Hey, everybody.
So there's this type of real estate that you're seeing every single day,
but most people probably never thought of it as real estate.
So this is my story about how I was able to turn a profit
of $1,000,000 on this type of investment that sits in plain sight.
But no one ever typically considers it.
Hey, everybody. It's Ken McElroy here.
So I have over 30 years of experience investing in real estate,
and I'm here to share with you how to invest the right way.
But first, please, if you're enjoying our content,
be sure to click the Like and Subscribe button
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So today I'm talking about Bill,
but for purposes of talking about $1,000,000, for some reason,
everybody's got this figure in their head of $1 million.
So I found this on the internet I thought was really, really, really good.
So you just need 5000 people to buy a 200 dollar product or $1,000,000
or 2000 people to buy a 500 dollar product, et cetera, et cetera, et cetera,
or get 300 people to pay $278 a month for twelve months for $1 million.
But what I'm going to do is show you how I made
$1,000,000 on just one Billboard transaction.
So today I'm talking about billboards and I've owned billboards,
and they are a great investment.
We touched on billboards recently in the video that's already been posted.
six real estate opportunities that you're probably missing.
But for today, we're going to get way more in-depth on one particular transaction.
If you haven't seen it,
there are some great ideas for investing that you probably have never considered.
So when you own a billboard, you're tenets there, the advertiser said.
Pay for the space and billboards aren't the most cutting edge form of advertising,
that's for sure.
But they are still tremendously attractive to advertisers.
And that's because, per viewer, billboards are the least expensive.
So just take a look at this chart.
It shows that it cost only about $5 to reach about 1000 people.
So now we're going to look at why billboards?
Why would I ever get involved in Billboard one?
Because I'm chasing cash flow
like many of you are, and I'm not necessarily chasing capital gains.
So the first thing that I really like about billboards,
which is a little untypical of a lot of real estate,
is that they have a high barrier
to entry, which means that a lot of cities and states don't like them.
In fact, in some cities like Scottsdale, there's only two left in the entire city.
And that's it.
And so obviously, if you want one of those two billboards
and you ought to advertise in Scottsdale, you're going to pay a lot more than you
would if there were a lot of them.
So in a lot of cases,
you just want to look for markets where there are high barriers to entry.
The second one is that there are limited locations.
What you'll find is you'll find a lot of these on highways.
Let's say a lot of times people see these as they're driving along highways,
but in around town, there's not a lot of them.
What are the things you always want when you're buying real estate
are limited locations.
That means there's going to be more people
trying to advertise on that board if there's less of them in the area.
And the third is
that there are low dollar investments, which means that you can get
into these things
for just a few hundred thousand dollars, oftentimes significantly less than home.
And they cash flow has the three things that I like high barrier to entry
limited locations, which means that they're hard to get advertising on,
and there are typically low dollar investments.
So a lot of times when people drive around
and they see billboards, they don't think of them as real estate.
But when I look at billboards, I look at them
just like I look at anything else I look at.
Do they have a value add component?
And of course, do they cash flow?
Those are the first two things,
just like it would do any other type of real estate.
The other one that I look at is, of course, location.
And as you guys know, for real estate, location, location, location.
So depending on where the billboard is, it's going to be the different prices
for the ads and the different prices that you're going to pay the billboard
along a busy freeway, for example, it's going to be worth a lot more than one
that might be on a city that has less traffic.
And the last issue that I love the most
is that there are no tenants, and you guys might really like this one
because as you know, a lot of the issues that we have around
property management are based around tenant.
Now, I still have a property management company managing the board,
but they're doing it very differently.
What they're doing is they're going out at actually putting advertisers
and they're putting the ads up on the boards.
And typically, these are minimums of 30 days and oftentimes multiyear contracts.
So now I'm going to go into the details of this exact billboard,
the one that we bought.
This billboard produced $1 million a profit, and this is actually
a picture of it.
And as you can see, it's just your typical billboard.
Or that you might see anywhere you might drive by this thing 1000 times
and never see it, but this one here has an advertising on just one side
of our local baseball team, the Arizona Diamondbacks on the other side.
I don't even know who's on it, but the point is this is called a static
billboard. It actually has two sides.
So when I first saw this, this is what I want you guys to understand.
I saw more.
I saw a value add opportunity.
Can you guys spot it if you can't stay tuned?
So the first thing that
I want to point out is the location which we've talked about already.
This is Chase Field.
This is the actual ballpark where the Arizona Diamondbacks play.
And this billboard was basically across the street
on a lot owned by somebody else where there was an office building
and somebody prior to me had actually taken this out as a lease here,
and they pay a lease payment to the owner of this land.
But in return, what they were able to do was get this billboard put up,
and this billboard here was called a static billboard.
It has two sides,
so there's a bunch of things that you look at, just like you would
in real estate on how to make money from this particular scenario.
The first one is here is the billboard right here, and here is the ballpark.
As you can see, this is Chase Field.
So the first one was the location.
Now look at the cars
that are going by here, but you could imagine what this is like
during a game or during some other event that they might be having at the stadium.
It's well located, and obviously there's
a lot of people that park around here and walk to the stadium.
There's all kinds of access and all kinds of traffic.
So there's two types of billboards
one's called the static, and the other, of course, is called the digital.
And of course, this is not a digital billboard.
This is a two sided static billboard, which means that somebody has to produce
the ad.
