How to Make a Fortune Buying Billboard Companies in Distress

The year was 1988. A combination of tax law changes and a plunge in oil prices sent the Texas economy into a tailspin that resembled - but exceeded - the Great Depression. Bankers and borrowers alike were jumping off buildings, and you could not give away any product or service or find a job if your life depended on it. That was the start of my biggest success in my billboard career, buying those distressed billboards from banks and insolvent borrowers. I bought or built around 150 billboards during this period.

Then came the early 1990's crash in California. Retail centers were abandoned, and the home foreclosure ads were bigger than the entire newspaper. And I used that depression to buy Leonard & Company, a mid-size billboard company in Los Angeles.

Fast forward to 2010. We're in the middle of the biggest economic melt down since the Great Depression. Is this another great buying opportunity? Absolutely! Here's how to do it.

Understand what still works in a Depression.

When the economy tanks, not all advertising is eliminated. What survives is the advertising that actually pays for itself, or turns a profit. If an advertiser sells 100 widgets per month from their billboard, at a price of $50, and a net profit of $10, then that billboard makes them $1,000 per month in net income. Will they keep that billboard if the rent is $500? Certainly. But what about if it's $3,000 per month? No, never. At the end of the day, the billboard has to make money. And a depression is a good time for many advertisers to cut loose all the advertising that they have that's not working.

When you look at a vacant billboard, you need to visualize the rate in which it makes complete sense. In many markets, that rate's $500 to $900 per month. It doesn't matter what the sign used to rent for in the boom times - maybe $7,000 per month - it's only worth $900 now. As long as you know what it takes to rent a billboard in a depression, you have the ability to turn that asset around.

Have a financing source outside the depressed area.

The worst place that you can look for financing of a billboard during a depression in Michigan is inside Michigan. In an economic downturn, the local banks are all broke. When I was buying distressed billboards in Dallas, I was banking in Alabama. When I was buying distressed billboards in Los Angeles, I was banking in Texas.

The key is to find a bank that has made billboard loans in the past in another state, and then pursue those type of banks. Find out what kind of lending they would do on distressed billboards. I had a bank that would loan me $10,000 - sight unseen - on any monopole billboard. It wasn't a lot, but it was enough to get the job done.

Relentlessly pursue distressed deals - and don't give up.

Nothing can wear you out more than trying to buy billboards in distress. That's because there are so many chefs in the kitchen when something goes bad, and you've got to appease every one. Many times, the seller will agree, and then his bank won't. Or the bank will agree, but the borrower won't. Or sometimes the borrower and bank will agree, but the bankruptcy judge won't. The key is to never give up.

I once had a deal that almost became comical in its complexity. Every time I thought I had it wrapped up, the deal fell apart. First, I thought I had it put together with the seller, Then the seller went under. Then I thought I had it put together with the bank - and then even the bank went under. I finally bought it from the FDIC. At every step along the way, I was about ready to throw in the towel, but I kept on going. And that is the essential trait for those who want to succeed in times of distress.

Conclusion

If you want to buy billboards for a penny on the dollar, this is the time. The economy has not been this bad since 1929. And billboards that were selling for $100,000 are now down to $30,000 and dropping. Most of the great fortunes in the U.S. were made during the Great Depression - the Hiltons, Kennedy's, Rockefeller's, to name a few - and the key was buying low and, later, selling high.

Can it be done? I've done it in two separate depressions, and I know that it can. You just have to understand the technique and work, work, work.