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Underimprovement refers to a site that does not have improvements that make the most of it’s best use for a property.
This is in stark contrast to overimprovement when the costs of improvements exceed the highest potential value of the land.
For example, a single family home sitting on an acre of land in a commercial zone can be considered as gross underimprovement.
This is because the value of the land can be maximized by building a commercial property on it consisting of several rental units.
This can potentially increase the value of the land including improvements ten-fold.
Underimproved real estate are particularly attractive to investors as they can generate a huge profit as long as the investor is able to see through re-construction plans that can take years to bear fruit.