort through Potential Sellers
For every 500 letters you send out, you may only receive 1-3 responses. In addition, we are just talking about responses here, not actual sales. Make sure you are returning calls right away, and respond immediately to potential sellers. One thing a lot of oil and gas royalty buyers seem to forget is that you should always screen the sellers. This means a background check and the whole nine yards. Getting scammed is not something you want to happen, so cover yourself well.
Once you find your seller make sure you send them the paperwork and get it signed. Before you do that, you must make sure it is looked over by an attorney. Once everything looks good, your attorney can then file the appropriate paperwork with the court. Then you are ready to start receiving monthly royalties.
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