The title phrase above about the highest and best use describes a real estate appraising term often applied to the B & B Valuation process as well. Use is the operative word. Using Wikipedia’s definition, the concept states that the “value of a property is directly related to the use of that property; the highest and best use is the reasonably probable use that produces the highest property value. This use, the Highest and Best Use, may or may not be the current use of the property.” (my emphasis applied)
This affects a LOT of inns. Some inn properties may have a higher property value as an alternate use. A smaller property may have a higher value as a residential property…and many small inns have sold recently as homes.
Some inns are restricted by codes (typically zoning and special use permitting) to provide all of the services they would like to offer…thus restricting revenue and profitability growth. These inns may have higher property value as another use…perhaps an office building or assisted living facility.
Many inns are currently enjoying the highest and best use of the property. It is reasonably likely that these viable inns have the highest property value as currenlty being used as an inn. Their value, therefore, can be established by a properly detailed valuation as a going concern as an inn.
Most innkeepers do not want to hear that their “baby” is worth more with an alternate use. But these economic times are clearing the air about value, and what level of loan to value (LTV) the lenders will support, and a clearer understanding of highest and best use. Scott