Billboard Mastery Podcast: Episode 1

Why Invest In Billboards?



Did you know that billboards are regulated by the U.S. government? There’s probably a whole lot about billboards that you don’t know. But all that’s going to change with our review of the basic reasons that you should consider investing in billboard signs as part of your financial security plan. You’ll see that billboards offer some amazing advantages as well as the flexibility to make your portfolio as big or small as you see fit.

Episode 1: Why Invest In Billboards? Transcript

You drive by them every day, but have you ever thought about owning a billboard? This is Frank Rolfe for the Outdoor Billboard [inaudible 00:00:12] . We're going to talk about the basic theme of, why would you want to own and invest in a billboard? [inaudible 00:00:19] something most people, [inaudible 00:00:20] the majority of Americans have never even thought about or considered. But as you'll see, there are some very definite reasons why you really should think about investing in a billboard or more than one. First off, the billboard industry is federally controlled. Most people have no idea of this. So what does it mean to be federally controlled? It means the supply of billboards in America is capped. Now this all went down back in the 1960s during LBJ and Lady Bird Johnson. She didn't want any billboards to go up near her ranch down in Austin.

At that time there were no laws regarding billboards in the United States, you could build them anywhere. You could have a billboard every two feet if you wanted, you could pepper billboards over every tree, and power line, and scenic area in America. She didn't want that to happen, so she went and got people in Congress to come up with this idea of the Highway Beautification Act. What the Act did is it restricted signs to commercial areas, and additionally, there had to be a certain number of feet between them. So forever after the Highway Beautification Act is enacted. Billboards can only go in certain zonings and certain spacings, and that is what created value for the industry. Her concept actually blew up in her face. If she had left billboards as just raggedy pieces of plywood people would nail to trees, they would have ultimately died out.

There was no purpose to it. There were too many ad messages and no one would pay any rent for them, because if you pay rent, then you just go build one yourself, right? But when they brought out the Highway Beautification Act and federal control, then what happened is ad rents soared. And as ad rents soared, the size of the billboards increased dramatically, because now you could put capital into building them, because the number of billboards was federally controlled. Now the government over the years has federally controlled some industries and then unregulated them. That happened with aircraft, it happened with the trucking industry and it's [inaudible 00:02:22] disaster. When they finally deregulate you, then you go from all that cushy comfort of regulations, which pretty much mandate profitability. And suddenly you have infinite supply, and prices collapse, and many people go bankrupt. They can't deregulate billboards. They'd love to, but they can't. They can't because billboards are something that people don't like that much aesthetically. There's a group called Scenic America, a very large lobby group that hates billboards with a passion and therefore they won't allow them to be deregulated.

It's been brought up many times and hasn't been discussed again now in several decades because they simply can't do it. So what you've got is an industry in billboards, federally controlled. That means the supply is capped, and under supply and demand, when you cap the supply, it's always great for people who own them, always great for people making money with them. Because with demand, it makes all the prices go up. The next reason you might want to own a billboard or two, incredibly high rates of return. Nothing else in the world of investments can match a good billboard, it's insane. Rates of return of 100%, 200%, 300%, 1,000% per year are not uncommon in the billboard industry.

You can go out and build a wooden billboard along just any old farm to market road in American in a small town, and you can build those for $4,000 and you can rent those things for a couple grand a month. And you can be making 50% plus per year. Let's just compare that to all the other investments out there, that's 10 times as much as you'd make with an apartment complex. That's 20 times as much as you'd be making with a CD or a bond. So the rates of return are insanely high, that's one thing that really attracts people. That's what attracted me into the industry myself. I had never seen anything with rates of return as high as billboard signs. The next reason, very low capital required to enter the business. Now, a lot of other things you can invest in, you have to write big checks, 50 grand, a hundred grand, 200 grand, or far more than that. Billboards are the only thing I know in America you can get involved in and build a nice income stream on tiny amounts, like $1,000, $500.

That's just not normal in America in the world of investments. So let's just look at some of the things you have out there. Eight sheet signs, little five by 10 single-poled metal units. You can buy those all day long in most markets, abandoned for $1,000 or less. For the same $1,000 or less, you can put a wallscape on the side of a building, or you can buy an old abandoned sign and just take over operation on it. Even those wooden telephone pole signs along the highway, out in the middle of nowhere, those things are only $3,000 or $4,000. So basically this is an industry for people who want to get in on the ground floor with very little down, this is the industry for you. Fourth reason is it's really easy to mesh billboards with your day job. In fact, many of the largest billboard owners started off life just doing a day job and doing billboards at nights and weekends. So why is that true? Why can you have a day job and without any impact to your day job, own and operate billboards?

