A trailing twelve month statement shows what a property collected and spent over the last year, but only if it is built correctly. We rebuild the T12 from source documents rather than taking the seller's summary at face value before any Long Island property gets treated as financially equivalent to what you are selling. This work happens before the property earns a spot on your identification list, not after you have already committed one of your limited slots to it, and not once the exchange deadline has already narrowed your options.
Where Sellers' T12s Go Wrong
The most common issue is not outright fraud, it is optimistic categorization. Capital repairs get labeled as one-time items to inflate normalized NOI, management fees get understated because the seller self-manages, and property tax gets shown at the old assessed value instead of what a new owner will actually pay after a sale-triggered reassessment.
We have also seen sellers exclude a vacant unit from the expense side entirely, showing carrying costs only for occupied space, which quietly inflates the margin the T12 appears to show. We correct that gap the same way every time, regardless of how the seller's broker packaged the original numbers.
Rebuilding The Expense Side
We reconstruct the expense side of the T12 against source documents rather than the seller's summary categories.
- actual paid tax bills, not budgeted or prior-year estimates
- insurance premiums at renewal rates, not expiring policy pricing
- utility bills for a full trailing twelve months, checked for seasonal swings
- repair and maintenance invoices separated from true capital items
- management fee at market rate if the seller self-managed
Once these are corrected, the NOI a buyer should underwrite to often looks different from the number on the seller's marketing flyer. On more than one Long Island deal, the gap between the seller's stated NOI and our rebuilt figure has run ten percent or more once taxes and a market management fee were applied, and that gap directly affects what price actually makes sense.
Seasonal Patterns Matter Here
Retail and hospitality-adjacent properties near the East End see real seasonal swings tied to summer visitor traffic, and a T12 pulled at the wrong point in the year can misrepresent typical performance. We check whether the trailing twelve months captured a full seasonal cycle or just the slow months.
A property near Southampton or Riverhead can show strong summer collections and a much quieter winter, and averaging the two properly matters more than picking whichever twelve-month window makes the number look best. We also compare year over year rather than a single trailing period where possible, since one strong or weak summer season can otherwise skew the whole picture.
The NOI Bridge For Your Lender
Your lender will build its own underwritten NOI, and it rarely matches the seller's number exactly. We build a bridge showing exactly where our adjusted NOI differs from the seller's figure, line by line, so there are no surprises when the lender's appraisal or underwriting comes back with a different number.
That bridge document also gives you leverage in price negotiations, since a documented, line-by-line correction carries more weight with a seller's broker than a verbal claim that the numbers look inflated, and it holds up better once the lender's own appraiser weighs in too.
Getting Everyone On The Same Set Of Numbers
Once the T12 is rebuilt, that same file goes to your lender, your CPA, and your qualified intermediary so financing terms, exchange value calculations, and tax planning are all working from one adjusted number, not three different interpretations of the seller's original statement. If the number changes again after a lender's own underwriting comes back, we redistribute that update the same day rather than letting stale figures sit in someone's file. That discipline matters most in the final weeks of an exchange, when a number quietly going stale can shift a debt sizing decision nobody meant to make.
Common 1031 Exchange Questions
How is a rebuilt T12 different from the seller's T12?
We separate capital items from true operating repairs, adjust taxes and insurance to actual forward-looking costs, and apply a market management fee if the seller self-managed. The result is usually a lower, more defensible NOI than the seller's marketing version.
Will your lender accept your rebuilt T12, or do they build their own?
Your lender will almost always build an independent underwritten NOI. Our rebuilt version helps you negotiate price and spot issues early, but the lender's own analysis governs your loan terms.
How do property tax reassessments affect the T12 you should trust?
The seller's trailing tax bill reflects the old assessment. We estimate what the assessment could become after a sale at the new price, since that is the number that actually affects your future cash flow.
What if the seller will not provide underlying invoices, only a summary T12?
That limits how much we can verify, and we tell clients directly when a seller is not providing supporting documentation, since it raises the risk that the summary numbers are optimistic.
Does seasonal income variation disqualify a property from being a good replacement?
No, but it changes how you should underwrite it. We make sure seasonal swings are reflected in the T12 rather than smoothed over by a trailing period that happens to avoid the slow months.
