After you've reviewed a few hundred offering memoranda, you notice that the same six tricks show up over and over again. They're not exactly lies — they're more like "aggressive interpretations" that push the numbers in the seller's favor. Every time.

If you learn to spot these six, you'll catch 95% of the inflated NOI you'll ever encounter.

Trick #1: The missing management fee

What it looks like: The T-12 shows zero management expense because the owner self-manages.

Why it's a problem: You're paying for cash flow. If the seller's labor is free and yours isn't (or if your next buyer also underwrites a market management fee), you're overpaying.

How to spot it: Look at the expense list. Is there ANY line for "management" or "property management"? If not, the fee is missing.

How to fix it: Add a market management fee to normalized NOI. For small retail: 3-5% of EGI. For multifamily: 4-8%. For single-tenant NNN: 1-3%.

Typical damage: $5,000-25,000 of NOI overstatement on a small commercial deal. At a 6% cap, that's $83K-417K of valuation error.

Trick #2: The stale property tax bill

What it looks like: The T-12 shows the seller's current property tax bill. In Florida especially, this number is often 40-60% below what YOUR tax bill will be after the sale.

Why it's a problem: Florida (and most states) reassesses property taxes when a sale occurs. The assessed value resets to the sale price, and your new bill is based on that. A seller who bought for $1.2M and is now selling for $2.8M has a tax bill based on $1.2M — not even close to what yours will be.

How to spot it: Compare the T-12 property tax number to (purchase price × local millage rate). If they don't match, the T-12 is stale.

How to calculate the real number:

Purchase price × millage rate (usually 1.5%-2.5% in Florida counties) = your likely new tax bill
Example: $2,800,000 × 1.8% = $50,400 — not $14,000

How to fix it: Use the post-sale number in your underwriting.

Typical damage: On a $2-5M deal, this alone can be $15,000-40,000 of NOI overstatement, which at a 6% cap is $250K-667K of valuation error.

Trick #3: The above-market rent that the pro forma "doesn't notice"

What it looks like: A tenant is paying more than market rent, and the pro forma quietly assumes they'll renew at the same rate (or higher) when the lease rolls.

Why it's a problem: When rent rolls, tenants with above-market rent either leave (and you re-lease at lower rent) or negotiate down (and you lose NOI). The pro forma pretends this won't happen.

How to spot it: Compare each tenant's PSF to market rate. If a tenant is paying 15-25% above market, flag it. If the lease expires within 24 months, flag it twice.

How to fix it: When that lease rolls, assume it re-leases at market rent, not at the current above-market rate. Your Year 2 or Year 3 NOI should show a step DOWN, not up.

Typical damage: Varies widely, but on a multi-tenant strip center, a single above-market lease rolling at the wrong time can change NOI by 5-15%.

Trick #4: Ghost income (income that isn't real)

What it looks like: The T-12 or pro forma lists income sources that don't actually produce cash. Common examples:

"Projected" parking income — currently zero, but the broker claims it could be $X.
CAM reimbursements that aren't actually being collected (tenants are in dispute or the lease doesn't allow it).
Late fees counted as recurring income when they're actually sporadic.
Laundry income at a multifamily that's been out of service for 6 months.
"Miscellaneous other income" that's never itemized.

Why it's a problem: Ghost income inflates EGI by $2,000-$15,000 per year, which compounds through NOI and valuation.

How to spot it: Demand tenant estoppel certificates (signed confirmations from tenants of their current lease terms and reimbursements) as a condition of closing. Any "other income" line should have a corresponding contract or bank deposit history backing it up.

How to fix it: Strip out any income line that can't be substantiated with bank records or contracts.

Typical damage: $2,000-$15,000 of NOI overstatement.

Trick #5: The reserves that don't exist

What it looks like: The T-12 shows no CapEx reserves, and the broker's pro forma also shows none. The "NOI" is therefore pre-reserves NOI, which is not real NOI.

Why it's a problem: Buildings need new roofs, new HVAC, new parking lot surfaces, and new structural work every 15-25 years. Not reserving for these is like buying a car and pretending it will never need new tires. The expense WILL come — you're just pretending it won't in the current year.

How to spot it: Look at the expense categories. Is there ANY line for "reserves," "CapEx reserve," or "replacement reserve"? If not, reserves are missing.

How to fix it: Add reserves to your normalized NOI calculation:

Multifamily: $250-400 per unit per year
Multi-tenant retail: $0.15-0.30 per SF per year
Office: $0.25-0.40 per SF per year
Industrial: $0.10-0.20 per SF per year
NNN (absolute): $0 (tenant pays)

Typical damage: $2,000-$20,000 per year depending on property size. At a 6% cap, $33K-333K of valuation impact.

Trick #6: Vacancy that's lower than reality

What it looks like: The pro forma shows 3% vacancy when the submarket runs 7-10% and the rent roll shows 8% physical vacancy today.

Why it's a problem: Every percentage point of vacancy is real money. On a property with $300,000 of gross rent, each 1% of vacancy = $3,000 of NOI. A 4-point difference between "optimistic" and "realistic" vacancy = $12,000 of NOI.

How to spot it: Compare the pro forma vacancy to the higher of:

Current physical vacancy on the rent roll
Submarket average vacancy for the asset class (check CoStar / Crexi reports, or ask a local broker)

How to fix it: Use the higher of those two in your underwriting.

Typical damage: $5,000-$20,000 of NOI on a small commercial deal.

The combined impact

Here's the uncomfortable truth: most small commercial deals feature two, three, or four of these tricks simultaneously. Not on purpose (usually) — brokers are trained to present the best case — but the cumulative effect is a 15-25% overstatement of NOI on deals worth $1-5M.

Let's run the math on a "typical" inflated OM:

Broker's claimed NOI: $200,000 Missing management fee: ($10,000) Post-sale tax increase: ($8,000) Vacancy adjustment (3% → 7%): ($8,000) CapEx reserves: ($4,000) Above-market tenant haircut: ($5,000)

Honest NOI: $165,000 Overstatement: 17.5% Valuation impact at 6% cap: $583,000

Every single deal has this dynamic. When you see a "5.5% cap" on a small commercial OM, what you're really looking at is often a 6.5-7% cap once you normalize. Your offer should reflect the honest number, not the marketing one.

The 15-minute scan

Every time you open a new OM, do this in 15 minutes:

Open the rent roll — read it with the 5 questions from Lesson 2 in mind (concentration, rollover, credit, rent-to-market, vacancy)
Open the T-12 — scan for management fee and reserves. If missing, flag.
Recalculate property taxes using your purchase price × millage rate. Flag any gap.
Compare pro forma Year 1 revenue against T-12 total. Flag any gap.
Check pro forma vacancy against rent roll and submarket norms.
Sum up the flags — mentally adjust NOI downward by the total of all adjustments.
Decide: if the honest NOI is within 5% of the broker's NOI, the deal might pencil. If it's off by 15%+, walk or counter aggressively.

With practice, this becomes reflexive. You'll start spotting inflated OMs in under 5 minutes and saving yourself hours of wasted underwriting on deals that aren't real.

What to take away

Six tricks show up on almost every inflated OM: missing management, stale taxes, above-market rent assumptions, ghost income, missing reserves, and optimistic vacancy
The combined impact is typically 15-25% of NOI overstatement
Spot-checking each one takes 15 minutes and saves hundreds of thousands in valuation error
Sharp buyers reflexively adjust every broker's NOI downward by 10-20% before making an offer

Next lesson: a full walkthrough — applying everything from this course to a real multi-tenant retail deal from start to finish.

The Six Most Common Seller Tricks on a CRE Deal