How to Earn Passive Income from Owning Cell Tower Real Estate

Wally Smith:
So talk a little bit about how that works. Somebody has a, and again, I’m always, you’re doing a great job of explaining things, but I always want to take it all the way down and translate it to somebody who’s just starting. Maybe they have a couple of condos or a couple of properties and they’ve just finally, this last couple of weeks they’ve said, I’ve had it, I’m done, I’m getting out of it. There’s got to be a simpler way in retirement to get mailbox income instead. And that’s what we want to help them do. But, boy, it can be a little bit of a stretch to think, how do I take the value in the wealth that I’ve created in this apartment building and turn that into a cell tower and a data center and how do I collect the rent on that? Explain that a little bit, Rich.

Rich Arnitz:
Yeah. So the nice thing about it is we work with institutional sponsors, advisors that have been in the commercial real estate and they all are sector specific experts. So, we have product out there that we have firms that we work with that only focus in on multifamily, commercial grade multifamily throughout the United States. We focus in on sponsors and advisors that work solely with storage, industrial. And those are part of the products that we give you an allocation in when you’re doing your 1031, you’ll get your fractional ownership. But for a cell tower, let’s just talk a little bit about that because that’s important. That’s almost like you’re owning the cell tower and you own the land underneath it and you get monthly rents from the people that are renting the cell tower: AT&T, Sprint. All those phone service providers are renting the space on top of the tower from you.

So, for example, when you’re driving down the street and you’re talking to one of your friends or one of your associates, and then all of a sudden your call drops, that’s very, very frustrating.

Wally Smith:
Yes.

Rich Arnitz:
The reason why sometimes where you’re driving down the street and you can be driving for 15 miles and your call doesn’t drop it’s because the phone signal goes from tower to tower to tower, and those are the towers that are owned in a portfolio and the real estate underneath it. And the tower itself is owned by these investors. The technology is owned by AT&T, Sprint, those types of carriers are responsible for that, but they write a check to rent so that their customers in those areas can get service for their phones.

Wally Smith:
Okay. So, back old school: kind of like a billboard would be a metaphor I would look at. You’re driving down the highway and there’s all these billboards down the side of the road, and now a lot of them are owned by a couple of big companies that have aggregated those, but it used to be that you could have a property and put up a billboard and then you could just rent that out and sell the signage, sell the display ad to somebody different every month or however often they wanted to change that up. You own the property, they’re paying you to rent that space. In that case it was to show their big picture ad for “Willie’s Cheeseburgers” or something. But in this case, they’re renting the access, renting to be able to hang their equipment on the top of the cell tower and run it.

And I know one question that’s come up, we’ve talked to several people about this is, “Oh, what about 5G? Isn’t 5G going to change everything?” Well, we don’t really care what technology the antenna is that the company’s running. That’s up to them. The Delaware Statutory Trust…in this case they own the cell tower and they’re renting it out for whatever antenna any one of the telephone companies would want to hang up there.

Rich Arnitz:
Yeah, that’s a great point. So from a technology standpoint, that’s not put on the…the burden is not put on the owners of the cell tower, the land itself, that is the burden put on by the tenant that’s paying the rent. So AT&T and Sprint and all those types of phone carriers are responsible if they want to go 4G or 5G on doing the upgrade of the technology.