T3 Annualized vs T12: Which Income Should You Underwrite an Apartment On?
On this page
A T12 (trailing 12 months) is an apartment building's income and expenses over the last year. A T3 annualized takes the last three months and multiplies by four. Sellers like the T3 when rents have risen recently, because it shows a higher income. A T3 is a fair basis for income when the rent roll proves the increase is real and lasting. It is almost never a fair basis for expenses, because three months can miss yearly bills such as the insurance premium and property tax installments. The safe combination: T3 or rent-roll income, if supported, with T12 expenses adjusted to your ownership.
This post is part of our guide to real estate syndication. It shows how the choice moves the price on one building. Figures are as of November 2026 and the example is illustrative.
A worked example
A seller sends both statements for a 60-unit building. The figures are an example.
| Line | T12 | Last 3 months | T3 annualized (× 4) |
|---|---|---|---|
| Income collected | $900,000 | $240,000 | $960,000 |
| Operating expenses | $450,000 | $96,000 | $384,000 |
| NOI | $450,000 | $144,000 | $576,000 |
Three ways to combine them, valued at a 7.0% cap rate:
| Basis | NOI | Value at 7.0% |
|---|---|---|
| T12 income and T12 expenses | $450,000 | $6,428,571 |
| T3 income and T12 expenses | $510,000 | $7,285,714 |
| T3 income and T3 expenses (seller's view) | $576,000 | $8,228,571 |
The seller's version is about $1.8 million above the T12 version. More than half of that gap is the expense line: $384,000 annualized against $450,000 actually spent. In this example the insurance premium was paid in a month outside the window and no property tax installment fell in it, so three months of expenses times four understates the year.
When is a T3 fair for income?
- Rents were raised recently across many units, and the rent roll shows the new leases.
- Occupancy rose and has held for at least a few months.
- Bank deposits match the T3 collections, not just the billed rent.
- No one-time items are inside the three months, such as a large back-rent catch-up or an insurance payout.
Even then, compare the T3 income with the rent roll's annualized in-place rent, less a vacancy and credit loss allowance; see economic vs physical occupancy and reading a rent roll and T12. If the rent roll does not support the T3, the T3 is not real income yet.
Why are T3 expenses unreliable?
- Yearly and twice-yearly bills. Insurance premiums and property taxes often fall in one or two months.
- Seasonality. Heating, snow removal, landscaping and pool costs vary by season.
- Deferred maintenance. A seller preparing to sell may hold off on repairs for a few months.
- Turnover timing. A quiet quarter for move-outs understates turnover cost; see turnover cost.
Build expenses from the T12 instead, then adjust each line to your ownership: property taxes reset to your price, your insurance quote, your management fee and payroll plan. See property tax reassessment and the first-year operating budget.
What do lenders use?
Lenders generally underwrite their own NOI from the historical statements and the current rent roll, with their own vacancy and expense assumptions. Some give weight to recent months when rents have clearly changed; many will not credit a short-term rise until it is sustained. Ask your lender how it treats recent months before you price the deal on them. See DSCR loans and loan sizing.
How DoorRaise fits in
DoorRaise helps sponsors raise equity for apartment buildings with 5 or more units from their friends and followers. The sponsor enters a few deal numbers and DoorRaise computes the projections on the deal page. DoorRaise forms the deal's LLC, prepares the offering documents, files Form D and verifies every investor's accreditation, in 506(b) and 506(c) deals, before they can sign or wire. Investors fund by wire into escrow at Enterprise Bank & Trust. DoorRaise charges two flat fees: $1,500 to set up (non-refundable) and $5,000 a year for administration, the first year paid at closing from the money raised and only if the deal closes.
Price your deal with the free cap rate and DSCR calculator, then start your deal.
FAQ
What does T3 annualized mean?
It is the last three months of a property's income or expenses multiplied by four to estimate a full year.
What is a T12 in real estate?
A trailing 12 month operating statement: income and expenses over the most recent 12 months.
Should I use T3 or T12 to value an apartment building?
Use T12 expenses adjusted to your ownership. Use T3 income only if the rent roll and bank deposits show the recent increase is real and lasting.
Why do sellers show T3 annualized numbers?
Because recent rent increases make the last quarter's income higher than the year's average, which supports a higher price.
Do lenders accept T3 income?
Practices vary. Many lenders weigh the historical statements and rent roll and credit recent increases only once they are sustained. Ask yours.
Sources
This article is general information, not legal, tax or investment advice. The example building and figures are illustrative. DoorRaise is not a lender, law firm, broker-dealer, investment adviser or funding portal.