What is a pro forma in real estate?
A pro forma is a forward-looking projection of a property's income, expenses, and cash flow over a hold period.
A pro forma models how a property is expected to perform, projecting rents, expenses, NOI, and cash flow forward, often comparing an in-place "as-is" picture to a "stabilized" or value-add scenario. It is where the upside case for a deal is laid out.
Pro forma numbers are assumptions, not facts. They depend on rent growth, lease-up, renovation costs, and exit assumptions, so experienced buyers read a pro forma as a thesis to test, not a guarantee.
Why it matters
The pro forma carries the story behind the price. Buyers scrutinize its assumptions because that is where optimism, or a credible plan, hides.
Where it shows up in your OM
Pro forma figures you provide are presented in the OM's financial sections and labeled as your inputs and projections, never as confirmed facts. That keeps the as-is and forward-looking numbers clearly separated, consistent with omgen's source-state labeling.
Frequently asked questions
- What is the difference between as-is and pro forma numbers?
- As-is numbers reflect the property's current, in-place performance. Pro forma numbers project future performance under a stated set of assumptions, such as renovations, lease-up, or rent growth.
- Are pro forma numbers guaranteed?
- No. A pro forma is a projection built on assumptions. It should be presented as a forward-looking estimate and tested against market evidence, not treated as a certainty.
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