Highest And Best Use Sf Or Mf

[leasedfee]

I'd opt to conclude the current use is the H&BU as-improved.

True. The default highest and best use is usually the status quo. It explains why vacant land, dilapidated, shell, or unrenovated buildings, and SFRs with conversion possibilities sit and sit and sit.

To convert this SFR to a multi-family is to make a 20 year economic-life decision: kitchen, plumbing, walls, bath, door ways, remodeling. That should give any investor a pause. The short-lived and medium-lived SFR components have to be largely depreciated to prevent a loss in functional value through a conversion.

The time horizon in real estate is very long. This critically differentiates us from most other forms of capital. Time horizon isn't sufficiently emphasized in our classwork. In bond valuation, they are keen on Macaulay's bond duration -- the weight average term to maturity. Longer duration periods have greater volatility to changes in yield rates. When the long-lived components economically last a weighted 100 to 250 years, there is a good possibility of retaining that value. Especially when building codes have onerous requirements, or the structure has a high FAR.