Is a group of properties is commercial or residential?

[Jeff Owen]

I am looking at a group of properties, but I am not certain whether they should be considered residential properties or commercial. The seller says all but one unit is on one lot, and the other property is on an adjacent lot. There are 12 units, total, and it is a mix of single-families, duplexes, and quad. Even though they are "on the same lot," each building has a separate street number. So, the seller is valuing the properties based on NOI and CAP. However, I suspect this is more of a collection of residential properties and not a true commercial property.

How do I go about determining the proper way to value this property?  If it matters, this is in TN.

[James Kojo]

@Jeff Owen : Look them up on the county tax collectors website, and see how many "parcels" are associated with the property addresses.  Each parcel has a unique parcel number. 

I'm willing to bet that they each have their own parcel number, in which case it's definitely a portfolio of residential units. You should also be able to see the zoning for each parcel, which should tell you if it's a SFR, small MFR, or larger MFR.

As you probably already know, residential units are primarily valued by comps with some consideration given to NOI (for 2-4 plexes.)

By the way, you should be doing this for all properties that you are purchasing during  the due-diligence phase anyways.

Hope that helps!

James