Pro Formas Are Fake

What else needs to be said?

Yes, you want to build a pro forma of any investment property you are looking at, but you should never rely on a seller-provided pro forma. They’re all fake. Indeed, since everyone knows they’re fake, even an honest seller/agent has to provide a fake pro forma because if they don’t, buyers will just assume the realistic prediction is fake as well.

So, never trust a pro forma. Instead, we’ll tell you what to look for from a seller and how to build your own.

Basic Components of Pro Forma:

Gross Income:

— Vacancy

— Economic Vacancy (delinquency)

Other Income (i.e. laundry, app fees, etc.)

Fixed Expenses:

— Property Taxes

— Property Insurance

— Utilities

Variable Expenses:

— Property Management Fee

— Maintenance

— Contract Services

— General Administration

— Marketing

— Payroll (for onsite management)

— Recurring CAPEX

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