Full Definition
A pro forma is a financial projection for a real estate investment — showing expected gross rent, vacancy, operating expenses, NOI, debt service, and cash flow typically over 5-10 years. Critical for underwriting acquisitions and development deals. Quality pro formas stress-test assumptions (cap rates, rent growth, vacancy) to model sensitivity.
Related Terms
NOI (Net Operating Income)
Annual income from a property after deducting operating expenses — before debt service, taxes, and capital expenditures.
Underwriting
The process of evaluating a property's financial performance, risks, and potential returns before committing to invest.
Cap Rate (Capitalization Rate)
The ratio of a property's Net Operating Income to its purchase price, expressed as a percentage. The primary metric for comparing commercial real estate investments.