Property fundamentals
Pro Forma
A projection of a property's future operating performance, as opposed to the seller's trailing actuals.
Why Pro Forma matters
Brokers always pitch pro-forma cap rates built on optimistic rent bumps and thin expense assumptions. Use pro forma for triage; for the actual offer, recompute with trailing actuals plus your own conservative growth assumptions.
Related terms
NOI (Net Operating Income)
Gross annual rent minus all operating expenses, before debt service and income tax.
Cap Rate
Net Operating Income ÷ property value. The unleveraged return a property generates, independent of f…
Rent Growth %
Editable annual rent-change assumption used in the 10-year projection; it is not a forecast or permi…
Expense Growth %
Editable annual operating-expense change assumption used in the projection.
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