A rent roll tells you who occupies the property today and what they owe under their leases. A T-12 tells you what the property actually collected and spent over the last twelve months. To read them properly, you check each one for quality, then tie the rent roll's annualized income to the T-12's collections and explain the gap. The result is an underwritten NOI you can defend to a lender.
Reading the rent roll
A rent roll lists every unit or suite on a specific date.
Multifamily rent roll columns:
| Column | What to check |
|---|---|
| Unit and unit type | Matches the unit mix on the OM and site plan |
| Square feet | Consistent across identical unit types |
| Tenant name | Vacant units marked clearly; no duplicate names across units |
| Lease start and end | Expired leases on month-to-month; clustering of expirations |
| Market rent | The property's own asking rent for that unit type |
| Contract rent | What the tenant actually owes |
| Concessions | Free rent or discounts still running |
| Balance / delinquency | Unpaid rent; large balances signal collection problems |
| Deposits | Present and reasonable |
Commercial rent roll columns add lease type (gross, modified gross, NNN), base rent per square foot, scheduled rent steps, expense reimbursements, options and tenant improvement obligations.
What to calculate
- Physical occupancy: occupied units ÷ total units.
- Economic occupancy: rent actually collected ÷ gross potential rent. This is the number lenders care about.
- Loss to lease: market rent minus contract rent, summed. Large loss to lease is upside for a value-add plan, not current income.
- Annualized in-place rent: total monthly contract rent × 12.
- For commercial: rent by tenant as a share of total, weighted average lease term, and expirations by year.
Rent roll red flags
- Many leases signed in the last 60 days, especially before a sale or refinance
- Contract rents well above market rents
- Concessions not shown in the rent column
- High delinquency balances
- Employee or related-party units at full rent
- One tenant above 20% to 25% of commercial income with near-term expiry
Reading the T-12
The T-12 shows twelve months of actual income and expenses, usually month by month.
Income lines:
- Gross potential rent (GPR)
- Vacancy loss, concessions, bad debt
- Other income: parking, laundry, fees, storage, utility reimbursements (RUBS)
- Effective gross income (EGI)
Expense lines:
- Property taxes, insurance
- Utilities, repairs and maintenance, contract services
- Payroll, management fee, administrative, marketing
- Replacement reserves (often missing; lenders add them)
NOI = EGI minus operating expenses. Debt service, depreciation and capital expenditures sit below NOI.
What to look for month by month
- Trend: is monthly income rising, flat or falling across the year?
- Spikes: a large repair or legal bill in one month. Decide whether it recurs.
- Missing months: zero insurance or tax in some months may mean they are paid annually; annualize correctly.
- Accrual versus cash: a cash-basis T-12 can bunch payments into odd months.
T-12 red flags
- No management fee (owner self-manages; lenders add one, commonly 3% to 5% of EGI)
- Expense ratio well below comparable properties
- Property taxes that will reset on sale
- Insurance at a renewal rate far below current market
- Other income that looks one-time (insurance proceeds, lease termination fees)
Tying the rent roll to the T-12
This reconciliation is what lenders do first. If you do it before they do, your package survives the first read.
Worked example: 48-unit multifamily
| Item | Amount |
|---|---|
| Rent roll: 46 of 48 units occupied, total monthly contract rent | $68,000 |
| Annualized in-place rent (× 12) | $816,000 |
| Market rent on the 2 vacant units, annualized | $36,000 |
| Rent roll gross potential rent | $852,000 |
| T-12 gross potential rent | $838,000 |
| T-12 vacancy, concessions and bad debt | ($54,000) |
| T-12 net rental income | $784,000 |
Reading the gap: T-12 GPR is $14,000 below today's rent roll GPR, consistent with rents rising during the year. T-12 collections ($784,000) are $32,000 below annualized in-place rent ($816,000), which reflects vacancy and concessions over the year. Both gaps are explainable. If T-12 collections were $150,000 lower with no explanation, something is wrong: unreported concessions, delinquency, or a rent roll that overstates occupancy.
From T-12 to underwritten NOI
Lenders build their own NOI. Do it first, conservatively, and show each adjustment.
| Line | T-12 | Underwritten | Adjustment |
|---|---|---|---|
| Net rental income | $784,000 | $775,000 | 5% economic vacancy on $816,000 in-place rent |
| Other income | $42,000 | $38,000 | Removed a one-time fee |
| EGI | $826,000 | $813,000 | |
| Operating expenses | $318,000 | $318,000 | |
| Management fee | $0 | $32,500 | 4% of EGI; owner self-manages |
| Tax reassessment | n/a | $24,000 | Sale-triggered reassessment |
| Replacement reserves | $0 | $14,400 | $300 per unit |
| NOI | $508,000 | $424,100 |
The owner's NOI is $508,000. A lender's will look much closer to $424,100. Present the underwritten figure and the bridge between them, and the lender trusts your other numbers.
Use the underwritten NOI to test DSCR and debt yield, and keep upside such as loss to lease in a separate pro forma.
T-3 and T-6 annualizations
Lenders sometimes look at a shorter trailing period, such as the last three months annualized (T-3) or six months (T-6), especially when income has been rising after a renovation or lease-up.
- When it helps: a value-add property where recent months reflect renovated rents. A T-3 can show income the T-12 has not caught up with.
- When lenders resist it: when recent income is boosted by short-term effects, seasonal peaks, or one-off collections.
- How to present it: show T-12, T-6 and T-3 side by side, with the rent roll's annualized in-place rent. Let the lender see the trend rather than picking the most flattering number.
Permanent lenders commonly underwrite income closer to the T-12 or a T-3 that is supported by the current rent roll. Bridge lenders are more willing to credit recent trends because their loan is built around the improvement.
Expense benchmarks worth checking
Each expense line should be compared against similar properties in the same market. Ratios vary widely by asset class, age, location, utility structure and who pays what, so treat these as questions to ask rather than rules:
- Expense ratio (operating expenses ÷ EGI): unusually low for the asset type usually means something is missing
- Repairs and maintenance per unit or per square foot: very low can mean deferred maintenance a lender's inspector will find
- Payroll: does the staffing match the property's size?
- Insurance: recently repriced in many markets; use a current quote where possible
- Property taxes: model the post-sale or post-reassessment figure, not the seller's historical bill
- Utilities: check who pays, and whether a RUBS program or submetering explains low owner costs
When a line differs a lot from comparable properties, either explain it in the memo or adjust it. Unexplained low expenses are the most common reason a lender's NOI lands far below the broker's.
Commercial properties: extra checks
- Lease expiration schedule: percentage of rent expiring each year of the loan term
- Reimbursements: do NNN reimbursements on the T-12 match what leases allow?
- Rent steps: contract rent may increase during the year; lenders may or may not credit future steps
- Tenant credit: national, regional or local tenants carry different weight
- Leasing costs: tenant improvements and leasing commissions due on rollover; lenders often reserve for them
See what lenders look for in a CRE loan request for how this feeds the credit decision.
Checklist
- Rent roll dated within 30 days
- Unit count and mix match the OM
- Physical and economic occupancy calculated
- Concessions and delinquency identified
- T-12 annualized correctly for annual bills
- One-time items removed
- Management fee, reserves and tax reassessment added
- Rent roll and T-12 gap explained in one sentence
How Dori handles rent rolls and T-12s
Dori reads rent rolls and T-12s as PDF, DOCX or XLSX and lands them in your own underwriting template. Expenses are benchmarked against comparable assets, and every number keeps a link back to the page it came from, so you can show a lender exactly where a figure originated. The same record feeds lender matching and the loan package.