📊 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.

📈 Want to learn how to analyze deals like a pro?

Join the ProSphere Community where we break down real deals step-by-step.

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