I am looking at purchasing a Billboard Farm. There has been an asking price already given but I would like to find out if there is a way that I could possibly get an appraisal of the farm before purchase. I have all of the incomes, and the boards are close to 90% rented. Is there a multiplier that I can use,
Monthly Income x 12 months x ? Multiplier = Value?
Any advice would be great.
What is a billboard farm?
I am calling a billboard Company, basically a “Farm” of signs, there are 40 Structures included in his company. So just a billboard company aquisition. Sorry for the confusion.
The best way to come up with the value is to determine the EBITDA [earnings before interest, taxes, depreciation and ammortization – basically the true cash flow before not payment] and then apply a cap rate [for example 20%] to derive a value. A company making $100,000 of EBITDA would be valued at $500,000 under this formula.
Be sure and guard against cap rates that are too low. 20% allows you to get your money back, after interest, over a 7 year time frame. Deals under 10% never allow you to get your money back. Don’t look to the big companies for a role model – they have bought many companies at rediculously low cap rates that they are now in big trouble over.
Remember the old adage: " before there can be return ON principal there has to be return OF principal".