Jan 28 • General discussion
📊 ProSphere Underwriting Tip: Always Stress Test with the 50% Rule
One of the smartest ways to review a T-12 (trailing 12 months of income & expenses) is to compare it against the 50% expense rule.
🔍 Here’s how pros do it:
Take the gross rental income and assume:
👉 50% goes to operating expenses (taxes, insurance, repairs, management, vacancy, utilities, CapEx, etc.)
Then compare it to what the T-12 actually shows.
✅ If T-12 expenses are LOWER than 50% → great, but still underwrite at 50% for safety
⚠️ If T-12 expenses are HIGHER than 50% → dig deeper (there may be deferred maintenance, poor management, or rising costs)
💡 Why always use the 50% rule?
Because it protects you from:
• Overly optimistic seller numbers
• Unexpected repairs & vacancies
• Cash flow surprises after closing
Smart investors underwrite conservatively — profits come from the margin of safety.
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Join the ProSphere Community where we break down real deals step-by-step.
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📊 ProSphere Underwriting Tip: Always Stress Test with the 50% Rule
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