Strategies To Own The Land Under Your Sign

The majority of billboards in the U.S. are located on leased land. But a tiny fraction are cases where the sign owner also controls the land underneath, which gives them unique stability. In this Billboard Mastery podcast we’re going to explore the strategies used to own the land as well as the sign.

What is The Billboard Mastery Podcast?

Welcome to the Billboard Mastery Podcast, where you will learn the correct way to identify, evaluate, negotiate, perform diligence on, select the construction type, build, rent the ad space and operate billboard signs. And now here is your host – the guy that built from scratch the largest privately-owned billboard company in Dallas/Ft. Worth – Frank Rolfe.

Most billboards in America are on leased land. The billboard company goes and they lease the land from the property owner, paying them a certain amount of rent on regular monthly or quarterly or annual installments. And that's all the billboard company has to do with raw land. It doesn't own it. It doesn't maintain it. It doesn't pay taxes on it. It just has a right to locate the sign on that land in exchange for money. But not all billboards are set up that way. There's another option for some billboards and that's to actually own the land underneath. This is Frank Rolfe, the Billboard Mastery Podcast. Let's review when leasing land versus owning land, trying to figure out which is the best and most viable option for you.

Now, there are basically two main differences between leasing land and owning land for a billboard. The first one, permanence, because when you own the land, then as a result, you control everything. And that sign will be there forever. However, when you lease land, there's no guarantee that you'll be there until the end of time. And that permanence feature for many sign builders and operators is enough of a driver that that one factor alone makes them wanna own the land. They're just worried. They're nervous about leasing land because they know that leasing land is temporary. It doesn't go on in perpetuity. And as a result, they like the idea of owning the land underneath.

Another reason to own the land underneath is, of course, it means no ground rent, although that's typically imputed into the cost of the land. So we can't really say there's no, no ground rent. But it is true there's no set increase in the ground rent. So if a billboard's revenue was to spike enormously because it suddenly became very popular, then there would not be any proportional corresponding increase in the ground rent because you control the ground rent.

If sign rents doubled five years in, it doesn't mean your ground rent would double. It would remain basically fixed at that one low amount forever. So what are the types of methods that sign owners can use to try and own the land underneath the sign? Well, the first option is to buy the land that goes under the sign. So you basically own the entire tract where the sign is located at. I once had a billboard out on Interstate 30 east of Dallas and that's how it worked. There was a I beam structure that was wholly contained on a tiny piece of land, which I owned. Another option is to buy some land, and then subdivide off a tiny portion.

And I've done that also. I once bought a house on Interstate 45 south of Dallas, and I built a billboard in the backyard, and then I subdivided that land off from the house. A third option is to do what's called a permanent easement. Now a permanent easement is one in which the sign has a right to stay there in perpetuity, but it doesn't pay any rent or in some cases it could pay rent, but it would be at a fixed amount. Done that one also. I had a billboard on Highway 26 in Grapevine, Texas. It was on a property that was owned by a used car dealer, and he went ahead and if I bought the sign structure on that land and put it back into service, then I paid him a flat amount for a ground lease that ran for 200 years for $1 per year.

So those are the three types of variations when you can own the land. Now, what are some of the considerations in owning land? Well, a huge one, perhaps the biggest of them all, is you cannot remove the sign in the event it gets blocked, obstructed, or even if that highway shut down and permanently moved over. You'd be trapped there forever. When you rent land, that's one bit of freedom you have. You always think it's a negative. Well, the property owner might terminate my lease. True, but you may also at some point wanna terminate it yourself. Interstate 30 between Dallas and Fort Worth used to be a two way street for decades, and then they rebuilt it and they made it one way.

And then they built the reverse, another interstate 30, though in the other way, which became one way. And that means that every two sided sign suddenly had 50% of its revenue chopped off because you couldn't see the other side. If you had rented the land, you could have gotten the property owner and said, "Hey, I'm gonna terminate my lease. I can't afford to pay you anymore. My revenue has gone down by half." It also made it possible to renegotiate your lease. Hey, my revenue went down by half and they said, Oh, well, I don't want you to tear the sign down. Oh, okay. I'll drop my ground rent by half. But when you own the land, you have no such option.

Let's assume somebody builds a building or a sign blocking your sign and you can't rent it. If you rent the land, you could terminate or proportionally lower the ground rent. But if you own the land, you can't. It's there. There's nothing you can do about it. You're the property owner. Can't really renegotiate with yourself. So it's the loss of that freedom that's one of the biggest considerations about owning land as opposed to renting it. Another issue is who has to mow and maintain and pay tax on that land. Because you'll find out, even if you own a tiny tract of land, it's not cheap. You still have to mow it and maintain it and pay insurance on it and pay property tax and all those things go away from your profit.

So it's not like owning land is a freebie. It's not. And then one final big item is access. And this can be a real, real drag. Now, once you have the billboard already installed, you think, well, I only have to get in there with maybe a pickup truck when I need to change out the vinyl. But what if you have to do something bigger, some structural work? You have no way to get a crane in or an 18 wheeler with steel there. So what's gonna happen? I'm gonna have to go around and try and negotiate with the neighbors to see if I can get access to my sign. And what if they say no? Because typically a tiny little tract of land doesn't have much room to negotiate and it doesn't have much ability to bring in big equipment.

So that is yet another Pitfall often of owning the land. So when you take those negatives into consideration and you compare them against the positives of permanence and no ground rate increases, then what's the right solution? Well, the answer is every sign is different. You have to approach each of those on a one off custom basis because there is no one size fits all for every billboard. You have to look at the pluses and the minuses, weigh them against each other. In many cases, the option is not there. But in other cases, you realize, well, I bet I could convince this property owner to trim off that tiny piece.

Or maybe you're buying a billboard or looking at buying one that already comes with that tiny piece trimmed off. And then you'll just have to run the dollars and the cents and weigh into them the fact you're trading permanence for lack of freedom. This is Frank Rolfe for the Billboard Mastery Podcast. Hope you enjoyed this. Talk to you again soon.