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Seller's T12 vs pro forma: which numbers should you buy on?

DoorKeeping team

3 min read

A T12 reports the last 12 months of actual income and expenses. A pro forma is a projection of what the building could earn after changes. Price an offer on the T12 you have verified, and treat the pro forma as the seller's story. The gap between the two is the part of the price you would be paying for something that has not happened yet.

What each document is

A T12 (trailing twelve months) lists what the building actually took in and paid out, month by month. A pro forma restates income and expenses with assumptions: higher rents after renovations, lower vacancy, a new manager. Both can be honest. They answer different questions, and only one of them is a record.

Our post on how to prepare a T12 covers the actual statement. Our post on building your own pro forma covers the projection.

What the gap is worth

Example a made-up 14-unit building is listed at $1,300,000. The seller's T12 shows NOI of $78,000, a cap rate on the price of 6.0%. The seller's pro forma shows NOI of $97,000 after assuming rent increases and lower vacancy, which is 7.5% on the price.

Example the pro forma is $19,000 higher than the T12. At the 6.0% cap rate the T12 supports, $19,000 of extra NOI is worth about $316,667 of price ($19,000 divided by 0.06). A buyer who pays the asking price on the pro forma is paying that amount for improvements the buyer would still have to make and fund.

That is why the same building can look like a 6.0% or a 7.5% deal depending on the page you read first.

How to check a T12 before you trust it

  1. Match the T12's income to bank deposits for the same months. Rent roll rent that was never deposited is not income.
  2. Look for expense lines that are far smaller than the building's size suggests: repairs, payroll, turnover, management. A low line may mean work that was not done.
  3. Check that property taxes and insurance match the bills, and that nothing is booked a year late or early.
  4. Compare the rent roll to the leases for the same units. A rent roll can show a rent the lease does not.
  5. Look for one-time income, such as a lawsuit payment or a large fee, and remove it.

If the seller kept books on a cash basis, one unusual month can swing the total. See cash vs accrual for rentals.

How to read a pro forma fairly

  • List each assumption: rent growth, vacancy, new expenses, the work required.
  • Ask what each assumption costs to achieve and who pays for it.
  • Rebuild the projection with your own numbers, not the seller's.

A pro forma is a negotiation document. It is fair to ask the seller to support each line with a lease, an invoice or a quote.

Questions to ask the seller about the numbers

  • Can you show bank statements for the same twelve months as the T12?
  • Which expenses did you handle yourself without paying anyone?
  • Which tenants are behind, and are any in a dispute?
  • Were any rents discounted, free months given, or units used by staff?
  • What repairs were put off?

These questions are ordinary due diligence and a fair seller can answer them. Their answers help you rebuild the T12 into the building's real record, including costs the owner covered with their own time. If the seller managed the building without pay, add a management cost to your numbers, because a buyer either pays someone or does the work. Ask for answers in writing and keep them with your files. A refusal to share bank records is a signal in itself, and you can walk away or adjust your price to cover what you cannot see.

How DoorKeeping fits

After you buy, DoorKeeping produces the T12 and rent roll from your own books, which is the record that replaces the seller's. Ask Claude or ChatGPT to compare a seller's file with your first months. DoorKeeping does not value buildings or suggest rents. It costs $2 per unit per month.

Sources

  1. IRS, Publication 527, Residential Rental Property, read Oct 31, 2026
  2. CFPB, What is a loan-to-value ratio?, read Oct 31, 2026

Questions

Should I buy on the T12 or the pro forma?
Price the offer on a T12 you have checked against bank records, and treat the pro forma as the seller's projection.
What if the seller has no T12?
Ask for bank statements, the rent roll, leases and bills for the last 12 months and build one. A seller who cannot produce records leaves you guessing.
Can a pro forma be right?
Yes, if each assumption is supported and you can fund the work. It is still not a record of what happened.

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