Income Property Pro Forma

Pro forma profit after taxes is figured by subtracting the pro forma tax bill of 70 500 from the pro forma profit before taxes of 235 000.

Income property pro forma. Forecasting potential gross income is a function of both contractual lease terms as well as market rents. Pro forma income statement is the statement prepared by the business entity to prepare the projections of income and expenses which they expect to have in the future by following certain assumptions such as competition level in the market size of the market growth rate etc. Income property investing 101 how to read a property pro forma with jason hartman welcome. Potential gross income pgi the top line item in the proforma consists of the cash that could be generated if the property were 100 leased.

We ll discuss the main line items on the real estate pro forma in this article and give you an excel template but let s start at the beginning with the why. Simply input the property details and financials and quickly determine the noi cap rate debt coverage ratio gross rent multiple and cash on cash return. While that description is accurate it s more useful to think of the pro forma as a combined and simplified income statement and cash flow statement for a property rather than a company. If this is your first time visiting jason hartman s website please read this page to learn more about what we do here.

Pro forma is a future projection of a property s cash flow or net operating income noi. When it comes to corporate money management and accounting an income statement is considered one of the three most commonly used documents. Your pro forma profit after taxes in this case would be projected at 164 500. The proforma income statement is a proven method real estate investors use to evaluate a rental income property s future financial performance over time.

Here s how to calculate it. Estimate the property s potential gross rental income. What does pro forma mean. Pro forma a latin term literally means for the sake of form or as a matter of form in the world of investing pro forma refers to a method by which financial results are calculated.