156k views
4 votes
A single-family residence is located in a commercially-zoned area. Residential sale prices in the area range from $90-100 per square foot. The residence could be converted to offices at a cost of $40 per square foot. Office space in this area is selling at $110-120 per square foot. What is the highest and best use of this property?

O Convert the residence into offices
O Continue use as a single-family home.
O Raze the residence and build a new office
O Determine what the owner wants to do with the property

User Ishmaeel
by
8.5k points

1 Answer

1 vote

Final answer:

The single-family residence has a higher per square foot value as a residential property compared to after a conversion to office space, even at the lower end of residential sale price, making the continued use as a single-family home the highest and best use.

Step-by-step explanation:

The highest and best use for a property is the use that will likely produce the greatest net return over a period of time. In the scenario provided, the single-family residence is in a commercially-zoned area with residential sale prices ranging from $90-100 per square foot.

The cost to convert the residence into office space is $40 per square foot, while office space is selling at $110-120 per square foot. Using a basic comparison of potential sale prices minus the conversion cost, if we take the low end for office space ($110) and subtract the conversion cost ($40), we get a potential value of $70 per square foot for the converted office use.

On the other hand, using the property as a single-family residence would value the property between $90 and $100 per square foot, with no additional conversion cost required. It is clear that even at the lower range of residential prices, the property as a residence has a higher per square foot value compared to after a conversion, without considering additional factors like market demand, financing cost, or conversion time.

User Nowa Concordia
by
7.8k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.