Instead of building a billboard from scratch, you may want to purchase an existing billboard at a reasonable price. The latter option eliminates the stress of having to build the billboard itself, undertaking risk of errors, obtaining permits, and so on. In the case of purchasing a pre-existing outdoor billboard, you know exactly what you are buying. Here are a few things to keep in mind when doing so:
- Rate of return
The most obvious reason for investing in a billboard is to make money. So it is vital to know how much money a certain billboard is making.
- Length of ground lease
If the ground lease of a billboard is not longer that the period during which you have to pay back your loan for the investment, then do not buy the billboard. Otherwise, forget making money out of the sign, you may lose the billboard before you have even paid off the loan you took to purchase it!
- Right of termination
If the right of termination of the lease allows the landlord to terminate your lease at any time, there is a big risk involved. If for instance your ground lease is 10 years and your landlord terminates it just a month after buying the sign, you are in for absolute disaster!
- Check the permits
A billboard that doesn’t have any permits is not just illegal, but also worthless, regardless of how long it has been in existence. Always conduct adequate research regarding the permit of the sign through city and state regulations.
- Do your research on the market
Study every sign on that highway, how much the advertisers are paying for it, and how much the rent is. Is that market moving towards success or failure? Are there going to be any road expansions where that billboard is put up? If you are investing a large sum of money on a billboard, you need to know what you are in for.