T12 Statement for an Apartment Building: What It Is and How to Build One From Your Books

What is a T12 statement for an apartment building?

A T12 statement shows an apartment building's actual income and running costs for each of the last 12 months, side by side, with a 12-month total. T12 is short for trailing 12 months.

The T12 holds actual numbers only: what the building earned and spent, not a plan. The newest month sits last. When a month closes, the oldest month drops off and the new one is added, so the report is always the last 12. The T12 is 12 months of the P&L from the monthly report package for an apartment building.

Is an apartment building's T12 the same as its P&L?

A T12 is a P&L in a set layout: 12 monthly columns and a total. One month's P&L shows 1 month. The T12 shows the last 12, so slow changes are visible.

What lines does an apartment building's T12 show?

The same lines as the monthly P&L: rent if full, vacancy, concessions, other income, each running cost group, and net operating income. The loan payment can be shown below that line.

• Rent if full: every unit at its lease or market rent.
• Vacancy: the rent of the empty units, subtracted.
• Concessions: move-in specials and credits, subtracted.
• Other income: laundry, parking, pet rent, late fees and utility bill-backs.
• Each running cost group: on-site payroll, repairs and unit turns, utilities, property tax, insurance, management fee, office and other.
• Net operating income: the income left after the running costs.
• Below that line, if shown: the loan payment and what is left after it.

The T12 is not a tax document, and your CPA works from the year-end file rather than from it. What counts toward the bottom line of the T12 is in net operating income for an apartment building.

How do you build a T12 from an apartment building's monthly books?

Close each of the last 12 months. Use the same account list in every month. Set the 12 monthly P&Ls side by side, add a total column, and check the total against the 12 months.

1. 1Close each of the last 12 months. A month that is not reconciled to the bank is marked as not final.
2. 2Use the same account list in every month, so a cost sits on the same line in month 1 and month 12.
3. 3Set the 12 monthly P&Ls side by side, oldest on the left, newest on the right.
4. 4Add a total column and check it against the 12 months. Every line must add across.
5. 5When a new month closes, drop the oldest month and add the new one. The T12 rolls forward.

Only closed months go in. Each column is a month that has been through the month-end close for an apartment building. Built this way, the T12 is a report the books already hold. Nobody has to start a project when someone asks for it.

What does a T12 look like for a 50-unit apartment building?

For the 50-unit example, the 12 months show $870,000 of rent if full, $52,200 of vacancy, $817,800 of rent, $324,000 of running costs and $493,800 of net operating income.

Here is Birch Way for 12 months. Running costs are held at $27,000 and the loan payment at $33,500 every month, so only vacancy moves. Months 1 to 3 had 46 of the 50 units rented, months 4 to 9 had 47, and months 10 to 12 had 48. The table scrolls sideways on a phone.

Birch Way T12, 50 units, invented data

Every total is 12 times the standing month: $41,150 of net operating income a month is $493,800 for the year. The $402,000 of loan payments is $291,600 of interest and $110,400 of principal. Each line adds across to its total, which is the check in step 4.

How is a T12 different from an apartment building's rent roll and budget?

The T12 shows what happened in the last 12 months. The rent roll shows what each unit is charged today. The budget shows the plan for the next 12 months.

A buyer or lender sets the 3 side by side: what the building did, what it charges now, and what the owner expects. The report that shows today's rent, unit by unit, is the rent roll.

What is the trailing-3 check on an apartment building's T12?

Add the last 3 months and multiply by 4. Set that beside the 12-month total. A gap shows the building is now running above or below its own year.

At Birch Way, months 10 to 12 earned $208,800 of rent and $127,800 of net operating income. Times 4, that is $511,200.

The trailing-3 check at Birch Way, invented data

The gap is $17,400. The building is running above its own year because 48 units were rented in the last 3 months against 46 in the first 3. A gap the other way says the last 3 months ran below the year. Either way, the check names the months to look at.

How do lenders and buyers read an apartment building's T12?

They read the T12 next to the rent roll. They look for steady income, costs that match the bills, and months that stand out, and they ask about each one.

• Steady income. Rent that moves with units rented, as it does at Birch Way, and a vacancy line that explains every dollar below rent if full.
• Costs that match the bills. Running costs on the T12 agree with the invoices and the bank, month by month.
• Months that stand out. A month with a repair bill twice the usual, or a month of rent that dipped, gets a question. The books answer it.

What else a lender asks for each quarter and year is in the multifamily lender reporting package.