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 expenses are included in NOI?

Operating expenses include property taxes, insurance, utilities, repairs and maintenance, management fees, landscaping, and contract services. NOI excludes debt service (mortgage payments) and capital expenditures.

How does NOI affect my loan amount?

Lenders use NOI to calculate your Debt Service Coverage Ratio (DSCR). With a required 1.25x DSCR, your maximum annual debt service equals NOI divided by 1.25. Higher provable NOI means a larger loan.

What is 'Phantom Income' and how does it affect NOI?

Phantom Income is revenue that appears on your T-12 but can't be verified in bank deposits. Lenders exclude unverified income, which reduces your provable NOI and loan amount. Common causes include cash payments not deposited and Section 8 in separate accounts.

NOI Calculation: The Number That Determines Your Loan

Definition

Net Operating Income (NOI): Total property income minus operating expenses, before debt service and capital expenditures. This is the number lenders use to determine how much they'll lend you.

What Is Net Operating Income (NOI)?

NOI is the single most important number in commercial real estate. It determines your loan amount, your property valuation, and whether your deal closes.

If you understand nothing else about multifamily finance, understand this formula:

NOI = Effective Gross Income − Operating Expenses

How Do You Calculate NOI Step by Step?

Let's break this down with a real example. Assume a 20-unit apartment building.

Step 1: Calculate Gross Potential Rent (GPR)

GPR is what you'd collect if every unit was occupied and paying full rent.

Unit Type	Count	Monthly Rent	Annual
1BR/1BA	12	$950	$136,800
2BR/1BA	8	$1,200	$115,200
GPR			$252,000

Step 2: Subtract Vacancy and Credit Loss

No property runs at 100% occupancy. Lenders assume 5-7% vacancy even if your actual vacancy is lower.

Gross Potential Rent	$252,000
Less: Vacancy (5%)	($12,600)
Less: Concessions	($3,000)
Less: Bad Debt	($2,400)
Net Rental Income	$234,000

Step 3: Add Other Income

Include all non-rent income: laundry, parking, pet fees, late fees, application fees.

Net Rental Income	$234,000
Laundry Income	$4,800
Parking Income	$3,600
Late Fees	$1,200
Effective Gross Income (EGI)	$243,600

Step 4: Subtract Operating Expenses

Operating expenses include everything required to run the property. They do not include mortgage payments or capital improvements.

Expense Category	Annual Amount
Property Taxes	$24,000
Insurance	$8,400
Utilities (Owner Paid)	$12,000
Repairs & Maintenance	$15,000
Management (8%)	$19,488
Landscaping	$3,600
Contract Services	$2,400
Administrative	$1,800
Total Operating Expenses	$86,688

Step 5: Calculate NOI

$243,600 (EGI) − $86,688 (Expenses) = $156,912 NOI

How Do Lenders Use NOI?

NOI feeds into two critical calculations: Debt Service Coverage Ratio (DSCR) and property valuation.

DSCR: Can You Pay the Mortgage?

DSCR = NOI ÷ Annual Debt Service

Lenders require a minimum DSCR, typically 1.20x to 1.35x. This means for every $1.00 in mortgage payments, you must generate $1.20 to $1.35 in NOI.

Using our example with a $156,912 NOI and a 1.25x DSCR requirement:

Maximum Annual Debt Service = $156,912 ÷ 1.25 = $125,530

This caps your mortgage payment at ~$10,461/month, which determines your maximum loan amount.

Property Valuation: The Cap Rate

Property Value = NOI ÷ Cap Rate

At a 7% cap rate, our example property is worth:

$156,912 ÷ 0.07 = $2,241,600

Every dollar of NOI you can prove increases your property value by $10-15, depending on the cap rate.

$10,000 in additional provable NOI = $140,000+ in additional property value (at 7% cap).

What Destroys NOI (and Your Loan)?

Income Haircuts

If the lender can't verify your income, they'll "haircut" it. Common scenarios:

Cash payments not deposited: You say you collected $5,000 cash. Bank shows $0. Lender credits $0.
Section 8 in a different account: $22,000/year hitting an affiliate account. If not documented, lender credits $0.
Inconsistent deposits: Rent roll shows $10,000/month. Bank shows $8,500. Lender uses $8,500.

Expense Add-Backs

If your expenses look artificially low, lenders will add standardized expenses:

No management fee? Lender adds 5-8% management expense, even if you self-manage.
No reserves? Lender adds $250-300/unit for replacement reserves.
Below-market taxes? Lender projects post-sale tax reassessment.

What Is the Difference Between Your NOI and Lender NOI?

Lenders don't blindly accept your NOI. They adjust it to reflect "stabilized" or "underwritten" performance:

Your T-12	Lender Adjustment
3% vacancy	Adjusted to 5% minimum
$0 management (self-managed)	Added 6% management fee
$0 reserves	Added $250/unit reserves
Cash income (unverified)	Excluded from income

The gap between your NOI and the lender's underwritten NOI is where deals get reduced—or killed.

How Do You Protect Your NOI?

Deposit everything. Every rent payment, every fee, every dollar of income goes through a bank account.
Document your income mix. If you have Section 8, provide the HAP contracts. If you have commercial tenants, provide the leases.
Keep receipts for expenses. If you can't prove you paid it, it may not count as an expense—which sounds good until you realize unrealistically low expenses trigger add-backs.
Reconcile monthly. Your T-12 should tie to bank statements within 1-2% every month.

NOI is not what you earned. It's what you can prove you earned. The difference is your loan amount.