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.

T-12 Variance Explained: Why Your Numbers Don't Match

Definition

Variance: The difference between the income reported on your T-12 operating statement and the actual deposits verified in your bank statements. Lenders use variance to assess the reliability of your financial reporting.

When a lender reviews your loan application, they don't just read your T-12—they verify it. They compare every line of income you report against your bank statements. The gap between these two numbers is your variance.

A variance of 2-3% is normal and acceptable. A variance above 5% triggers additional scrutiny. A variance above 10% often kills deals entirely.

Why Does Variance Exist?

Variance isn't always a sign of fraud or incompetence. It often results from legitimate operational realities that weren't properly documented:

Timing differences — Rent billed in December but deposited in January
Cash payments — Tenants pay cash, owner doesn't deposit immediately
Multiple accounts — Section 8 payments hitting a different bank account
Concessions — Free rent months that reduce collected income
Accounting method — Accrual accounting showing billed rent, not collected rent

The problem isn't that variance exists—it's that unexplained variance signals risk to lenders.

How Do Lenders Calculate Variance?

The calculation is straightforward:

Variance % = (T-12 Income − Bank Deposits) ÷ T-12 Income × 100

For example, if your T-12 shows $480,000 in annual income but your bank statements show $456,000 in deposits:

($480,000 − $456,000) ÷ $480,000 × 100 = 5% variance

That 5% variance represents $24,000 in income you cannot prove. The lender will either:

Reduce your NOI by $24,000 (reducing your loan amount)
Request additional documentation to explain the gap
Reject the application if the variance seems suspicious

What Causes High Variance?

1. Phantom Income

Income that appears on your T-12 but never hit your bank account. Common causes:

Tenants who paid cash that was never deposited
Bounced checks counted as income
Credits applied to tenant accounts
Barter arrangements (tenant does maintenance in exchange for rent reduction)

2. Commingled Funds

When property income is mixed with personal funds or income from other properties, lenders cannot isolate what belongs to the subject property.

3. Multiple Bank Accounts

Section 8 payments often go to a different account than tenant payments. If you don't provide statements for all accounts, the income looks like phantom income.

4. Accounting Method Mismatch

If your T-12 is prepared on an accrual basis (rent billed) but compared to cash deposits, there will always be variance. Lenders want cash-basis T-12s.

Red Flag: If your variance exceeds 10%, lenders assume you're either inflating income or your record-keeping is too unreliable to trust. Neither assumption helps your loan application.

How to Eliminate Variance

The goal is a T-12 that ties to bank statements within 2%. Here's how:

Step 1: Start with Bank Statements

Don't build your T-12 from what tenants owe. Build it from what actually deposited. Every dollar of income on your T-12 should trace to a specific deposit.

Step 2: Categorize Every Deposit

Label each deposit: rent (by unit), Section 8, laundry, late fees, security deposits. Unidentified deposits become a problem during underwriting.

Step 3: Provide All Bank Accounts

If income hits multiple accounts, provide statements for all of them. Missing accounts = missing income = unexplained variance.

Step 4: Reconcile Monthly

Each month's T-12 income should match that month's deposits within 1-2%. Large monthly swings need explanations.

Step 5: Document Anomalies

If a tenant paid two months at once, note it. If Section 8 sent a catch-up payment, document it. Lenders accept explanations; they reject mysteries.

What If My Variance Is Already High?

If you're preparing for a loan and discover significant variance, you have two options:

Option 1: Forensic Reconstruction

Work backward from bank statements to rebuild the T-12. This is labor-intensive but produces a defensible document. Every line item ties to a deposit. Every variance is explained.

Option 2: Adjust the T-12

If you cannot prove income, remove it. A smaller but provable NOI is better than a larger NOI with unexplained variance. Lenders haircut suspicious numbers anyway.

The rule is simple: if you can't prove it, don't claim it. A T-12 with zero variance and $400,000 NOI will fund faster than a T-12 with 8% variance and $450,000 NOI.

Variance Thresholds by Lender Type

Lender Type	Acceptable Variance	Notes
Freddie Mac SBL	<3%	Strict verification requirements
Fannie Mae Small	<3%	Similar to Freddie Mac
Regional Banks	<5%	More flexibility with explanations
Credit Unions	<5%	Relationship-dependent
Private/Bridge Lenders	<10%	Focus on asset value over income

The Bottom Line

Variance is not a paperwork problem—it's a credibility problem. When your T-12 doesn't match your bank statements, lenders question everything else in your application.

The solution isn't to inflate your T-12 to match aspirational income. The solution is to build your T-12 from verified deposits and document every anomaly.

Zero variance isn't about perfection—it's about proof. Every dollar you claim should have a deposit to back it up.