ROI means Return On Investment in financial circles.
Real estate investment can seem like a reasonable choice when it comes to seemingly lower-risk, higher yield pursuits. In general, the value of real estate goes up or comes down over time, adds diversity to a portfolio, and comes with strong tax advantages that allow your profits to go farther.
There is another investment opportunity that also has a great deal of potential: Mineral rights ownership. Often incorrectly lumped in with riskier and higher cost oil and gas investments, mineral rights projects offer many of the same advantages of real estate investments while providing a better ROI.
Mineral Rights ROI vs. Real Estate Investment ROI: Expenses
Calculating the return on investment of any project takes the amount of the investment into account in proportion to the expenses and costs you encounter while owning it.
Real estate investments usually include a number of significant expenses. For example, purchasing the real estate (including all the extensive mortgage detail, paperwork, and legal fees), maintaining the property, hiring help to do things like clean or manage the property, insurance, paying taxes on the property, and handling legal fees associated with renting the property and drawing up leases are all expenses that must then be taken into account when calculating the ROI.
Mineral rights ownership, on the other hand, comes with relatively low expenses, especially when undertaken through a minerals fund project like the one currently being offered through Redhawk. With an initial investment that can be as little as $25,000 and individuals can begin earning an ROI of 2.7 to 3.5 times and greater on their investment.
In addition, there are very nominal expenses besides the initial investment. Mineral rights leases absolve the owner of the mineral rights from any liability or financial responsibility when it comes to paying for drilling or operating the well used to access the underground oil and gas. And that means that you can enjoy an ROI undiluted by numerous costs and operating overhead.
Mineral Rights ROI vs. Real Estate Investment ROI: Volatility
The ROI depends upon both the amount of money you earn from the investment and the cost of the investment. However, another factor to consider when seeking to understand the ROI of a potential project is the volatility or risk you will undertake in order to earn that ROI. If you are using retirement income to invest or simply want to ensure as much as possible that your investment will make you money, you want to find a project that delivers a high yield without a great deal of volatility.
Real estate investments are often, but not always, stable investments. For example, sometimes buildings or apartments can remain vacant for a period of time, costing investors money for upkeep without providing a return on investment. Sometimes, housing bubbles burst or other factors (such as construction or zoning or other changes in a neighborhood) can send property values tumbling. Anytime these kinds of big changes occur, you can expect your ROI on the real estate to suffer.
Mineral rights ownership, on the other hand, is almost always a stable investment. The greatest risk you run is that companies leasing the mineral rights will not find producing wells on your land. However, this risk is mitigated by purchasing minerals in areas that have proven productivity in vast shale plays and high demand. For example, Redhawk’s minerals fund project is located in the Oklahoma STACK Play, which is currently one of the most popular and productive shale areas for accessing natural gas and oil.
There is a relatively low risk involved in mineral rights ownership. Because of the almost nonexistent costs associated with owning and leasing mineral rights, oil prices would have to become almost zero before mineral rights owners ceased to make money off the project. Minimal capital expenses mean that mineral rights owners do not need to worry about problems with a project that increases costs, and lease bonuses can provide mineral owners with money even if a well is not drilled on their land. All of these factors make mineral rights ownership a stable investment tool, especially as compared to real estate investments.
Mineral Rights ROI vs. Real Estate Investment ROI: Time
Investments often require time to grow. For example, retirement accounts are intended to grow over the course of an individual’s career in order to produce a nest egg they can use when they cease working. However, sometimes investors want near-term cash returns in addition to stable and high-yield investments.
If you are looking for this type of project, mineral rights ownership can be a strong choice, especially as compared to real estate investments. When you purchase property, for example, that property’s appreciation usually takes place over the course of many years. Similarly, overcoming the relatively high costs to purchase and rent out a property in order to begin making a profit can take patience and time, especially considering ongoing expenses like maintenance, taxes, insurance, etc.
Mineral rights ownership, on the other hand, tends to deliver a favorable ROI almost immediately. Thanks to the low costs of entry into these types of projects, the absence of significant ongoing costs, and upfront lease bonuses that occur before well production starts, profits often begin to accrue within months, not years, of the investment. And that kind of near-term cash returns can be ideal for certain investors who want to see results quickly.
Mineral Rights ROI vs. Real Estate Investment ROI: Percentage
Finally, mineral rights ownership often produces a higher ROI than do real estate investments. A strong ROI for real estate is considered to be anything above 15 percent. Through projects such as Redhawk’s minerals fund, you can expect an ROI of 25 percent or above. That means that your investment could earn significantly more over time than investments in real estate.
Mineral rights ownership has the potential to deliver a strong ROI for investors, especially when compared to real estate investments. Their low expenses, low volatility, quick turnaround, and greater ROI percentages can make them preferable to real estate investments for many investors. If you want to learn more about how to enter the world of mineral rights investments, or if you want to learn more about Redhawk’s minerals fund project, do not hesitate to reach out.
The material herein does not constitute an offer to see nor is it a solicitation of an offer to purchase any security. Offers will only be made through a private placement memorandum to accredited investors and where permitted by law. Investments in security are not suitable for all investors who can withstand the loss of their investment. Investors should perform their own investigations before considering any investments and consult with their own legal and tax advisors. Past performance does not guarantee future results. This presentation is copyrighted material and only for the use by Redhawk Investment Group and its affiliates.