Do Cell Tower Lease Companies Pay Landowners Fairly?
As demand increases every day, companies need to take up space in rural areas and dense urban regions. For property owners, cell tower leases can be a great way to rack up some extra passive income.
Get to Know How Cell Tower Lease Rates Are Determined
Cell tower leases could pay out anything from $10 per month for small niche carriers to more than $10,000 a month with the larger companies. Typical cell tower lease rates from a major management company could hit around $15,000 a month depending on location and space. If you’ve got lots of unused space on the ground or on top of a building you own, you could have a gold mine waiting to be tapped.
Demand for coverage is what really determines how much you can get paid. If you have a lot of space but very little demand for a certain provider, they won’t pay out a whole lot to get your space. The density of users and a lack of reliable tower locations is what makes the difference in price. It’s hard to tell exactly what a cell tower lease is worth.
Conventional wisdom might say that it’s up to the market to determine that. Some companies might try to tell you that prices are based on square feet. While that might be tempting to believe, in actuality, there is no real standard. If you feel that a price you’re being offered is lower than it should be, reach out to other building owners to see what they’re getting for cell tower leases. These leases don’t fall under the wisdom of commercial real estate laws, meaning the space for them could cost as little or as much as you choose.
Other Factors That Determine Price
Beyond demand and density, there are a lot of other factors that determine the price of your lease. You’re up to the whims of the service provider in some cases while in others, you can call the shots.
If you live in a region where the topography is inconsistent, with lots of hills, mountains, and trees in the way, you could be offered a price you don’t like. Because providing coverage to that area will be a challenge, communications companies will want to offer you less.
Zoning restrictions can determine how much you end up getting offered. If there’s a limitation of how many cell towers you can have up or how tall they can be, you could be restricted.
If there’s a lot of competition nearby, you might also have a harder time. When all of your neighbors are making extra money leasing out their roofs, you could be left in the dust, having to take offers that are less than ideal.
There’s No Single Resource
Without an existing database to tell you what you could be asking for, you might feel lost in the dark. You could ask other people what the terms of their leases are, but that won’t guarantee you’ll get the same deal.
Rental prices change based on market saturation, how much growth is anticipated, and a whole range of issues that are based on data you’re not privy to however cell tower lease experts like David Espinosa can help you determine the most accurate rates in your area.
Cell tower leases are determined on a site by site basis. Different providers will have differing rent escalations per year. This is a percentage increase in prices that cell providers are willing to pay on every renewal of their contract or at the beginning of every calendar year.
If you sit at the edge of a high traffic interstate area or a dense city location, you will see that cell providers are willing to open up their wallets. If you’re in a lower coverage area, they will want to lower their potential spending since not many of their users will need service near you.
The Odds Are Stacked Against You
Wireless companies and cell providers often pay their leasing agents on commission. They’ll hand out a list of preferred prices they’re looking to pay for a given location and will reward their agents for talking the building owner down.
The terms that leasing agents want to agree with aren’t based on how well they’ll serve you. They’re going to want to do well for the tower companies and cell providers, whether negotiating lease terms, or cell tower lease buyouts.
Despite the fact that some people talk about prices “per square foot,” that’s not really how they’re calculated. Towers can build up, so why would you measure square footage?
When you factor in a one percent difference in your yearly rental increase, you could be talking about $150,000 to $200,000 over the course of a 25-year lease. If you have a three-carrier tower, you’re talking about a half a million dollars. If you don’t negotiate for as high of a rate as you can, you could be losing out big time in the long run.
You need to advocate for yourself to get the best deal.
Cell Tower Leases Provide Reliable Extra Income
If you’re thinking about signing some cell tower leases for your own properties, make sure you get long leases with fair annual increases.
That passive income could sustain your investments through thinner months or when you need some repairs to your building. It will add to the value of your buildings and keep income flowing in at all times.
Before you sign a cell tower lease, check out our guide for information on the tax consequences you could be facing.