-the seller should collateralize the note with the property (although the construction lender will want the note subordinated), pay off the loan (in addition to regular payments) with release fees as each lot is sold, and make sure the interest is paid (not accrued) regularly.Your issue is classics dealer vs investor issue.Note: Classification of gain as capital or ordinary is determined property-by-property, based on the statutory determination of whether the property is a capital asset or property held for sale to customers in the ordinary course of business.

Next you will need to determine how much work needs to be completed on the property and develop a cost estimate to conduct those repairs.

What are the best/most accurate tools to determine fair market value for a property?

I did more research and thinking after I posted and I determined that I am likely eligible for the primary residence exemption on taxes which negates the capital gains factor.

Crazy.You should try to determine if someone in the family is able/willing to take responsibility.

@Avery Robertson our approach to due diligence begins with determining if the value of the park is in line with the seller's price expectations.

My assumption has been that higher density would equal greater value for the land but don't know the metric for how to determine that given all the unknowns with the new legislation. 

You can do this but you have to be very determined and do the difficult stuff that will be required going forward.  

Also just another thing on CAP rates yes you can "make more money" with higher CAP rates but CAP rates also determine risk. 

The way to determine value on a park like this is not to focus on how the current books are kept, but to underwrite to how it will actually perform if you run the park correctly.