Does anyone know anything about billboard investing?
Real Estate Investor · Philadelphia, PA · Member since 2012 · 41 posts · 2 votes
I'd really like to get started in billboard investing, but I know it's not a very popular method of real estate investing. I have experience flipping houses and buying/renovating small apartment buildings, so I'm familiar with that area of investing. I'm in the Philadelphia area and I'd like to explore different options such as buying or leasing land, erecting a billboard, then reaping the benefits of the insane low-maintenance monthly cash flow. A few questions:
1. Do lenders finance billboard investments or would I have to use cash?
2. How much does it cost to erect a big, sturdy billboard that you see on the sides of major highways?
3. What kind of maintenance costs are there? I'm assuming the tenant would be responsible for the electric, but what about stripping down and putting up ads?
Any help would be greatly appreciated. Thank you.
Only read if you're interested in the digital sign route --
I used to work for an LED sign company and from what I understood, you could expect to pay in the low 6 figure range topping out in the 200k range, for the typical side of the interstate sign.
The signs came with a 5 year warranty, including diagnostics, parts, & labor. They were managed by an automated diagnostics system and the company I worked for dispatched the technicians for repairs based on the diagnostics server. Kinda like a property manager for the first five years. You just have place your own customers is all.
Because you can reach the sign using cellular data, you can update the sign from anywhere at any time. This means that if customer #8 didn't pay on time, customer #8 doesn't get sign time. You can control who gets prime slots and charge premiums, etc.
Here is a list of the 3 top manufacturers to my knowledge. I'm sure they all have case studies as well as recommendation lists. Full disclosure, I worked for Watchfire Signs in the past, but I no longer do.
Watchfiresigns.com would be a good place to check for case studies, although I don't recall finding a lot of good economic data. Just make sure to look into OA signs, not On Premise signs. (On premise would be any business owned sign. These are not permitted to sell ad space and are typically much smaller. Think banks/schools/restaurants) Watchfire signs likely has a higher price point than some competitors, but the customer service and warranty are very good. Call the tech department if you have any questions.
Daktronics is probably the largest and best known digital sign company in the space. I believe they have a larger selection and tend to have a lower price tags when comparing similar signs. I'm not familiar with their product or services first hand, but have heard some less-than-great things about customer service. I imagine you'd want to look into cost of ownership vs competitors in the long run.
Yesco would be the third big sign manufacturer. I don't have a lot of details for you on them.
If you do decide to move forward with digital signage, I would encourage you to strongly consider a modular sign structure. By this, I mean a structure that has been designed in such a way that the components can be upgraded as technology moves forward. LED signs run the risk of becoming outdated. It may be a decade, it may be two decades, but if after that time you can retain your structure, and simply update the components, you're relieving yourself of a huge cost. (Think basic computer tower, and upgrading internal components...)
Oops...I went a little overboard and you still didn't get your numbers.
Hi @Chris Wyche - I am not particularly familiar with this sort of investing, but if you are interested in the urban Philly market I would advise reading up on pending legislation.
In the past 12 months there have been significant discussions surrounding new billboard legislation and zoning. My understanding is that nearly all discussions so far focus on the removal and/or strict limiting of billboard advertising in Philadelphia.
This is largely a result of a report released by Penn(?) that shows a large proportion of existing billboards do not follow current guidelines and are illegal.
Sorry I can't provide specific information, but hopefully this helps.
Thanks for the advice, Lucas. I will definitely read up on that
Chris, financing isn't really done directly for billboards, until it gets to larger sign companies through operations as the land or building space is usually leased. You financing alternative is factoring accounts receivables on contracts, which will vary based on your client's strengths.
Costs of a free standing billboard can be 5K to 50K or much more, depends on codes, type sign, materials and locations, I had a client in the business. Electric is usually metered to you. Insurance from what I understood was only viable for larger steel structures, too costly for a wood billboard on farmer Smith's pasture next to a highway. You'll need liability coverage, probably not too bad.
Location determines rents based on traffic count and size.
My electrician does signs, maintenance can be rather regular for large electrics, bulbs get replace on small wood signs and many small ones are not lit. The equipment can be anything from nothing to elaborate solar/battery set ups to high voltage.
Can't really say how profitable it was as my guy also had cell towers leased, another animal, but overall, he did well.
Some sign space is taken care of by the lessee, like a beer distributor that has their own signs manufactured and they just hire an independent hanger or employee as such a distributor may have 200 signs.
That's all I got on this subject. :)
Only read if you're interested in the digital sign route --
I used to work for an LED sign company and from what I understood, you could expect to pay in the low 6 figure range topping out in the 200k range, for the typical side of the interstate sign.
