How to Add $500k to Your Apartment Building for FREE

NOI. If you are a multifamily real estate investor you know it’s all about Net Operating Income. Building owners are always looking for ways to increase their income (and therefore increase their building’s value).

Over the last 25 years, one of the best-kept secrets to add income to your apartment building is to lease out space to a cell carrier. Usually the first question I get asked about cell sites is, “how do you go about getting a cell site installed on your property?” This is a complicated answer. The truth is, there is no direct phone number or representative to call to have a cell site installed. Not all properties are situated in a location where a cell site is even needed. And even if it were needed, your best bet would probably be having a relative who works high up in the chain for one of the major cell carriers or tower owners.

However, there are a few things you can do to help your chances. You can email all of the major carriers/tower owners at their respective, “submit a site” pages. These websites will take your info and property location(s) and you may get a call back if they think you’re property may be a good fit (Pro Tip: Follow up every six months). You can call customer service lines and ask to submit your property over the phone. Some building owners will even posts signs on their property stating, “cell carriers wanted.” And of course there is always the old-fashioned route of googling the local cell carrier office locations and going down there in person to try and talk to someone. You never know who may be in the building and what they may be looking for.

Now that you know a little bit about the process of potentially acquiring a cell site for your property, here are some pros and cons to consider:

Pros:

Income: Just like typical tenant paying rent, the cell carriers pay you to lease out space on your property. So how much do they pay? Well, like anything else, no two leases are the same. Some sites could require leasing space for (12) antennas on your roof, (3) pieces of equipment in your basement and a generator in your backyard. Some sites could only need (1) radio and (1) antenna on the face of your building. All of these factors and negotiations determine how much a carrier will pay for leasing space. The rent can range between $1,000 and $3,500 per month and a typical lease is contracted between 5-10yrs. $3,500/month at an 8% cap rate equates to appreciation of $525,000 at a cost of $0!

It’s free to build: You don’t incur any cost. The cell carrier will hire a contractor and they will build the entire site for you. No cost to build and you start receiving money as soon as the site is complete. That’s a pretty good return on investment.

You can get extras: Depending on how much leverage you have during the negotiation, you can typically get some extras out of the carrier during the construction project. Some extras I have seen negotiated as a part of the contract are: additional lighting, roadways, structural upgrades, correcting existing code violations, addressing existing safety issues, painting, roofing and even utility service upgrades.

Once you have one carrier more usually follow: Once the first carrier leases out space on a building, additional carriers usually follow and that means more money for you. I have seen very few buildings that lease out space to cell carriers that only have (1) single carrier. Usually the other carriers know that (a) the building owner has already agreed to lease out space, and (b) that the first carrier usually did a lot of the due diligence and foundational work to get the property ready for a cell site. It’s usually an easier process for a cell carrier to co-locate where they know their competition has already done a lot of the leg work. Also having (1) carrier on your building is like having a great big sign to welcome additional future/potential carriers. Cheers to free marketing!

Better coverage: One great perk of installing a cell site on your building is your coverage for that carrier will be significantly improved which will make tenants very happy!

Cons:

The construction process: The construction process is a necessary evil. If you are building a roof top cell site it can take anywhere for 6-12 weeks depending on how complex it is. It goes without saying that tenants are not thrilled about ongoing construction for any reason, ever.

Adding equipment to your roof: This one is pretty self-explanatory. Adding equipment to your roof adds more risk to your property. You risk having more potential for leaks and structural issues. However, these risks are usually mitigated and addressed by the engineers who design the site. But, you should ALWAYS be asking questions like “what is being done to ensure we have the proper structural support and “who is responsible if this equipment causes any leaks?” Stay tuned for an upcoming post on how to manage your cell site once it’s up and running.

Losing lease space: Beyond roof top equipment, sometimes cell carries require lease space in the attic, basement or even apartment space for their equipment. Bad news is you lose that space; the good news is you get additional lease revenue.

Ongoing maintenance: If a cell site is designed and built correctly, there is usually little maintenance needed but there are typically upgrades that need to be performed every couple of years. So there will be personnel and construction workers on your property from time to time to handle these tasks. You always want to make sure you keep strict records of who is coming and going at your property (see my upcoming blog on cell site management).

Fear of the unknown: Cell sites are a controversial subject. There are many studies showing cell sites/frequencies are harmless and there are many studies that claim they are harmful. I am many things, but one thing I am not, is an expert on this subject. I urge you to educate yourself as much as possible on this subject so that you can decide for yourself. One thing I do know is if there is one thing that all cell carriers have in common its safety. When it comes to safety, they spare no expense and usually try to make every possible accommodation including, safety signage, providing you education, and any additional safety precautions.

Now that you have some basic knowledge of cell sites, you will be able to make an educated decision on whether or not installing a cell site on your property would be a good fit for you.