Maximize Return by Assessing ‘Highest and Best Use’ for San Antonio, TX Commercial Real Estate
“The highest and best use” is a real estate appraisal concept designed to show the greatest value of a specific property. As an investor, you will find this concept useful in determining how to maximize your investment return. There are four tests each property must meet when determining the highest and best use:
Is it legal? Only legal uses add value to a property. Research into zoning restrictions may be necessary to determine the legal uses for a parcel of land.
Is the use physically possible given the specifications of the real estate in question? An elaborate plan can become obsolete if the physical limitations of the property won’t accommodate it.
Is the upgrade financially feasible? The proposed change must be able to generate sufficient profit to justify the cost of improvements. That means establishing whether the property has existing economic life in its current condition or whether there is limited economic life with any improvements.
What is the maximum use of the property? Is the property generating the highest net return? From an investment perspective this is often the most important question. The issue of whether a property is of higher value used for residential, commercial or industrial purposes will greatly influence its final sale price.
By closely balancing the cost of improvements against the highest use for the property, you can maximize your investment dollars.
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