The signs came with a 5 year warranty, including diagnostics, parts, & labor. They were managed by an automated diagnostics system and the company I worked for dispatched the technicians for repairs based on the diagnostics server. Kinda like a property manager for the first five years. You just have place your own customers is all.
Because you can reach the sign using cellular data, you can update the sign from anywhere at any time. This means that if customer #8 didn't pay on time, customer #8 doesn't get sign time. You can control who gets prime slots and charge premiums, etc.
Here is a list of the 3 top manufacturers to my knowledge. I'm sure they all have case studies as well as recommendation lists. Full disclosure, I worked for Watchfire Signs in the past, but I no longer do.
Watchfiresigns.com would be a good place to check for case studies, although I don't recall finding a lot of good economic data. Just make sure to look into OA signs, not On Premise signs. (On premise would be any business owned sign. These are not permitted to sell ad space and are typically much smaller. Think banks/schools/restaurants) Watchfire signs likely has a higher price point than some competitors, but the customer service and warranty are very good. Call the tech department if you have any questions.
Daktronics is probably the largest and best known digital sign company in the space. I believe they have a larger selection and tend to have a lower price tags when comparing similar signs. I'm not familiar with their product or services first hand, but have heard some less-than-great things about customer service. I imagine you'd want to look into cost of ownership vs competitors in the long run.
Yesco would be the third big sign manufacturer. I don't have a lot of details for you on them.
If you do decide to move forward with digital signage, I would encourage you to strongly consider a modular sign structure. By this, I mean a structure that has been designed in such a way that the components can be upgraded as technology moves forward. LED signs run the risk of becoming outdated. It may be a decade, it may be two decades, but if after that time you can retain your structure, and simply update the components, you're relieving yourself of a huge cost. (Think basic computer tower, and upgrading internal components...)
Oops...I went a little overboard and you still didn't get your numbers.
Ope! Sorry, I meant to add that the signs themselves were provided by the manufacturer, but the structures themselves were the responsibility of the customer. The company would help coordinate though.
Not sure if that plays into your strategy at all, but just figured I'd add it.
Regardless of whether or not you're interested in digital signage, I bet those three companies have salesmen that could tell you much about the billboard industry in general. And for free.
If my huge post above was totally off-topic for your strategy, feel free to remove it.
Best of luck!
Thanks Anthony, the digital billboard route is definitely something I'd be interested in. Typically, what kind of income do you think I could expect from a digital board?
Thanks for the feedback, Bill. After doing some reading I'm thinking of buying an existing digital LED billboard. The profitability from those things seem to be better than the regular ones. Can anybody advise me of any potential cons of this business? It seems really good
Chris,
Unfortunately I don't have the specific economic details that you are seeking. I worked on the technical side of things. I would love to learn more myself.
I would imagine that the income expected would be largely based off of traffic flow/impressions and would therefore be a function of location.
As for getting into the digital industry. Please make sure to look into your maintenance costs of parts once your signs are beyond the warranty period. Also make sure you have insurance covering "acts of god," etc. (Lightning strikes, other weather, accident damage to sign structure, gun shots to panels..) Not saying these things are common, just that I've seen them all.
If you had planned on doing any of the maintenance yourself, make sure you discuss this with the sign manufacturer of the used sign you will be purchasing. The sign company I worked for (Watchfire) essentially had "dealer" relationships and would only sell parts to Watchfire approved "Sign Companies". This isn't to say that it's hard or impossible to become a "Watchfire sign company," just that the only way you can purchase parts is through a Watchfire SC, not direct from manufacturer. This can potentially lead to headaches if you don't find a good SC to run your maintenance.
Really above all, make sure to call the sign manufacturer before you purchase. Very likely they will be able to look up a log of all "incidents" recorded on that specific sign. At least it was this way with Watchfire. In this manner, you can see if they can check through the logs and see if there is a large number of incidents or any ongoing incidents. Specific issues you'd want to look out for are anything that could signify Lightning/surge damage. Although there is oversurge protection in the sign, it is possible for problems to string along a bit until the root cause is found. This can be costly in both labor and parts.
In my experience, the oversurge issues were not all that common, but not unheard of. Definitely not something that happened on most signs.
Finally, please please please check into permits and zoning before getting too deep on any sign. You want to be sure of what you are allowed to do with your sign. Different areas allow different things.
Many places you can change ads every 8 seconds, but there are some places that go far enough to say you can only show 1 message at all times...something like only changing the message 1 time per 24hrs...
Billboard/OA signs generally are not permitted to show any videos because of their proximity to traffic. I'm sure there are exceptions (Vegas?).
Sorry I can't be of more help in terms of the economics. Again, I'd love to hear more about that aspect myself as I've always thought these signs to be full of potential.
