Pro Forma
A projected financial statement showing expected income and expenses for a property, often based on assumptions.
Definition
A pro forma is a forward-looking financial projection that estimates a property's income, expenses, NOI, and cash flow based on assumptions about rent growth, vacancy, expense increases, and financing terms. Sellers and brokers often present pro forma numbers that assume optimistic conditions — full occupancy, above-market rents, and below-average expenses. Experienced investors distinguish between "in-place" financials (based on actual current numbers) and pro forma projections (based on what could be achieved). Always underwrite deals based on current actuals and your own conservative projections rather than relying on the seller's pro forma.
How This Relates to DSCR Loans
DSCR lenders underwrite based on current appraised market rent, not pro forma projections. Your deal needs to work with today's numbers, not future assumptions.
Related Terms
NOI (Net Operating Income)
A property's total income minus operating expenses, before debt service and taxes.
Cash Flow
The net money remaining after all income is collected and all expenses and debt payments are made.
Rent Roll
A document listing all rental units, their tenants, lease terms, and current rents.
Stabilized Property
A property that has reached a consistent occupancy level and is generating predictable income.
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