Get Your Free Pro Forma Template Excel for Export Today

Free pro forma template excel for Export

the term pro forma is a latin term that means for the sake of form or as a matter of form and it's essentially a combined income statement and cash flow statement for a property although every pro forma can be a little bit different the purpose of it is to put the information into a consistent format outlining the various income and expenses different real estate firms and investors may use slightly different terminology especially in different parts of the country so it's important to just understand what each of the different concepts represents and how they're analyzed pro forma may look very different depending on if they are compiled by a buyer or seller sellers typically want to get top dollar for their property when they're marketing it for sale so they're usually going to represent the property's performance when it is operating at its best buyers on the other hand typically want to project what they think is most likely to happen in the future and they may make adjustments to account for the various risks or market conditions that they think may need to be accounted for if you're on the buy side of a transaction and looking at a seller's proforma it's critically important that you do your due diligence and verify all the information provided to you and use your own pro forma for your analysis either way the amount of information that each investor or real estate professional is going to want to collect and analyze in their pro forma is going to be different depending on each person's unique role or circumstance so in a nutshell a pro forma is simply a tool for you to organize your information and conduct your analysis now i make a distinction between an operating pro forma and an investment pro forma an operating pro forma is what you would typically see advertised by a seller or a listing agent this outlines the basic operating revenue and expenses of a property without regard to non-recurring items such as capital expenditures or below the line items such as interest payments on debt financing non-cash items such as depreciation and amortization typically the bottom line on an operating pro forma is the net operating income an investment pro forma on the other hand or financial pro forma is typically what would be used by an investor looking to acquire a property and it takes all the information contained in the operating pro forma and goes even further to account for capital expenditures outside financing such as bank debt and sometimes even non-cash items like depreciation and amortization typically the bottom line on an investment pro forma is either the net cash flow after debt service or the after tax income to the investor you