Value of a sign

Hi, I am thinking of buying a double sided sign that has annual income of 64,000 - it is leased to a major advertising company for the next 13 years. What is this worth?

Thank You,


To determine the value, you need to subtract the expenses and find out the net income. Then apply a capitalization rate. That will give you a value based on a return on investment. For example, if the net income is $40,000 per year, and you want a 20% return on investment, then the value is $200,000.

Frank - thank you - I understand how cap rates work - my question is at what cap rates do billboards sell at? My guess is that froma cost replacement approach to come up with value - that a 2 sided pole sign on a major express that is somewhat tall - costs appx 500,000 to build - and I on the correct path with this?