My First Flip!

Hey guys,

I’m moving forward on my first flip. So far things look to be in compliance and I know this market is strong because a representative of a BIG billboard company told me that local advertisers usually “lock-in” billboards with long-term leases whenever they become available, due to short supply.

A 12 x 24 billboard accross the highway rents for $1,500 per face in 4 week intervals. My site is quite good but slightly less visibility. If it is worth even $1,200 per face a double-sided sign can produce $31,200 per year. According to my source the average occupancy rate of the area is around 80% (this must include the less favorable “far-off” interstate signs). That brings my revenue down to $24,960. With expenses of $15,000/year (complete guess) the net income from this sign could be about $9,960. At a cap rate of 15% the finished sign would be worth $66,400. If I subtract $35,000 to build it (has to be a monopole) and another $10,000 for goodwill/risk to build, it comes to $21,400 for my lease/permit. That seems high so maybe I’m missing something.

I had a few questions. To be clear, this particular location requires approval from both state and local agencies as it is located on a major highway within city limits. The city requires blueprints, electrical diagrams, and the name of a contractor to actually build the sign. Since I’m not actually building the sign do I need this local permit? What happens if the billboard company wants to use a different design, or different contractor?

  1. Should I obtain just the land-lease agreement and state permit, and let the billboard company acquire the local building permit?

  2. Will billboard companies even want to purchase my lease agreement if I have not obtained the building permit from the city yet?

The local permit from the city (to build the bilboard) expires after 180 days. This is not a favorable timeframe.

Thanks in advance for your responses and thank you Frank for the wonderful website and forum.