I keep hearing about land leases, which seem like a risky expense especially if your billboard is without a customer advertising for any length of time. If you want to buy commercial land, it’s often either several acres or expensive properties. Isn’t there a way to buy small parcels of land just for billboards ? Why are land owners so reluctant to parcel out their land, especially acres of desert land which aren’t being used for anything ?
George
The standard industry perspective is that you would not want to buy land when you can rent it. When you buy it, you have to mow it, insure it, and pay property tax on it. When you rent it, you escape all those issues. Economically, you are always ahead – in most cases – renting as opposed to buying. The only thing you give up is “permanence” because you might be kicked off the land at some point. But the billboard companies like the flexibility to be able to remove the sign if the market gets weak or they change the highway or visibility of the sign, so they consider that a wash. And then there’s the issue of the landowner wanting to keep control over the aesthetics of their property, and not wanting to give up that control by selling a small piece.
The bottom line is that I don’t think you’ll see a change in the relationship of billboard companies from land renters to land owners. In Dallas, for example, out of thousands of billboards built there are only maybe 100 that are built on land that the sign company owns. In my old portfolio of 300 signs, I only owned the land on about 3.
Thanks for the info, Frank. BTW, what is your rule for how much you should offer on a land lease ? Location and other factors can affect the lease amt. However, what if nearby billboards by Lamar & Clear Channel are paying a big lease amt, but you’re only starting out & have a limited budget ?
Thanks,
George