Bank Statement Reconciliation for Multifamily Properties

When you apply for a multifamily loan, the lender doesn't take your word for how much income the property generates. They verify it. Bank statement reconciliation is how they verify it.

The outcome of reconciliation determines whether your stated NOI holds up—or gets haircut.

Why Do Lenders Require Bank Statement Reconciliation?

Lenders have learned the hard way that T-12 statements can be... optimistic. Common problems they've encountered:

• Income inflated to qualify for larger loans
• Cash payments that were never actually collected
• Deposits from non-property sources counted as rent
• One-time payments (insurance claims, deposits) treated as recurring income

Bank statements don't lie. Every deposit is timestamped and traceable. When your T-12 matches your bank statements, lenders trust your numbers. When they don't match, lenders assume the worst.

What Documents Do You Need?

For a complete reconciliation, gather:

• 12 months of bank statements — For every account that receives property income
• Current rent roll — Unit numbers, tenant names, rent amounts
• T-12 operating statement — Monthly income breakdown
• Lease agreements — To verify stated rents
• Section 8 documentation — HAP contracts showing payment amounts

How to Reconcile: Step-by-Step Process

Step 1: Create a Deposit Log

Go through each bank statement and create a log of every deposit. For each deposit, record:

• Date
• Amount
• Source (if identifiable from memo)
• Category (rent, Section 8, other income, non-property)

Step 2: Categorize Each Deposit

Every deposit falls into one of these categories:

*Insurance claims for business interruption may be includable with documentation, but most property damage claims are not operating income.

Step 3: Match Deposits to T-12 Line Items

For each month, sum the categorized deposits and compare to your T-12:

The two numbers should match within 1-2%. If they don't, you have a variance that needs explanation.

Step 4: Document Discrepancies

For every variance, create a written explanation:

• Timing differences: "December rent for Unit 4 was deposited January 3rd"
• Catch-up payments: "Section 8 sent 2-month catch-up payment in March"
• Concessions: "Unit 7 had one month free rent per lease agreement"
• Collections: "Unit 12 tenant on payment plan, partial rent deposited"

Step 5: Create the Reconciliation Summary

Produce a monthly summary showing:

Common Reconciliation Problems and Solutions

Problem: Cash Payments

Tenants pay cash, owner doesn't deposit same-day or at all.

Solution: Going forward, deposit all cash immediately. For historical gaps, you may need to reduce T-12 income to match deposits. Income you can't prove is income you can't claim.

Problem: Commingled Accounts

Property income mixed with personal funds or other properties.

Solution: Identify and tag each deposit by source. Create a spreadsheet showing which deposits relate to the subject property. Non-property deposits must be excluded from T-12 income.

Problem: Multiple Properties in One Account

Income from several properties hits one bank account.

Solution: Match deposits to specific properties using tenant names, unit numbers, and lease amounts. This is tedious but necessary.

Problem: Section 8 in Separate Account

HAP payments go to a different account than tenant portions.

Solution: Provide statements for both accounts. Create a combined reconciliation showing total income from both sources.

Problem: Venmo/Zelle Payments

Tenants pay through payment apps that transfer to personal accounts.

Solution: Provide payment app transaction history. Match transfers to bank deposits. Document the trail from tenant payment to bank account.

What Lenders Look For

When reviewing your reconciliation, lenders check for:

• Consistency: Are monthly deposits relatively stable, or wildly variable?
• Completeness: Are all income sources accounted for?
• Accuracy: Does the math actually work?
• Documentation: Are discrepancies explained with supporting docs?
• Reasonableness: Does claimed rent match market rates?

Red Flags That Trigger Additional Scrutiny

• Variance exceeding 5%
• Large unexplained deposits
• Income significantly above market rents
• Declining income trend over 12 months
• Round-number deposits that don't match lease amounts
• Deposits from unknown sources

Tools for Reconciliation

You can reconcile using:

• Excel/Google Sheets: Manual but gives full control
• QuickBooks: If you categorize deposits properly
• Property management software: AppFolio, Buildium, etc.
• Professional service: When the task is too complex or time-sensitive

The method matters less than the outcome: a clear, documented trail from T-12 income to bank deposits.

The Bottom Line

Bank statement reconciliation is where deals get made or broken. A T-12 that ties perfectly to bank statements sails through underwriting. A T-12 with unexplained gaps triggers stips, delays, and haircuts.

Do the reconciliation before you submit. Find the problems before the lender does. Fix what you can, document what you can't, and present a package that answers questions before they're asked.