Well, here's why, because there's not a lot of personal meetings or calls required. You typically rent the ad space on a billboard once every year. Shortest term is one every six months, some billboards are one every multiple years. And you only meet with the property owner one time to build the thing. You never meet with them again. So basically you can run your billboard business at night and weekends no problem. Even when it comes to trying to find new billboards to build or buy, you can do all that on a weekend. You can just set that aside and every Saturday you'll go out, look for some billboards, have lunch, and return. So it's beautiful the way that you're able to take the industry and harness the basic lack of human interaction required.

Often you can rent a billboard off nothing more than your phone number on the sign itself. You don't even have to make a sales call. Don't even have to dial the phone, don't have to do anything at all. All you have to do is answer the phone or return the call. So one of the great things about the billboard industry, it's just so adaptable, and there's no risk on it. You can build a billboard, build another billboard. And at some point you may build enough billboards or buy enough billboards that your billboard income outstrips what you make in your regular job. Then it's up to you, do you keep the regular job or do you ditch it and just do billboards? But you get to start small, and build up, and there's no risk. It's not like Federal Express where to get it off the ground he had to buy all those planes and all those trucks. That's betting everything on your endeavor.

This is more like something where there's really never a lot of risk in it. You may end up with just five billboards, and what's wrong with owning just five billboards? Those five billboards may pay your kids' college education. Those five billboards may pay your entire retirement. It's just a really neat business because it is so very adaptable to your goals. Nobody else's goals matter, just yours. And you're able to make that thing work regardless of what your goals are. Finally, billboards are a very simple industry. They have very low repair and maintenance costs. So how does that work? Well, let's just think about what a billboard is. A billboard is just a thing that you can put an ad on, whether it's made of wood, or steel, or masonry because you attach it to a wall. It's whole point of life is just to stand there.

It doesn't have any moving parts, doesn't do anything. It just stands there and holds up the ad. So it's like having a gigantic salesman who gives his message tens of thousands of times a day, but you don't have to get involved in it. You don't have to do anything to make it happen. In fact, even on those giant single-poled billboards out there, there's only one moving part, that's the time clock. The little dial that turns the lights on [inaudible 00:08:23] unless it's digital, that's it. The only thing that can burn out. Of course, you have some light bulbs on there too, if it's lighted. Those can occasionally burn out, but they typically last months and sometimes years. So it's not like you're out there all the time fixing that. So it's a very low management business. And let me give it to you how low a management business it is.

If you have a billboard and you have an ad lease where the customer rents that billboard once every year, you may in an entire year only drive out and check on that billboard a few times a year. Now, personally, I would recommend you do it at least quarterly, just to make sure there hasn't been any wind damage or other problem, but here's another way you can do it. You can just find the name of a business right next door to the billboard, or across the street, and you can get their phone number and you can call them periodically and just say, "Hey, can you look out your window and tell me if my sign is fine?" It's real handy if you have a windstorm or something, that way you don't have to drive all the way out there. Have you ever heard of a less management intensive business, though?

Do you know any other business that you can actually have something which charges a monthly fee and you don't check on it ever, except just a few times a year. It's mind boggling. I don't know of any other business like that. Sure isn't a restaurant. Sure isn't a hotel. Sure not an apartment complex, but billboards give you that flexibility, and that's fantastic. What that means is not only does it not take any time out away from your regular life, [inaudible 00:09:52] also, as you can see, that is the roadmap to getting bigger. Because if you only have to view your billboard occasionally, think how many you can tack on until you have to spend any significant amount of time on that endeavor. Not many. I know someone who's a car dealer. They're a car dealer by day, but they also have a little billboard portfolio for nights and weekends, just as a hobby. They own about 10 billboards, but those 10 billboards make them about 50 grand a year.

Think about that. A hobby, 10 billboards, that means you'd only have to visit them 10 times a year, that makes about 50 grand a year. It's unbelievable. I know another person not far from where I am. He's been in the business for a long time as a hobby, never as his day job. He's built up about a hundred old wooden telephone poled signs across Southern Illinois. And each of those signs makes a couple thousand dollars a year. So he's making about $200,000 a year with his hobby. So that's a [inaudible 00:10:53] of a hobby that interests you. If that's how you want to invest your money, that's the kind of rates of return and scale that you're looking for, then welcome to the Outdoor Billboard Mastery podcast series. We're glad you're here, hope you enjoy this. We'll be back again soon.