Updated: Mar 10, 2021
Owning and leasing out a billboard can be a very profitable business. You can easily charge rent to advertisers every month for your billboard. The bigger it is, the more money you will make each month. It is estimated that average billboards (all covered with advertisements) can make over $10,000 per year in rent. The potential profits by owning a billboard are enormous, but there are also many hidden costs and hurdles to overcome before you can start renting out your first billboard. Read on to learn more about this great, passive business.
Starting a Billboard Business
The best way would be to start off small at first, maybe by leasing out just one or two smaller billboards that have lower rental rates. It is important that you analyze all of the relevant market factors so that you will not suffer from any significant losses in your initial years of operation. For example, you should know what the projected market value of billboards is in your area. This is a very important question to ask since the value will greatly determine your overall profit. If you are buying a billboard at the wrong price, then it would be more difficult to make money in the future.
By analyzing the various data available on billboards, such as area demographics and historical data on rent rates, you will be able to project how much rent can be charged for a particular billboard under certain conditions and how much profit per year you can make from that billboard.
For example, say that there are 22,000 households within a one-mile radius from what could be your hypothetical new location to build your first ever billboard. Also assume that all of these households have annual incomes of $100,000 or more and an average of 2 cars per household. By looking at these factors alone (without considering other variables), we can already conclude that this is going to be "the ideal" location for building this first ever billboard.
With these assumptions, we can now calculate the projected yearly profits from the billboard such that we will make a total profit of $1.8 million dollars in 10 years. By looking at the data provided by the U.S. Department of Commerce and Bureau of Economic Analysis, you can predict how much rent can be charged for a billboard using these assumed figures.
Building your own Billboard
The value of billboards is based on how many people will potentially read it. If you're planning on building a billboard, this would be true for the land you're building on as well. You should consider:
1) How high to build it so that drivers can read it as they pass by?
2) How much traffic passes through the area?
3) What are the demographics of the local population?
4) How many competing billboards are in the area?
5) What are the government restrictions and regulations?
6) How much should I lease the billboard for?
The costs of building a billboard can range anywhere from a few thousand dollars (for small wooden billboards) to hundreds of thousands of dollars (for elaborate, LED billboards in which the ad display changes every few seconds).
Build a Billboard on Your Own Land
If you found land you'd like to build the billboard on, you'll need to make sure you are legally able to do so. There are zoning laws that might prohibit such a thing. The best thing to do is find out what are the requirements- such as permits and other paperwork- before you start building.
Once you take care of this paperwork, you can begin the process of building your billboard. But first, you must consider the costs.
As mentioned earlier, if you want to go the cheap route, your billboard will have to be a wooden structure. This medium-sized billboard can cost around $15,000, including construction. However, for a steel board, it can easily be over $100,000 depending on the size.
Build a Billboard on Another Person's Land
To build a billboard on someone else’s land is a little trickier, since it will also entail you renting a piece of land from the land owner. You'll need to negotiate a lease, and you'll probably need a lawyer, since certain stipulations need to be applied, such as:
-Enabling you to access the billboard when needed...
-The land owner can't block your sign's view...
-The land owner doesn't have a right to decide what gets advertised on the billboard.
It's likely you'll have to pay about 15% of the billboard's ongoing revenue to the landowner for lease payments. In dense, city locations, you'll likely pay more.
Restrictions and Regulations of Owning Billboards
As mentioned earlier, before taking on the billboard business, it's a good idea to find out about your local government's rules and regulations. There are no universal tax laws for billboard advertisements. So if you want to skip the paperwork, it may be worth your while to just buy a billboard outright. Though it may mean larger upfront costs, at least you'd know you were already in compliance.
In addition, many major cities attach excise taxes on billboards so that they can support local communities. For instance, some states view billboards as actual property and require owners to file returns and pay taxes on this property on an annual basis, based on the size and configuration of the board.