Some buyers are making deals work in today's market because they are buying properties not reflecting the NOI accurately. If you buy C vintage properties, be careful if operating expenses are less than 45% NOI. Realistically speaking, properties built between 1960-2002 should be running at 50-55% of effective gross income. A more effective way to determine if the operating expense ratio is realistic is to ask your property manager for the average expenses per unit for your class, size, and vintage property.

Operators want to decrease operating expenses as much as possible to increase the NOI (net operating income) to increase the property's sales value. As a buyer, here are things to look for on the T12:

• 1.  No property management fee. Even if the seller manages the property, you probably won’t, so make sure you include the property management fee in your underwriting. Even if you will also manage the property yourself, your time is worth something.
• 2.Make sure repairs are not incorrectly categorized as Capex.
• 3. Double-check with your insurance broker if the insurance expense is reasonable.
• 4. Remember, property taxes will be reassessed to a higher amount based on the new purchase price. Make sure you double-check with the county.

As a real estate investor, it is your responsibility to double-check all the numbers.