Trailing Twelve (T12)
Also called: T12, TTM, Trailing twelve months
A trailing twelve is an operating statement showing a property's actual income and expenses for the most recent twelve months, and it is the primary evidence base for underwriting a multifamily acquisition.
The T12 is what happened, as opposed to the proforma, which is what the seller projects. Underwriting discipline starts with rebuilding net operating income from the T12 and only then layering on your own business plan assumptions.
Reading a T12 well means looking at monthly detail rather than the annual total. Seasonality, a one-time insurance or legal charge, a month of unusually low repairs, or a step change after a management transition are all visible monthly and invisible in the annual column. The trailing three and trailing six columns are useful for exactly this reason: they show the current run rate rather than the average of a year that may no longer be representative.
Rules of thumb
- Compare T12, T6, and T3 annualized side by side. A widening gap means the run rate is moving and the annual figure is stale.
- Scan for non-recurring items in both directions. Removing a one-time legal expense is as important as removing a one-time insurance refund.
Related terms
- Net Operating Income (NOI)
Net operating income is a property's effective gross income minus all operating expenses, excluding debt service, capital expenditures, depreciation, and income taxes.
- Rent Roll
A rent roll is a unit-by-unit schedule of a property's leases showing unit type, square footage, current rent, market rent, lease start and expiration dates, and occupancy status.
- Offering Memorandum (OM)
An offering memorandum is the marketing document a broker prepares to sell a commercial property, containing property details, financial statements, rent roll summaries, market data, and a proforma projection.
- Due Diligence
Due diligence is the contractual period after a purchase agreement is signed during which a buyer inspects the property, audits its financials and leases, and can typically terminate and recover earnest money.