Guide

Real Estate Pro Forma Modeling: A Complete Guide

A pro forma is the financial story of a property before you own it — projected income, expenses, financing, and return. Done right, it tells you whether a deal actually pays. Done in a spreadsheet, it takes an evening per listing.

1. Gross scheduled income

Start with the rent the property would collect if 100% occupied for 12 months. For multifamily, sum every unit's market rent. Use comparable listings — not the seller's optimistic number.

2. Vacancy and effective gross income

Subtract a vacancy allowance (5–10% in most markets) and credit losses. What's left is effective gross income (EGI)— the rent you'll actually collect.

3. Operating expenses

Property taxes, insurance, property management (typically 8–10% of collected rent), repairs, maintenance, utilities you pay, HOA, and reserves for capital expenditures. Do not include mortgage payments here — that's below the NOI line.

4. Net operating income (NOI)

NOI = EGI − Operating Expenses. This is the number lenders and appraisers care about. Divide NOI by purchase price and you get the cap rate — the unlevered yield of the property.

5. Debt service and cash flow

Model your mortgage: down payment, rate, term, amortization. Annual debt service comes out of NOI. What's left is cash flow before taxes. Divide it by your cash invested and you get cash-on-cash return.

6. Projections and IRR

Grow rent, expenses, and property value at reasonable rates (2–3% is a common baseline). Model a sale in year 5 or 10, subtract selling costs and remaining loan balance, and you have proceeds. The internal rate of return (IRR) combines annual cash flow with the exit to give you a single levered return number.

7. Skip the spreadsheet

Every listing you underwrite by hand takes 30–60 minutes and reuses the same formulas. RE-SIM runs this exact pro forma automatically on any listing page — Zillow, Redfin, Realtor.com, and 40+ MLS portals — pulling price, taxes, and rent estimates and giving you NOI, cash flow, cap rate, cash-on-cash, and a 10-year projection in one click.