George Hatch
Elite Member
- Joined
- Jan 15, 2002
- Professional Status
- Certified General Appraiser
- State
- California
One other aspect of HBU/as is that "risk" is arguably a part of the analysis. There is no risk of loss involved when leaving an existing use in that usage. Redevelopment does include an element of risk due to the uncertainties of market trends in effect as of the future completion of a construction project.
The point being that even if the values are similar, the existing use might still be the HBU/as is in that moment, even if the REL is extremely limited. And, the rate/terms for an SFR loan are a lot easier than the rate/term for a land acquisition, if you can even find a lender who will lend on land.
Cost to demo/haul off is another potential complicating factor, although not always. If it takes 2yrs to process a subdivision map or condo map or other construction project then leaving the existing SFR onsite during that 2 years to generate rents can partially offset the holding costs.
The point being that even if the values are similar, the existing use might still be the HBU/as is in that moment, even if the REL is extremely limited. And, the rate/terms for an SFR loan are a lot easier than the rate/term for a land acquisition, if you can even find a lender who will lend on land.
Cost to demo/haul off is another potential complicating factor, although not always. If it takes 2yrs to process a subdivision map or condo map or other construction project then leaving the existing SFR onsite during that 2 years to generate rents can partially offset the holding costs.