You will find several opinions regarding a proforma financial report for an investment property. Some descriptions used may be “working magic,” “pie in the sky,” and “using a bit of pixie dust,” to coin a few terms.
With accurate research, a proforma statement can be a valuable tool an investor can use in determining the viability of an investment.
What is proforma?
Proforma is a method applied to a financial analysis that can draw focus to a specific figure of current or future projections. A “method” is a loosely used term as some would consider this manipulation.
You will find a proforma analysis widely used when analyzing investment real estate. There are several types of metrics used over a five or ten-year period, for example, IRR, net present value, and many more.
One could consider the five or ten-year projection of an investment property’s income and expenses to be a proforma analysis.Read More