What is bigger than a bread box, made out of wood, and creates cash flow? The answer is a wooden outdoor billboard sign. No other pile of wood can create up to a 100% return on investment annually.
So how does it work? Here’s the basic steps to building a wooden billboard.
Find a legal billboard location
What makes one location legal and another illegal to build a billboard? The answer is the Highway Beautification Act, originating from Ladybird Johnson in the 1970s. Prior to the establishment of this act, you could put a billboard anywhere you want in the U.S. without any permits.
The Beautification Act regulates the spacing between signs, as well as the maximum height, size and other features. It also requires signs to be in certain zonings. And on top of that, most cities have their own ordinances on signs that give it even more specification. The first job is to learn all these rules and how to work around them.
Sign a ground lease with the landowner
Once you have found a legal location, it’s time to contact the person that owns the land and see if you can enter into a lease to build the billboard and pay them rent. Typically, the amount you pay is around 20% of the gross revenue of the sign.
You’ll need a standard billboard ground lease document, and be able to identify where to put the sign and how you’ll access it through the property.
Get the permit
When you have the fully executed ground lease in hand, you’ll need to get the construction permits. In some areas you have to get both a state and city permit, and in some areas just a state or city permit. It’s the scarcity of the permits that creates the value.
Build the sign
A 10’ x 24’ wooden billboard costs about $4,000 to $6,000 to build, depending on who does the work. These signs are traditionally non-lighted, so there really is no cost except the sign itself.
Rent the advertising space
The final step is to rent the advertising space. Wooden signs such as these normally rent for about $2,000 per year per side. Advertisers are normally local in nature, and would include restaurants, gas stations, stores, tourist attractions, lawyers, doctors and car dealers.
How the numbers work
The numbers on a wooden billboard are pretty easy to calculate. In most markets, these type of signs rent for $2,000 per year per advertising face. The expenses are very slight. There is the ground rent to the land owner – the biggest of the line items – at 25% of the revenue – although this is normally in the form of a fixed annual amount of, say, $500 per year. There are no lights so there is no electricity charge. Repairs are slight or non-existent. You have to install the vinyl copy on the sign at a cost of around $200.
So here’s how it looks in most markets. The revenue is $4,000 per year ($2,000 per side with two sides) and the expenses are $1,000 – so the net income is $3,000. If you built the sign for $4,000, then your return on investment is 75% per year. Rent it for a little more, or build it for a little less, and your return is 100% per year.
The key is volume
So if that is how wooden billboards work, then let’s say you build more than one. Then what? Well, if you built ten billboards, you would have invested $40,000 and earn $30,000 per year on your investment. If you invested in CDs at 2%, that same $40,000 would earn you $800 per year.
And the upside unlimited
There are individuals in the U.S. that own hundreds of these units. I know one individual in Illinois that has 100 of them. That’s a $300,000 per year income. Sure, it took him years to build it up, but it takes decades to build up your IRA or savings, and they don’t provide even 1/10th of that amount.
There’s lot of use for lumber. You can build a tree house. You can build a doghouse. But nothing you can do with that lumber is more profitable than building a billboard. Shouldn’t you investigate that as an alternative investment?