There are firms which obtain billboard permits and land leases and sell them for a fee. Most are legitimate but there are unscrupulous developers who will try to take advantage of you especially if you are new to the business. A billboard site seller has no skin in the game. They have an incentive to inflate their fees, not to make you a success. I can think of a case where a developer sold a mediocre two sided static billboard generating $1,500/month in revenue with an above market $850/month land lease to someone new to in the industry for $115,000. If you assume power of $100/month, sales commission of 20% and insurance of $45/month that board is generating a paltry $2,500/year in cashflow. The cash return on capital is 2%/year. That board is underwater and will never pay off as an investment. Here are three pointers for dealing with site developers.
- Don’t pay a finders fee of more than $10,000-20,000 for a static billboard site or $40,000 for a digital billboard site.
- Make sure you’ve got a competitive lease. The lease term should be at least 20 years. The lease should cost no more than 20% of the projected revenue of the billboard. Also, make sure the lease is assignable to you without consent.
- Don’t pay more than construction cost plus $10,000 for a billboard which is up and empty or construction cost plus $40,000 for a digital sign. Don’t pay the seller for work which you need to do generating revenue.
- Insist that a valid sign permit and a signed, recordable land lease be delivered to you at closing.