Pro forma

A projected income statement showing what a property could earn under stated assumptions.

When a broker hands you a pro forma, it's a forecast — usually optimistic. Common red flags: market rents above current rents (assumes you raise rent on day one), expense ratios below 30% (most stabilized rentals run 35-45%), vacancy below 5%, no capex reserve. Always rebuild the pro forma with your own assumptions: real rent comps, full operating expenses, conservative vacancy, capex reserve sized to roof+HVAC replacement cycle. The deal pencils on your numbers, not the broker's.