Somebody has to go out and put up the ad.
All of those things, once you convert this billboard to digital.
Then, of course, you can do it all from a laptop.
So the value ad that I saw was,
I wonder if I could buy this billboard and convert it to digital.
The one thing that really drove the price of this
billboard was the car count.
So what the car count here?
That's what an advertiser looks at.
How many people go buy this billboard?
So right now, they just see one ad.
But if I'm able to convert it to digital, then there's actually four ads per side.
So each ad is about 15 seconds.
So it goes from two ads, one on each side
to eight ads, which of course, grows your revenue up.
The question was is can I convert it to digital now on its own?
This board actually produced a pretty good cash flow.
So I wasn't sure
whether I was going to be able to get it zoning change to a digital,
but I bought it anyway.
So here are the numbers.
The board was for sale for $300,000
and it produced about $45000 in gross income.
But they also used a management company named after all of their fees
and the lease cost.
But as I said, for the board itself, it netted around $33,000.
So that was the due diligence that we did.
33,000 into 300 is about 11% cash on cash return.
That's actually a pretty good deal.
So I was looking at it as 300 grand.
I call Ross, I go, Hey, you want to throw 150?
And he's like, done.
So we bought this board because it had $33,000 of cash flow each and every year.
We were not buying it for our capital gains strategy while we were in escrow.
We contacted another management company and said, What do you think
that this board could do?
And they said, I think that it should be doing close to 60,000
or $45,000 net a year.
So in other words, the management company,
plus the cost for the lease all netted another 15 grand.
So it was right around now a 14% return.
So we were able to grow our cash flow by about $1,000 a month
just by hiring a different management company.
We could have stopped right there
and we could have been content at the $45,000,
but I was trying to figure out if I could convert it to digital.
So what we had to do is we had to engage in a zoning attorney
and we had to see whether or not we could convert the board to digital.
Now, mind you, I had never done this before
and I
didn't know anything about Billboard, so this is something that you could do to.
So we bought the board in 2016.
We engaged the attorney in 2017.
It took about a year before we actually got the city of Phenix
to approve a digital billboard.
But here's what I found out
you can't just put a digital billboard on top of an existing structure.
So we had to hire a zoning attorney to see whether or not the city of Phenix.
Would allow a digital billboard in place of what we had.
And we got approval, but it took about a year, but
we got approval, so obviously we were very happy about that.
But what I learned is that you can't just take two flat screens
and put them on top of an old billboard because the old structure
won't support the new heavyweight, plus all the electronics.
So what we had to do is we had to buy a whole new billboard.
The flat screens plus the pole, and we had to hire somebody
to come in and put the whole thing in and hook it all up.
And so the zoning, the legal and the digital cost about $125,000.
So now I had a 300,000 dollar initial investment
for the static billboard, plus another one.
So now I'm into the whole billboard for about 450 k,
but now I have a billboard
that produces $100,000 a year.
So now I'm the more than double the income so far with unlimited potential.
But this was netting around $80,000 a year.
So you can see over a period of three years we were able to grow
the income from 33,000 to 80,000 now.
That was, of course, with 150,000 dollar investment,
but now I'm sitting at about an 18% return.
If you take the 80,000 and divided into the 450,000.
But now what I've really done was I've created a massive value add.
I've actually taken a static billboard, converted it to digital.
It has the potential of running eight ads on each side
at 15 seconds each versus two static ads.
Lo and behold, Ross and I own this billboard.
We're into it for 450.
It's cash flowing, let's say, six to $7,000 a month.
We're happy and we're moving along.
And guess what happens?
It's not listed,
but a national company comes along and says, We want to buy your billboard.
And the first thing we say is No, because why would we?
We got 40 or 50 grand sitting in this thing
and we got $80,000 a year in cash one, as you guys know, I'm a cash flow guy.
Finally, after a lot of negotiation back and forth, mostly from them on them,
just kind of raising the price and raising the price and raising the price,
we finally settled in on a 1.5
million dollar sale.
So the question is, why would we do that?
And so now you have to take a look at how long does it take to get that 80
grand back and make an extra million dollars so it can take a while?
This is literally the million dollar question
like why do you sell and why do you not stick with cash flow?
As you guys know, I'm cash flow, guys.
And we thought, Well, what can we do with this million?
How can we keep this going?
It's called velocity of money, so we didn't just stick this
in our pockets, stick this in our bank and go buy depreciating assets.
We actually had this calculated into something else.
We did not do a 1031 on this, which we probably could have done.
We cashed out, we invested something else and we just paid the tax.
What's the point of this whole video?
So here's the deal about real estate guys.
I saw the deal. That's why I asked you the question.
The beginning of the video.
What do you see? Do you see a value add?
So I love this quote. It's all in your mind.
Whatever you hold in your mind will tend to occur in your life.
If you continue to believe, as you have always believed,
you will continue to act as you have always acted.
If you continue to act as you have always acted,
you will continue to get what you have always gotten
if you want different results in your life or your work.
All you have to do is change your mind.
Can you see your next deal?
That's what you need to be thinking about.
Can you see it?
Because if you can't see it before you buy it,
then you're going to be at a massive disadvantage.
And this is exactly how you guys can make millions of dollars
on investing in real estate, on what you can see
if you can see the deal before you buy it again.
Thank you guys very much. If you like what you saw.
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