Tapping Mineral Rights: One Couple Shares Their Success Story

Even in the worst of times, some investors manage to turn a profit, and so it can be inspiring to be reminded that careful and clever management of …

Even in the worst of times, some investors manage to turn a profit, and so it can be inspiring to be reminded that careful and clever management of one’s assets can yield great returns. It is no secret that in the last year investors who have more diverse portfolios which include alternative investments have fared better than those invested solely in the stock market, but you may be surprised at just how well some investors have fared and how they did it. Janice Stoddard can give you one example.

Janice and her husband Jack established two self-directed IRAs in 2004 and made small real estate transactions, buying and reselling property. All of the profits remained within the IRAs, and by 2006 the couple was maneuvering to buy and immediately re-sell a 60-acre parcel of land using a solo 401k of their combined profits. The deal was a success, but the real profit of it came from a recommendation from their son, who recommended that for future transactions they look for land with mineral rights.

Once again keeping the profits in their retirement accounts, the duo found their next deal in Arkansas—a 57-acre plot with a 3-acre residence and the remaining land all undeveloped. Because the plot was worth more than they had available in their Solo 401k, the couple convinced two friends to join the deal with the intention of subdividing and selling the land in smaller parcels.

Up to this point, each of the Stoddards’ transactions had been slightly more complex than the last, and for this most complex deal they enlisted the same company that established their Solo 401k, Nabers Financial, to create an LLC owned jointly by their account and their friends’ IRA.

The plot was originally being offered for $435,000 dollars—$5,250 per acre—but this deal only included 50 percent of the mineral rights. With the advice of their son in mind, Janice and Jack negotiated for full mineral rights at $5,875 per acre. At the time of purchase, no one was drilling the land, so this may have seemed a somewhat risky move to some, but it paid off. Within a few months, Chesapeake Energy had placed a well and the LLC was receiving monthly royalty checks for the natural gas on the property. Over 18 months, those checks totaled more than $100,000.

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The Stoddards eventually sold only the mineral rights for $8,700 an acre, netting another $465,000 while retaining the land, now valued at an estimated $435,000. Within six real estate transactions and in less than two years, the LLC’s asset value had gone from $350,000 to more than $950,000—more than quadrupling their initial investment. The Stoddards aren’t stopping there, though.  Other property and mineral rights deals are already on the table for purchase with their Solo 401k funds.

Jeff Nabers, whose firm Nabers Financial regularly structures self-directed IRA and Solo 401k investment plans, says the growth in the Stoddards’ investments is exceptional, but not unique for someone who is as diligent in their investing as they are.

“Janice knows real estate and knew how to identify an under-valued property that was a good investment. With her son’s knowledge of oil and gas, her strategy became as much about the mineral rights as the real estate. Mineral rights prices had been skyrocketing and lease values had been increasing in her area, and Janice knew she could resell the land and improvements alone and at least break even while keeping what she was really after—the mineral rights,” Nabers said.

 “I will admit to being a researcher,” Janice Stoddard says.  “When I found out that as a self-employed individual I could set up a retirement plan that would allow me to invest in real estate, which is something I know very well, I was excited about that.”

Others recommended that she just buy stocks instead, but it seems impossible to argue in favor of that position in hindsight. The fact that real estate and the laws surrounding retirement investment accounts remain a mystery to some explains why many investors stick to traditional stocks, but Stoddard advises other real estate professionals to follow her lead and do their research. She has joined the IRA Association of America to ensure that she is aware of regulations and new opportunities available to individual investors.

“The hard part was finding a financial expert who would embrace the concept of self-directed investing.  Everyone I talked to told me I should buy stocks instead. The Nabers Group has a wealth of experience in this area and Jeff has been very instrumental in giving us a thorough understanding of our options and the opportunities,” she says.

According to Nabers, “My business is growing because there are plenty of people who are not willing to ‘wait and see what happens’ with the stock market.  They want control over their finances, and they want to replace their restrictive IRA or 401k with one that offers unlimited possibilities.”

Stoddard is very pleased with the work that Nabers’ firm has done for her, and says that she never hesitates to tell people to take control of their retirement assets. “I talk to my friends, and they are absolutely despondent over what is happening to money they thought they had for retirement or college. A lot of people have lost a lot of money in recent months. When I tell them I didn’t lose a dime and that I’ve quadrupled the value of my Solo 401k over the last eighteen months, they want to know how." 

“If we had not established our self directed investment accounts we would not have the cash available for investing that we now have. That’s what allows us the ability to act fast with real estate and mineral rights opportunities. It’s a lot different than helplessly watching the market, and it has absolutely changed our future.”

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