What it is
A T-12, short for trailing twelve months, is a property's income and expense statement covering the last twelve months of operations. It is usually laid out with one column per month and a total column. Lenders treat it as the primary evidence of what a property actually earns.
What's on it
A typical T-12 includes:
- Income. Rental income by category, vacancy and concessions, bad debt, and other income such as parking, storage, laundry or fees.
- Operating expenses. Real estate taxes, insurance, utilities, repairs and maintenance, payroll, management fees, contract services, marketing and general administrative costs.
- Net operating income. Income minus operating expenses, by month and in total.
Some T-12s also show capital expenditures and debt service below the NOI line. Those are not operating expenses and should be separated.
How lenders read it
Lenders use the T-12 to build their own underwritten NOI. They look for:
| What they check | Why |
|---|---|
| Trend across the twelve months | Is income growing, flat or slipping? |
| The most recent three months (T-3) | Many lenders annualize the T-3 for income if it's stronger or weaker than the full year |
| One-time items | Insurance claims, termination fees or catch-up tax payments distort the total |
| Missing expenses | No management fee, no payroll, or no insurance line on a property that clearly needs them |
| Tie-out to the rent roll | Rental income on the T-12 should be consistent with the current rent roll |
They'll often compare it to the prior year or two of operating statements as well.
T-12 versus pro forma
The T-12 is history. The pro forma is a projection. Permanent lenders mostly underwrite the T-12. Bridge lenders look at the T-12 to understand the starting point and at the pro forma to judge the business plan. A package that shows both, side by side, and explains the gap is easier to underwrite.
Common mistakes
- Sending a T-12 that ends six months ago. Lenders want the most recent full month. Stale numbers lead to questions.
- Cash-basis surprises. Annual tax or insurance payments land in one month and make that month look terrible. Note it or show accrual figures.
- Owner expenses in the numbers. Personal or non-property costs inflate expenses; leaving out real costs inflates NOI. Both get caught.
- No reconciliation. If the T-12 income doesn't line up with the rent roll, explain why: concessions, a recent lease-up, or a rent increase.
In the package
Include the full monthly T-12, a summary with your underwriting adjustments, and a short note on anything unusual. Dori reads T-12s in PDF or spreadsheet form through document extraction and drops the line items into your underwriting template. For a step-by-step walkthrough, see how to read a rent roll and T-12.