A pro forma is a forward-looking projection of a property’s income, expenses, and cash flow under a planned business plan. It models what a property could earn after improvements — and is only as good as its assumptions, which is why investors stress-test them.
A credible pro forma is grounded in real comps and conservative assumptions about rent growth, vacancy, expenses, and exit cap rate. Aggressive pro formas are the most common way deals disappoint, so scrutinize the inputs, not just the projected returns.
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