What is a T-12 in real estate?

A T-12 (Trailing Twelve Months) is an operating statement showing the last 12 months of income and expenses for a property. Lenders use it to calculate Net Operating Income (NOI) and determine loan amounts. Bhumi provides forensic T-12 audits that reconcile every line item to bank statements.

How long does a T-12 audit take?

Bhumi delivers a complete, lender-ready T-12 package within 48 hours of receiving your documents. Full forensic reconstruction typically takes 1-2 weeks. Deal closing support runs approximately 30 days.

What size multifamily portfolios does Bhumi work with?

Bhumi specializes in $500K to $5M multifamily portfolios with 5-50 units. This is the sweet spot where institutional lenders require documentation but owners often lack institutional-grade bookkeeping - too complex for most accountants, too small for institutional advisors.

What documents do I need to start a T-12 audit?

To start, Bhumi needs three things: 12 months of bank statements for all accounts touching the property, a current rent roll showing units, tenants, and rent amounts, and your most recent tax return or Schedule E for the property.

How much does a T-12 audit cost?

Bhumi charges a flat fee based on portfolio complexity - number of units, bank accounts, and document condition. No hourly billing surprises. Contact for a specific quote based on your situation.

What lenders does Bhumi work with?

Bhumi is lender-agnostic and has prepared packages for Freddie Mac Small Balance Loans, Fannie Mae Small Loans, regional banks, credit unions, and private lenders. The documentation standards are tailored to each lender's requirements.

What is NOI variance and why does it matter?

NOI variance is the gap between what your T-12 operating statement shows and what your bank deposits prove. Lenders require zero variance for loan approval. Bhumi's forensic reconciliation traces every dollar of revenue to a specific bank deposit, eliminating phantom income and protecting your loan amount.

Can Bhumi help with inherited real estate portfolios?

Yes. Bhumi specializes in inherited portfolios where the previous generation ran operations manually. We've handled portfolios with Venmo payments, cash deposits with no paper trail, commingled personal and business expenses, and decades of accumulated documentation gaps.

What is a Freddie Mac SBL appraisal?

A Form 1025 appraisal is Freddie Mac's standardized property valuation using the Income Approach (cap rate applied to NOI) and Sales Comparison Approach. The lower of the two determines your maximum loan amount via LTV constraints.

What is cap rate compression and expansion?

Cap rate compression (lower rates) increases property values; cap rate expansion (higher rates) decreases values. A 50 basis point cap rate increase on $100K NOI reduces value by $125,000—and your loan proceeds by $100,000 at 80% LTV.

Can you challenge a Freddie Mac appraisal?

Yes, through the Reconsideration of Value (ROV) process. Submit comparable sales the appraiser missed, correct factual errors, or challenge cap rate selection with market data. Success rate is low but possible with strong evidence.

What is the Income Approach to valuation?

The Income Approach divides Net Operating Income by a market-derived capitalization rate. Value = NOI ÷ Cap Rate. A $100,000 NOI at 6% cap = $1,666,667 value. At 7% cap = $1,428,571—a $238,000 difference.

What happens when the appraisal comes in below contract price?

You have three options: bring additional equity (cash-in), renegotiate the purchase price, or walk away. Freddie Mac will not lend above their LTV limit regardless of contract price.

The Appraisal: When Cap Rates Kill Your Proceeds

Definition

Form 1025 Appraisal: Freddie Mac's standardized property valuation combining the Income Approach (NOI ÷ Cap Rate) and Sales Comparison Approach. The appraisal sets your maximum LTV—and often, the gap between what you expected and what you get.

Why Does the Appraisal Matter So Much?

Your T-12 is clean. Your DSCR works. Your documentation is tight. Then the appraisal comes back—and you're suddenly $150,000 short on proceeds.

The appraisal is where market conditions meet your deal. In a cap rate expansion environment (rising rates), even perfect properties lose value on paper.

How Does Freddie Mac Value Your Property?

The Form 1025 appraisal uses two approaches, and the lower value determines your maximum loan:

Approach	Method	When It Controls
Income Approach	NOI ÷ Cap Rate = Value	Most multifamily (investment properties)
Sales Comparison	Recent comparable sales adjusted for differences	When comps are stronger than income

The Income Approach Usually Wins: For stabilized multifamily, the Income Approach typically sets value. Investors buy cash flow, not square footage. Your NOI is the foundation—but the cap rate is the multiplier that can make or break your deal.

What Is the Cap Rate and Why Does It Matter?

The capitalization rate is the market's required return on your property. It's derived from comparable sales and reflects risk, location, and market conditions.

