What Is a T12 in Real Estate?
A T12 is a trailing twelve months operating statement that shows a property's actual income and expenses over the most recent 12-month period. It is the standard financial document used by lenders, appraisers, and investors to evaluate a commercial property's historical operating performance.
What Does a T12 Include?
A T12 presents month-by-month income and expense data for the preceding 12 months, along with annual totals. The format varies by property management platform, but the core sections are consistent.
- Revenue section: rental income, parking, laundry, RUBS, late fees, application fees, and other income by month
- Vacancy and concessions: deductions from gross revenue, shown separately
- Operating expenses: property taxes, insurance, utilities, repairs, management fees, administrative, landscaping, pest control
- NOI line: the bottom line, calculated as revenue minus expenses
T12s typically come from property management software such as Yardi, RealPage, or AppFolio. The raw exports from these systems are often messy, with inconsistent categorization and formatting that varies from property to property.
How Does a T12 Compare to T3 and T6 Annualized?
Each trailing period captures a different window of performance. Shorter periods reflect recent trends more quickly, while longer periods provide more stability and seasonal coverage.
| Metric | Data Period | Annualization | Best For |
|---|---|---|---|
| T12 | 12 months actual | None needed | Lender underwriting, appraisals, baseline NOI |
| T6 Annualized | 6 months actual | Multiply by 2 | Properties mid-renovation or with recent rent increases |
| T3 Annualized | 3 months actual | Multiply by 4 | Post-renovation "run rate" estimate |
| T1 Annualized | 1 month actual | Multiply by 12 | Quick snapshot, least reliable |
Sellers often present T3 annualized numbers when they favor the buyer narrative (for example, after completing renovations that raised rents). Always request the full T12 to see the complete picture, including months before improvements.
What Are Common Red Flags in a T12?
The most frequent issue is incomplete or manipulated data. Sellers sometimes clean up T12s before marketing a property, which can obscure real operating conditions.
- Missing months: gaps in data suggest the seller is hiding poor performance periods
- Personal expenses: owner cell phone, vehicle, travel, and meals mixed into property expenses (common with smaller operators)
- One-time items: insurance claims, legal settlements, or capital expenditures incorrectly booked as operating expenses
- Self-management discount: no management fee line item because the owner self-manages. Add 5% to 8% to normalize
- Deferred maintenance: abnormally low repairs and maintenance may indicate the owner has deferred spending ahead of a sale
- Tax reassessment risk: property taxes based on the current owner's basis, not the purchase price. Taxes will reset on sale
The CBRE Income/Expense Analysis provides expense benchmarks by property type and market. Comparing T12 line items against these benchmarks is the fastest way to spot anomalies.
How Do Investors Use a T12 in Underwriting?
The T12 serves as the starting point for building a pro forma. Analysts take the historical data, adjust for known anomalies, and project forward based on their investment thesis.
The standard workflow involves three steps. First, normalize the T12 by removing personal expenses and one-time items. Second, adjust for known changes like property tax reassessment and market-rate management fees. Third, build the Year 1 pro forma from the normalized T12 and layer in your assumptions for rent growth, occupancy, and expense inflation.
The NAA Income/Expense Survey publishes annual operating benchmarks for multifamily properties. Use these to validate that your adjusted T12 expense ratios are reasonable for the market.