Maximally Productive

Once it is determined that the answer to the first three tests is yes, the most profitable or maximally productive use of several uses must be determined.  The four factors of production are labor, capital, management, and land.  The most profitable use after the first three factors of production is highest and best use.

 

Only one use can be maximally productive.

 

Example:  A developer has a tract of land in Buckhead.  He can build 20 $1,000,000 condominiums with a margin of $200,000 each or he can build 50 $300,000 condos with a margin of $50,000 each.  Since the million dollar units provide the most profit, it appears that they are the highest and best use.  The appraiser would have to analyze the quality of the income as well as the quantity.  If there is little or no demand for million dollar condominiums in Buckhead, the $300,000 condos may be the highest and best use.

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