HIGHEST AND BEST USE OF LAND ANALYSIS

The study of the highest and best use of land involves analyzing and valuing a piece of land to determine its most profitable and efficient use. This analysis considers factors such as location, physical conditions of the land, feasibility analysis, and municipal regulations.

How to maximize the value of your land?

The highest and best use of land analysis helps determine the most profitable and suitable use for a piece of land, considering location, surroundings, regulations, and market conditions.

BOOST THE ECONOMIC VALUE OF YOUR REAL ESTATE PROPERTY BY ANALYZING THE HIGHEST AND BEST LAND USE!

When conducting an economic valuation process for a property, analyzing the highest and best use of the land helps determine the most profitable use of the real estate asset. This ensures that the property is as competitive as possible, and that the investment is made at the right time to achieve the desired objectives.

“Location, Location, Location” has long been the real estate slogan. However, substantial real estate losses can result if this phrase is not combined with the Highest and Best Use of the Property. According to The Appraisal Institute, the Highest and Best Use of Property is defined as the legal and probable use of land or property that is:

Physically Possible: This refers to whether the topography, soil conditions, size and shape of the property, water, and electricity, among others, can make real estate development possible.

Legally Permissible: The use of the property must be permitted by zoning/land use regulations.

Financially Viable: Evaluate the property’s market analysis and financial cash flows. Only proposed property uses that meet the criteria for financial viability advance to the next step of the analysis.
Maximum Value: This last step is of utmost importance as it takes all proposed uses that meet the previous requirements and ranks them in order of value or rate of return. This step ensures that the chosen use of the property is the most beneficial and profitable.

The analysis that will tell you how to make the most of your land

Why conduct a real estate assessment?

The real estate valuation must be supported by the principle of highest and best use to determine the profitability and value of the property. Within the valuation, the physical characteristics of the property are considered, such as surface area, topography, accessibility, proximity to main streets or avenues, among others.

In addition to the physical characteristics, it is important to thoroughly investigate the environmental and construction regulations of the area where the property is located to determine if the project is financially and legally viable.

Identify the most profitable development opportunities for your land

A study of highest and best land use can help you identify the most profitable development opportunities for your land. This analysis considers factors such as location, surroundings, regulations, and market demand, to determine the use that will maximize the value of your land.

Avoid economic losses due to the improper use of your land

If you own land, it is important to conduct a study of highest and best land use before making any decisions about its use. This study will help you make the best decision for your investment and avoid economic losses.

On the other hand, it is necessary to gather information about commercial premises and properties near the study object, as well as the activities carried out there and the social sector they target. Thanks to this analysis, it is possible to determine the viability of new developments, prices, and benefits when investing.

Another important point when determining the value of a property is to have an objective estimate of the property in the current market and a future projection. With these figures, it is possible to attract investors interested in real estate transactions who are willing to negotiate efficiently and profitably.

If there are no investors, real estate assessment also allows you to request bank financing and seek options to mitigate credit risk by guaranteeing that the value of the property will be the collateral for a loan or mortgage.

Finally, having a real estate assessment is also important when resorting to an insurer, as it allows determining the necessary coverage and estimating the cost of the premium, in addition to having an objective and reliable backup in case of an event such as fire, flood, or earthquake.

What kind of questions can I answer with this analysis?

The analysis of highest and best land use provides valuable information that allows for strategic decisions on the use and valuation of real estate, as well as the planning of real estate investment and urban developments.

To achieve the desired profitability, the analysis must answer questions such as the following:

Questions related to property valuation

What is the current value of this property in the market?
What would be its value if it were used differently?
What is the appreciation and development potential that increases the value of the property in the medium and long term?
What would be the value of the property in case of refurbishment or new construction?

Questions about real estate development projects

What is the use that will bring the greatest benefits in terms of profitability?
What alternative uses can be given to vacant land or an existing property?
What is better to build on the property, commercial premises, offices, housing, or parking lots?

Questions related to zoning

What type of investment is more profitable, a shopping center, an industrial area, commercial premises, or a residential area?
What is the appreciation of the area? • What changes in the area could increase the value of the property?
What will be the appreciation of the area in a projection of 5 years, or another determined period?

Questions focused on profitability

How long will it take to recover the investment in this property?
What type of property will bring a faster return on investment?
What is the potential for future growth in property value within a certain time frame?
In comparison with other similar properties in the same area, what is the investment that allows for the highest profitability?

Questions about urban planning

What type of services are needed in the area where the property is located?
How can the community benefit while being profitable?
How to contribute to urban development through investment?

Strategic Valuation for Success

A strategic valuation to analyze the highest and best use of a property can focus on two aspects:

Physical, legal, and financial viability
Maximum profitability of the property

The analysis of highest and best use can be applied to vacant land or previously built properties, taking into account current characteristics and their future potential. In addition, the feasibility of demolishing existing buildings to give the property a new use must be analyzed, thus giving it a new value.

During the valuation, the behavior of the real estate market must be considered to determine the most competitive use of the property. In addition, the specific time at which the study is conducted must be considered to analyze the supply, demand, and potential of the property.

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Frequently asked questions

What is a study of highest and best land use?

A study of highest and best land use is an analysis that determines the most profitable and suitable use for a piece of land, considering factors such as location, surroundings, regulations, and market demand.

Who needs a study of highest and best land use?

Anyone who owns land and is interested in using it in the most appropriate way, whether to develop it, sell it, or invest in it.

What are the benefits of conducting a study of highest and best land use?

A study of highest and best land use can provide the following benefits:

Identify the most profitable development opportunities for the land.
Make informed decisions about land use.
Avoid economic losses due to the improper use of the land.

What factors are considered in a study of highest and best land use?

The factors considered in a study of highest and best land use are as follows:

Location: The location of the land is an important factor that influences its use.
Surroundings: The surroundings of the land, such as infrastructure, public services, and access to communication routes, also influence its use.
Regulations: Urban planning and environmental regulations in force must also be considered in the study.
Market demand: Market demand for the various land uses is also a factor to consider.