Pro forma
A projected income and expense statement for a property, usually forward-looking. Sponsors use it to pitch investors. Actual numbers rarely match pro forma exactly, so read the assumptions carefully.
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Part 1 of 4
Why a seller cares
A pro forma is a projection, and when you sell a rental the buyer's pro forma is where they decide what to pay. A seller's pro forma with market rents and low expenses persuades nobody; the T-12 is what gets read.
Part 2 of 4
A simple example
Your listing's pro forma shows $57,600 of rent and $18,000 of expenses. The buyer's underwriting uses your actual $50,400 and $22,000.
| The document | What it says |
|---|---|
| The seller's pro forma | What the building could do |
| The buyer's pro forma | What they think it will do under them |
| The T-12 | What it did |
A pro forma is an argument. The trailing twelve months is the evidence.
Part 3 of 4
What people get wrong
That an optimistic pro forma raises the price. It lowers the seller's credibility, and buyers underwrite from actuals anyway.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
In your Room, this word explains itself where it appears.
Your Room defines pro forma in the step you meet it in, beside the document or the date it belongs to. Free to set up, with an agent or on your own.
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