HIGHEST AND BEST USE OF LAND ANALYSIS

The study of highest and best use is an analysis and valuation that determines the most profitable and efficient use of a piece of land, considering factors such as location, physical conditions of the land, and municipal regulations.

How to maximize the value of your land?

Highest and best land analysis use helps you to determines the most profitable and suitable use for a piece of land, considering factors such as location, surroundings, regulations, and market demand.

Learn how the analysis of highest and best use can boost the economic value of your real estate properties!

When conducting an economic valuation process of a property, the analysis of highest and best use helps determine the most profitable use of the real estate asset, so that it is the most competitive option, and the investment is made at the right time to achieve the 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 MAXIMIZE THE POTENTIAL OF YOUR LAND.

WHY CONDUCT A REAL ESTATE ASSESSMENT?

Real estate project valuation must be based on the principle of highest and best use to determine the profitability and value of the property. This includes considering the property’s physical characteristics, such as surface area, topography, accessibility, and proximity to main streets or avenues. It is also important to thoroughly investigate the environmental and construction regulations of the area where the property is located to determine the financial and legal viability of the project.

Identify the most profitable development opportunities for your land

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

Prevent economic losses by using your land properly

If you own land, it is important to study the 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.

What types of questions can i answer using the highest and best use analysis?

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

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 the 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 property´s value in case of refurbishment or new construction?

Questions about real estate development projects

What is the use that will bring the most significant benefits in terms of profitability?
What alternative uses can be given to vacant land or real estate property?
What is the best use for the property: shopping centers, 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 the area´s appreciation be in 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 specific time frame?
Compared with similar properties in the same area, what investment allows for the highest

Questions about urban planning

What 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 for analyzing the highest and best use of a property can consider two spects:

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

The analysis of the highest and best use of land can be applied to vacant land or previously built properties. This involves considering current characteristics and future market potential. Additionally, it is essential to assess the feasibility of demolishing existing buildings to give the property a new use, thus increasing its value.

During the valuation, the behavior of the real estate market must be considered to determine the most competitive use of the property. Additionally, the specific time the study is conducted must be considered to analyze the property´s supply, demand, and revenue potential.

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Frequently asked questions

What is a study of the highest and best land use?

A study of the 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 requires a highest and best land use study?

Anyone who owns land and is interested in using it appropriately, whether to develop it, sell it, or invest in it, should consult this guide.

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

A study of the 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 when studying the highest and best land use?

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

Location: The location of the land is an essential 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: The study must also consider urban planning and environmental regulations in force.
Market demand and revenues: Market demand and revenues for the various land uses are also key factors to consider.