Property Valuation :

Highest and best use of property.

A concept you need to understand when analyzing
and appraising investment property is called “highest and best
use.” Think about a time when you drove through a commercial
area, only to see an old farm or single- family home that looked completely out of place. If you wanted to buy that property, the question
is, Should it be appraised as a residence or as a commercial lot?

The answer is probably a commercial lot, for that would be the
property’s highest and best use.

Awareness of a building’s highest and best use can yield hidden
profits. Each of the following properties, for example, would
warrant a valuation as its highest and best use rather than its current
use:

 A house in an industrial area

 Small units on a large lot zoned for multiunits in an area with
many new buildings

 Buildings that may sit on two separate plots

 An apartment house with large one-bedroom apartments
that could be made into two bedrooms simply by adding a
wall and a door

 A small house on a multiunit-zoned plot where extra units
can be added

 A vacant commercial building that can be converted to loft
apartments

Read More