What Is a Real Estate Pro Forma? - Episode 589
Investing in Real Estate with Clayton Morris | Investing for Beginners
Clayton Morris
4.1 • 1.1K Ratings
🗓️ 19 February 2020
⏱️ 19 minutes
🧾️ Download transcript
Summary
What is a real estate pro forma, and how does it work? A pro forma is a critical document used to evaluate a piece of real estate. On today's show, Natali and I are discussing the ins and outs of a real estate pro forma so that you can better understand how to project returns.
You're going to learn what a pro forma is, when to use it, and mistakes to avoid! We're sharing a free download, plus having a conversation about logically evaluating a real estate investment. Don't miss episode 589 of Investing in Real Estate!
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Transcript
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| 0:00.0 | All right. Today we're talking about a pro forma. What is a pro forma in real estate investing? |
| 0:10.3 | Hey everyone, I'm Clayton Morris. I'm Natalie Morris. |
| 0:12.3 | And that's today's show let's dive into it |
| 0:14.3 | So if you're new to the show this is a show we help you build financial intelligence so you can build financial freedom |
| 0:19.4 | We've done it through buy and hold real estate, but we've also started multiple businesses. |
| 0:24.0 | So I like to think of the holy grail is businesses that own real estate. |
| 0:28.6 | So we try to educate you, help you build wealth here on this channel. |
| 0:31.9 | And one of the things you need to look at when you're making an investment is a pro forma. |
| 0:35.0 | So what is a pro forma? |
| 0:36.0 | Right, so a pro forma is basically like an indication of how an investment will pro form, not pro form, but perform. |
| 0:45.0 | Because it comes from the Latin, it comes from the Latin as a matter of form. |
| 0:49.0 | Right. |
| 0:50.0 | And so it's sort of a way for you to get a sense of how an investment will perform, right? |
| 0:56.2 | These are very common in more commercial deals. |
| 0:59.5 | They're less common in sort of one-off real estate deals residential right but that doesn't mean |
| 1:05.8 | that you can't create one for yourself if you're looking for an investment in |
| 1:09.6 | fact you should you should run the numbers for yourself make sure they pan out you should be |
| 1:16.7 | very familiar with how this real estate deal will perform for you so this is just |
| 1:21.9 | like it's basically like a kid's |
| 1:24.5 | work sheet, right? |
| 1:25.2 | You plug in these numbers. |
| 1:27.0 | It's going to give you some kind of performance |
... |
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