Problem:
You estimate that the value of a single family home is $700,000. However, local zoning regulations would permit a 5 unit rental housing structure to be built. There is demand for rentals in the area.
The estimated value of the rental structure is $1,100,000, but the construction costs, including demolition of the existing home, is estimated at $500,000.
Required:
Question: What is the property's highest and best use?
Note: Please show how to work it out.