A financial projection that provides an estimate of the potential income, expenses, and profitability of a real estate investment or development project. Typically used for planning, analysis, and decision-making purposes, a real estate pro forma presents anticipated revenues, operating expenses, financing costs, and cash flows, allowing investors, developers, and stakeholders to evaluate the financial viability and expected returns of the project.
While a pro forma is based on assumptions and estimates, it is an essential tool in real estate investment, enabling informed decision-making and risk assessment. In some contexts, the term pro forma is used to describe the projected state of a given financial metric as such is the case with pro forma NOI.
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