Real Estate Proforma Excel Model Template
This is a Real Estate Proforma Template in Excel for you to use and analyse for your own needs.
The first thing you have to do when it comes to a real estate investment decision is to build a real estate pro forma, which really just means a cash flow projection. The following components are generally found in all real estate proformas.
Potential Gross Income (PGI)
This item found in the top line makes up the cash that could potentially be generated if the property was 100% leased. To forecast potential gross income is a function of both contractual lease terms, market rents included. Firstly, for each contractual lease in place on the rent roll, the cash flow is calculated for each year within the holding period.This considers the lease terms that are specific to each tenant.
Secondly, if in the holding period there is any period of time which is not covered by a contractual lease, the market rent is forecasted with the aim of determining cash flow that could potentially be generated considering the then prevailing market conditions.To project possible rental income will often involve taking into account renewal assumptions after the lease has expired. This includes forecasting tenant improvements, reimbursements, abatement, market leasing conditions, etc.
It is not realistic to make the assumption that a property will be fully leased forever, the vacancy allowance line item found on a real estate proforma is intended to account for expected vacancy. You can calculate vacancy in a number of different ways.
You'll usually find other income items after vacancy allowance on the real estate proforma. These generally aren't a part of contractual leases, but they'll still provide additional revenue for the property.
Effective Gross Income (EGI)
You get effective rental income as a result when you take away the vacancy allowance from potential rental income, and then add other income items.
These will include things like property management fees, insurance, taxes, and utilities.
Net Operating Income (NOI)
To get the net operating income, you subtract all operating expenses from the EGI for a property. This is probably the most commonly used indicator of cash flow when it comes to commercial real estate. It's worth noting that NOI ignores expenditures that are irregular like tenant improvement allowances, leasing commissions, and certain capital improvement expenditures.
These are expense items with regards to the property that don't occur regularly or that are specific to the investor. For example, leasing commissions, debt service, tenant improvement allowances, or reserves for replacement.
Before Tax Cash Flow (BTCF)
This allows a clear picture of the free cash flow that is available before taxes to the owners of a property.
Reversion Cash Flows
This is a value that is estimated in various ways with the aim of arriving at a net sales proceeds figure.
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