Mastering Property-Level Pro Forma Analysis

Purpose of a Pro Forma in Real Estate Investment Analysis

• Provides a projected financial performance of a property, detailing anticipated income, expenses, and cash flow.
• Assists investors in evaluating the financial viability of a potential investment.
• Informs decision-making by illustrating potential returns and risks associated with the investment.

Typical Length of a Pro Forma

• Usually spans over a period of 5 to 10 years.
• Length may vary based on the investment strategy and type of property being analyzed.

Users of a Pro Forma in Real Estate

• Real estate investors and developers utilize pro forma to assess investments.
• Financial analysts and real estate brokers employ pro forma for appraisals and feasibility studies.
• Lenders and banks review pro forma to evaluate the creditworthiness of borrowers.

CF Pro Forma in DCF Valuation Equation

• CF pro forma represents projected cash flows from the property over time.
• Essential for calculating the present value of investment through discounted cash flow (DCF) analysis.
• Highlights the expected financial performance, crucial for determining overall investment value.