One more tidbit: I know watchfire will do traffic analysis for billboard customers, and I believe they do it for free for serious customers. They may have a source for data on the sign or sign area you are purchasing. I'd suggest you give them a call as it can't hurt.
And again, sorry about all the "watchfire this...watchfire that"...they are simply the only company i'm familiar with. I'm sure the competitors have same/similar features.
A couple of years ago I did a tax return for some people who lived in a rural area. They leased the billboards to clear channel and received between 8-11k per billboard annually. The only expenses on the return were depreciation on the billboard structure and property taxes.
Also the City of Philadelphia has some pending legislature related to billboards so be sure to check that out. I just read about it on philly.com
@Chris Wyche There is a BP member Frank Rolfe who used to have a Billboard business that he sold to a national billboard company. He has a few posts about billboards here on BP.
He wrote a book about the Billboard business. He is active on his own website forums on billboards at http://www.obuniversity.com. You can get answers and information there.
I've bought a few tax liens that have billboards on them and if I end up with the land through foreclosure I wanted to learn the business. It's a nice income stream as a property owner when you lease the land but have the structure owned by a national billboard company. They tend to pay rent on time and no toilets to fix, or maintenance - since they own the structure. Taxes, and liability insurance are usually your only expense - but only if the billboard itself is owned by the billboard company.
I'm going to hijack the thread just a little. The property I'm looking at tomorrow has, according to the agent, the electrical service for a billboard which is located off the property. The owner, now deceased, was getting "a hundred or so dollars" in rent a year for the use of the property. While I'm going to find out if there's a contract, etc, I'm curious as to whether anyone's run into anything like this?
Obviously, the value is going to vary from market to market, but I'm curious if it's something that might be more valuable if renegotiated.
Here's a PlanPhilly article from 2 days ago that discusses potential updates to billboard regulation in Philadelphia.
Interesting article @Lucas Pfaff . Thanks for the feedback, everyone
Damn right there is. I have a friend who owns a few billboards, and also has a few lease agreements in place for land, with national companies owning the sign/leasing the sign.
There is money to be made by simply getting in between the farmer(land owner), and a large billboard company.
The tightening restrictions on billboards are common nationwide.
The Federal Aid HIghway Act of '56 was passed, and interstates were born. Billboards followed. As in all gold rushes, regulation was needed. In '65 Lyndon and Ladybird Johnson made a huge push to keep the highways beautiful, and the Beautification act was passed, with lots of regulations on them. There has been many amendments since then, and I am sure more will follow. There is also many state and local laws that apply as well. I know for example, in the township my parents live in, you cannot construct any new billboard. Here is the just of it from Wiki:
It can be tough to get into the business these days I would think, with how many big players there are, but I have no doubt that there still is areas for the little guy to make money.
Were you ever able to get your feet wet in the billboard industry? If so, I would like to schedule a conversation with you regarding multipliers and cap rates for the billboard industry. I am trying to value a group of bulletins along an interstate just outside of the Philadelphia city boundaries.
Thanks,
Spencer
@Spencer Ricks Spencer, I actually have been involved in the acquisition and valuation of over 750 billboards. Are you look at the structures themselves or the land beneath them? I currently represent investors that target both, so would be happy to provide any information.
@Oliver Pilco. Oliver I am new to this site and was unsure how to contact you, but would really appreciate the opportunity to talk to you regarding your experience. I am currently in negotiations with an owner of 28 faces who is looking to liquidate due to personal concerns. I have some numbers in mind regarding cap rate, etc. but insight from someone with your experience would go a long way. Please let me know if there is any way we could set up a discussion.
Thanks,
Earl
Hi Oliver,
Found your post while trawling the internet, we have structured an investment around DOOH it would be good to get some input considering your experience. I have just registered for this site so could you kindly PM me as I am not too familiar with the etiquette .
Thanking you in advance
Adam
@Adam Brown Thanks for reaching out! I just sent you over a PM.
Just came across the post. Really interesting. I too was searching regarding the same matter. Got cleared my queries. Thank you Guys.
I think DOOH is another best option. My friend too had an advertising agency, its really going good and effective . He had widened his business by including OOH Advertising also.
Billboard advertising is having a greater audience. As i was behind this topic, i could search a lot and got so many reviews . See the experience in Dubai. These people are doing amazing work http://www.backlitemedia.com/services/billboards/ .One can know the reach of this advertising from there works. In my view, investing in these sort of area will definitely become a great success but it varies depending on the restrictions and the rules on the place where you do the same.
Its better to enquire about all the rules and regulations relating it , before getting in to the business.
How is lamp post advertising? Can anyone provide some information regarding this?
Thanks.
I too would like information. I am very interested in investing in billboards