Determining the value of billboards can be a complex process, especially with reference to eminent domain. It must be handled in a unique way and should be completed by an appraiser with experience in billboard appraisals.
In many cases, there are no properties similar to the the billboard property being appraised. Typically, either the location is different, or there is another factor that renders sales comparisons invalid. When this information is readily available, the sales comparison method may be used. However, instead of using a comparable approach, billboard appraisals often use the income method to determine value. This method figures in the annual rent and projects the likelihood of the rent continuing in the future.
Another option is to use the cost approach. This method figures in the cost of replacing the billboard minus any depreciation to include the length of time the billboard has already been in use.
The sign site is often part of the rest of the property rather than being kept separate. However, the income received from the billboard must be calculated independently of any other income for the property.
To determine the value of the billboard, the first step is to determine the income and then decide upon the capitalization rate. The formula is Value = Income/Rate.
When the billboard rent is raised periodically, this must also be factored in. If the property owner has been raising the rent every three years, it must be assumed that this increase would continue in the future. Another factor to be included is the length of the current lease for the property owner.
Billboard valuations is a niche market, and it is important to find an appraiser with experience in this area if the property being taken by eminent domain includes one or more billboard signs.