Are Cell tower Leases Free Money?

Another way to look at your cell tower lease. Besides being a 'lottery' winner, well sort of, your property location hit the jackpot. You now have a monthly income somewhere between $500 and $10,000 a month. Now here's my question: “What if the cell carrier would have offered you all cash for the cell lease instead?”.

For simple math's sake, say they offered you 200 times the monthly rent you now get instead of the monthly rent. Would you have said, “No”? Of course not. It's free money. Money to pay off a mortgage, send a child to college or maybe purchase some real estate.

A Lump Sum Buyout

What would you do with a lump sum of cash? Personally I'd pull out my 'bucket list” and start visiting some travel sites. My kids? My grand kids? What about them? Wouldn't it be nice to leave them some income producing property? Yeah, but it wouldn't be a lease with a cancellation clause built in. I'd leave them with some real estate that produces income. Unlike a cell lease, banks will lend on real estate (in case of an emergency).

Cell Lease vs Real Estate

Let's make a quick list of pluses and minuses for our cell site vs some additional real estate.

Cell lease – Pluses: Monthly income, goes up average 3% yearly, cell site reverts back to owner after lease is up, additional rent from added carriers (if you negotiated this)

Rent Reduction, Lease Termination & Non-sheltered Income vs Stable Ownership & Tax Sheltered Income

Cell leases – Minuses: Termination clause that gives the cell carrier right to cancel with as little as 30 days notice, risk of downgrading of one or more cell carriers due to merger or acquisition and subsequent rent reduction, income is taxed as ordinary income
Real estate – Pluses: Tax sheltered income (depreciation), real estate at or near its lows, rents rise with the economy, ownership can't be terminated as long as you're paying your bills, pride of ownership.
Real estate – Minuses: Tenants can be a headache, maintenance cost, repair hassles

Sell Half Your Cell Lease

Maybe cashing in only half the lease and keeping the other half makes more sense to you. Diversification is always recommended.
I'm sticking to my bucket list. How about you?