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What Is a Proforma Income Statement?

A proforma income statement is a report investors and analysts who are engaged in real estate investing commonly use for the purpose of forecasting the cash flows generated by a rental property. The concept is simple. By projecting out over some number of years the income that a rental property might likely generate, investors and analysts are able to conduct a cash flow analysis that will help them evaluate the future performance of a property during the real estate investing decision-making process.
There are no restrictions on the number of years you want the proforma income statement to project. I’ve seen real estate investment software, for instance, that create statements ranging from ten to twenty years; a few even boast that their software provides for thirty-year forecasts. However, I personally feel that these longer range projections can become too misleading to be given much weight. There are just too many …