Financials

What Is a Pro Forma?

A pro forma is a forward-looking projection of what a property could earn, as opposed to what it has actually earned.

Sellers lead with pro forma numbers because they show the property at its best: full occupancy, raised rents, trimmed expenses. None of it has happened yet. A pro forma is a sales argument, useful for understanding the upside, but never a substitute for actuals like the T-12 and the rent roll.

Underwrite the deal that exists today on real numbers, and treat the pro forma as the plan you would execute after closing. See requesting the right financials.

Related terms

• T-12 (Trailing Twelve Months)
• Rent Roll
• Operating Expense Ratio

Part of the RVP Underwriter glossary of income-property underwriting terms. Browse all definitions, or put them to work with the free calculators.