T-12 Financial Review

A T-12 is the trailing 12-month operating statement showing actual income and expenses for a property. It matters for 1031 exchange buyers because it reveals the true financial performance of a replacement property, as opposed to pro forma projections that may be overly optimistic. For Washington DC investors on exchange timelines, verifying the T-12 quickly and accurately is essential to making informed acquisition decisions and avoiding properties that underperform expectations.

We review every expense line item including property taxes, insurance premiums, utilities, repairs and maintenance, property management fees, landscaping, pest control, legal and accounting, advertising, payroll, capital expenditures, and reserve contributions. For single tenant NNN retail properties, many of these expenses are passed through to the tenant, but we verify that the lease actually requires the tenant to pay them. For multifamily and other property types, we compare each expense to industry benchmarks and local market norms to identify any anomalies.

We cross-reference the T-12 against supporting documentation including bank statements, property tax bills, insurance policies, utility invoices, vendor contracts, and management agreements. We compare the reported rental income against the rent roll and lease terms, verify that reported expenses align with actual invoices, and look for missing or understated expense categories. For Washington DC exchange investors, this verification process ensures you are paying a fair price based on actual, not inflated, net operating income.