Value = NOI ÷ Cap Rate

The Cap Rate Sensitivity Problem

Small cap rate changes create massive value swings. On a property with $100,000 NOI:

Cap Rate	Value	At 80% LTV	Change from 6%
5.5%	$1,818,182	$1,454,545	+$121,212
6.0%	$1,666,667	$1,333,333	—
6.5%	$1,538,462	$1,230,769	-$102,564
7.0%	$1,428,571	$1,142,857	-$190,476
7.5%	$1,333,333	$1,066,667	-$266,666

The 50 Basis Point Trap: A mere 0.50% cap rate increase costs you ~$100,000 in loan proceeds on a $100K NOI property. In a rising rate environment, cap rates expand—and your expected proceeds evaporate.

What Does the Appraiser Actually Do?

The Form 1025 appraiser conducts a detailed analysis:

Appraisal Scope

Property Inspection: Physical condition, unit mix, amenities, deferred maintenance
Income Analysis: Review T-12, rent roll, verify rents against market
Expense Analysis: Compare expenses to market norms, adjust if outliers
Comparable Sales: Find 3-5 recent sales, adjust for differences
Cap Rate Derivation: Extract cap rates from comps to determine market rate
Rent Comparability: Compare in-place rents to market (Form 1103A analysis)

Where Do Appraisers Get Cap Rates Wrong?

Issue	What Happens	Your Argument
Stale Comps	Uses sales from 6-12 months ago in shifting market	Provide recent sales (last 90 days)
Wrong Submarket	Comps from inferior/superior neighborhoods	Provide comps from your specific submarket
Property Type Mismatch	Compares Class B to Class C (or vice versa)	Provide comps with similar vintage, condition
Size Mismatch	Compares 20-unit to 100-unit (different buyer pool)	Provide comps in similar unit count range

What Is the Reconsideration of Value (ROV)?

When the appraisal comes in low, you have one shot: the Reconsideration of Value process. This is a formal challenge to the appraiser's conclusions.

Timeline	Must submit within 5-10 business days of receiving appraisal
Format	Written request through your lender (not directly to appraiser)
Success Rate	Low (~10-20%) unless you have strong evidence

What Can You Challenge?

Challenge Type	Evidence Needed	Likelihood of Success
Factual Errors	Wrong unit count, square footage, amenities	High (if provable)
Missed Comps	Recent sales appraiser didn't consider	Medium-High
Cap Rate Selection	Market data showing lower cap rates	Medium
Adjustment Errors	Incorrect adjustments to comparables	Medium
"I Disagree"	Opinion without evidence	Zero

The ROV Reality: Appraisers rarely reverse themselves without compelling evidence. "I think my property is worth more" doesn't work. You need comparable sales they missed, factual errors they made, or market data that contradicts their cap rate.

How Do I Prepare for the Appraisal?

Don't wait for a bad appraisal to react. Prepare before the appraiser arrives:

Pre-Appraisal Preparation

Gather Your Own Comps: Research recent sales before the appraisal. Know what's trading and at what cap rate.
Clean Up the Property: First impressions matter. Curb appeal, common areas, and a "show unit" influence the appraiser's perception.
Prepare a Property Package: T-12, rent roll, capital improvements list, market rent comps—make the appraiser's job easier.
Know Your Story: If you've made improvements, document them. New roofs, HVAC, renovated units—these support value.
Be Present: Meet the appraiser, answer questions, highlight positives they might miss.

The "Trust Me" Trap: Don't assume the appraiser will find the good comps. They're under time pressure and may use the first comps they find. Your job is to make sure they see the best data.

What If the Appraisal Still Comes In Low?

If the ROV fails or you don't have grounds to challenge, you have three options:

Option	When It Works	Downside
Bring Cash	You have liquidity and want to close	Lower leverage, reduced returns
Renegotiate Price	Seller is motivated, market is soft	Seller may refuse, deal falls apart
Walk Away	Gap is too large to bridge	Lost time, due diligence costs

The Cash-In Calculation: Before walking away, calculate the return impact. If bringing $100K extra equity drops your cash-on-cash from 12% to 10%, is that acceptable? Sometimes closing at lower leverage beats restarting the search.

What's the Appraisal Timeline?

Order to Inspection	5-10 business days
Inspection to Draft	7-14 business days
Review and Revisions	3-7 business days
ROV (if needed)	5-10 additional business days
Total	3-5 weeks typical

The Rate Lock Pressure: A delayed appraisal or ROV process can push you past your rate lock expiration. Factor appraisal timing into your lock period—don't cut it close.

The Bottom Line: The appraisal is where market reality meets your deal. You control your NOI through clean documentation. You influence cap rate perception through comp selection and property presentation. But ultimately, the market sets the rate—and your loan proceeds follow.