When Pro Forma Meets Reality: The Risk Investors Can’t Ignore
By Mark Kenney | Think Multifamily
In multifamily investing, pro forma projections are everywhere.
But just because numbers are in a spreadsheet doesn't make them true.
At Think Multifamily, we’ve seen too many investors fall into the same trap:
Basing decisions on best-case scenarios instead of real-world data.
And when reality shows up? It doesn't care about your spreadsheet optimism.
Real Story
We’ve reviewed deals where the pro forma assumed:
Double-digit rent growth in flat or declining markets.
Massive operational savings without real strategy behind it.
Unrealistic renovation timelines with no contingency for delays.
When even one assumption fell short, the entire deal structure began to crack — leaving operators scrambling and investors frustrated.
Key Lesson
Your underwriting is only as strong as the reality behind it.
Smart operators:
Start with conservative assumptions, not aggressive ones.
Validate every major input with real, third-party data.
Stress-test outcomes for slower growth, higher expenses, and longer timelines.
If your deal only looks good when everything goes perfectly,
you don’t have a good deal. You have a ticking time bomb.
Practical Guidance
✅ Confirm rent comps personally — don’t just trust OM projections.
✅ Build in realistic renovation and lease-up timelines.
✅ Assume higher operating expenses than current levels, not lower.
✅ Always ask: "What if we fall short of these projections — can the deal still survive?"
Bottom Line
Pro forma projections should be a roadmap, not a fantasy novel.
Investors don’t just need big numbers — they need realistic ones backed by data, experience, and conservative assumptions.
We’ve done over $1B in deals — and we’re still learning, adjusting, and teaching from the front lines.
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