Alternative investment opportunities have been booming in recent years.
Cryptocurrencies are dominating the news cycle as investors find new ways to exploit block technology. However, the sheer amount of interest in cryptocurrencies like Bitcoin makes that market inherently unstable.
Other alternative investment opportunities, like a cell tower lease, are more reliable.
There are currently 215,000 cell phone towers in the United States. This is up from 900 in 1985. That’s a 23,888.89% increase in 30 years time!
Considering it costs an average of $150,000 to build a cell phone tower, people would rather take advantage of pre-existing infrastructure rather than build a new tower. This makes a cell tower lease a stable, attractive investment.
To help you learn more, we’ve compiled an overview of how to view a cell tower lease to turn a profit.
What You Need to Know About a Cell Tower Lease
A cell tower is the metal structure that holds the receivers that comprise the mobile phone grid. We just wanted to be clear, since you can’t know how to negotiate a cell tower lease buyout without knowing what you’re investing in.
Cell towers have to be close enough together to afford uninterrupted service. This requires hundreds of thousands of towers. Phone companies own a few, and they rely on a cell tower lease for the rest.
Many property owners lease part of their property for cell usage. Phone companies pay a pretty penny to use these sites. They tend to offer an annual rate increase in their contracts, meaning a cell tower lease keeps up with inflation.
How to Make Money with a Cell Tower Lease
If you’re a property owner or own a tall building, your real estate may be prime to host a cell tower.
Sometimes phone companies will approach pertinent real estate owners with a proposal to host a cell tower on their premises. They’d likely have done so by now, however, if your location were that desirable. That makes this option one of the least likely of the different ways to invest in a cell tower lease.
The next option would be to drive around your region looking for cell towers. If you find a tower, you might consider approaching the owner and ask about taking over their lease.
One final solution might be to buy a slightly run-down property with a pre-existing cell tower. Fix up and resell the property, but keep the cell tower. That way, you’ll receive a cell tower lease payment every month.
Things to Keep in Mind When Taking Over a Tower Lease
Like any industry, the cell tower market is constantly fluctuating.
Here are some things to think about when considering a mobile tower lease as an investment opportunity.
The rate for a tower lease will depend on the real estate market value of the property where it’s located.
Rural and industrial areas are going to be less expensive than a busy urban center. Take that under advisement when looking for the right lease for your portfolio.
Urban and suburban settings might have a higher demand for cell towers. This will yield a better monthly return on your investment. If you can afford the upfront capital, this is a good way to make your money back quickly and start turning a profit.
Remaining Time on Lease
You might be able to force a cell phone company’s hand if their lease is close to expiring.
If they’re unable to negotiate acceptable terms with the lease-holder, the cell company might be forced to find a location for a new tower, zone it, and then build it. Only then can they take down the old tower, in order to avoid disruption of services for their existing customers.
Subsequently, a lease with only one year remaining is far more valuable than one with fifteen years left to go. Tower leases are usually renewed every five years.
How Much Rent Is Currently Being Paid
A single tower can collect rents from multiple tenants. A tower with 10 tenants paying $3000 per month is obviously worth more than a tower with one tenant paying $500.
Make sure you investigate the terms of the existing owner. Sometimes purchase negotiations will allow the current owner to keep collecting rents until the current batch of leases of expire.
If the terms allow you begin collecting rents immediately, however, it might be worth your time to pay more upfront.
Current Providers Using the Tower
A mobile tower providing service for multiple cell phone companies is more valuable than one that’s only being used by one organization.
Don’t forget to factor in potential growth, though. Determine how many more companies may be able to use the tower in the future.
This is especially important in urban and suburban settings. Cell phone companies are limited in the number of cell towers they can build in urban settings due to zoning laws. The laws may change, but it’s important to be aware of the legalities of the industry you’re investing in.
The rules for investing in a tower lease are the same as any industry: buy low, sell high. Anything less than 10 times the amount you’d make in a year should be considered a low initial payment.
It’s projected that there will be up to 5.07 billion cell phone users worldwide by 2019. The demand for mobile phone towers is unlikely to diminish anytime soon.
Considering the amount of time, money, and resources it takes to construct new cell towers, cell phone companies will be eager to take advantage of the existing infrastructure. Leverage that fact into a tidy recurring income!
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