What does a pro forma document primarily forecast?

A pro forma document primarily forecasts the cash flow of a real estate asset to estimate its value or return. This financial projection is crucial for investors, as it allows them to anticipate the future revenue that a property may generate. It includes projected income from rent, ancillary fees, and any potential capital appreciation, while also accounting for operating expenses such as maintenance, property management fees, and taxes.

By analyzing the expected cash flows, investors can evaluate the profitability of an asset and make informed decisions on whether to invest, hold, or divest. The accuracy of these forecasts directly influences investment strategies and financial planning. Thus, understanding and preparing a pro forma is essential for real estate professionals looking to make sound investment decisions.