Pro Forma vs Actuals in Multi-Family Investing

 

Every apartment building listing comes with a story. The rents are below market, the vacancy is temporary, the expenses will fall once a new owner tightens things up. The numbers in that story are called the pro forma, and they're almost always better than what the building actually did last year.

Pro formas aren't dishonest by nature. They're a projection of what a building could earn, and sometimes that projection is realistic. The problem is when buyers pay for the projection instead of the performance, handing the seller the value that the buyer was supposed to create.

This guide explains the difference between multifamily pro forma vs actuals, where pro formas most often stretch the truth, how to rebuild the numbers yourself, and a worked example from a hypothetical Edmonton walk-up. For more on the asset class, visit our commercial multi-family real estate guide.

 

 

Multifamily Pro Forma vs Actuals: The Core Difference

Think of actuals as the building's report card and the pro forma as its business plan. Both are useful, but they answer different questions.

	Actuals	Pro forma
What it shows	Past income and expenses	Projected income and expenses
Main documents	T12, rent roll, tax bill, utility bills	Broker or seller spreadsheet
Rents	In-place rents from signed leases	Often market rents or post-renovation rents
Vacancy	What really happened	Often an optimistic 1% to 3%
Expenses	Real invoices and bills	Often trimmed or missing categories
Best used for	Valuation and financing	Understanding upside potential

 

Lenders care about actuals. Appraisers weight them heavily. Your purchase price should be anchored to them too.

Where Pro Formas Most Often Stretch

Rents at market, not in place

The most common gap is loss-to-lease: the difference between current rents and what the seller says the market will bear. In Edmonton, CMHC put the average purpose-built two-bedroom rent at $1,603 in 2025. If a 1970s walk-up is renting two-bedrooms at $1,350 and the pro forma says $1,500, ask yourself whether that jump is realistic for the building's condition and location, and how long it will take given Alberta's rule that rent can only rise once every 365 days.

Vacancy that ignores the market

Edmonton's purpose-built vacancy rose to 3.8% in 2025 as a wave of new rental supply came online, and turnover climbed to about 29%. A pro forma using 2% vacancy is betting against the market. Older buildings competing with new mid-rises often run higher.

Missing or understated expenses

•        Management left out because the owner self-manages

•        Repairs and maintenance that reflect a lucky year or deferred work

•        Insurance based on last year's premium, not a current quote

•        Utilities where heat and water are landlord-paid, common in older Edmonton walk-ups with boilers

•        Capital reserves omitted entirely

•        Property taxes that don't account for a possible reassessment after a higher sale price

 

Other income that hasn't happened yet

Parking, laundry, storage, and pet fees are real revenue sources, but only count what's being collected today. A pro forma line for new paid parking in a building where tenants have always parked for free is a plan, not income.

 

A Worked Example: 12-Unit Edmonton Walk-Up

Here's a hypothetical 12-unit building in a central Edmonton neighbourhood. The listing leads with the pro forma. We'll compare it to the T12 and then to what a careful buyer would underwrite.

Line item	Pro forma	Actuals (T12)	Buyer underwriting
Gross potential rent	$216,000 ($1,500 avg)	$194,400 ($1,350 avg)	$194,400 (in-place)
Vacancy	-$4,320 (2%)	-$9,720 (5%)	-$7,776 (4%)
Other income	$6,000	$3,600	$3,600
Property taxes	-$18,000	-$18,000	-$18,000
Insurance	-$12,000	-$14,000	-$15,000 (new quote)
Utilities	-$26,000	-$30,000	-$30,000
Repairs and maintenance	-$10,000	-$16,000	-$18,000
Management	$0	$0	-$7,609 (4%)
Caretaker	-$6,000	-$6,000	-$6,000
Capital reserves	$0	$0	-$4,800 ($400 per unit)
Net operating income	$145,680	$104,280	$90,815
Value at a 5.0% cap rate	$2,913,600	$2,085,600	$1,816,300

 

Same building, same cap rate, and a value spread of about $1.1 million between the pro forma and a careful buyer's underwriting. If you pay the pro forma price, you've paid the seller for every rent increase, every expense cut, and every vacancy improvement you'll need to deliver yourself, with no margin for mistakes.

Edmonton multi-family has recently traded at cap rates of roughly 4.5% to 5.5% depending on quality and location, which is why small NOI differences create large price swings. At a 5% cap, every $1,000 of NOI is worth $20,000 of value.

How Lenders Treat Multifamily Pro Forma vs Actuals

Lenders underwrite on what the building produces now, adjusted for their own assumptions on vacancy, management, and reserves. They generally won't lend against projected rents you haven't achieved. For CMHC-insured financing, the MLI Select program sets a minimum debt coverage ratio of 1.10 for standard rental properties, which means your underwritten NOI needs to cover the mortgage with room to spare.

If your purchase price is based on pro forma NOI but your loan is sized on actual NOI, the gap has to come from your down payment. That's how buyers end up putting far more cash into a deal than they planned. Our comparison of MLI Select vs conventional financing shows how each lender type sizes a loan.

When a Pro Forma Is Worth Paying Some Attention To

Pro formas aren't useless. They're a map of the value-add opportunity. A building with genuine loss-to-lease, under-managed expenses, and unused space can be a great buy, as long as the price reflects today's income. The best value-add deals are ones where you can see a credible path from actuals to pro forma and you're not paying for that path upfront.

To test that path, verify each assumption:

•        Rents: pull comparable rentals of similar age and finish within a few blocks

•        Renovation costs: get contractor pricing per unit, not a broker's round number

•        Timeline: map realistic turnover, since rents reset mostly when tenants leave

•        Condition: a building condition assessment reveals capital needs the pro forma ignores

 

 

Red Flags in a Pro Forma

•        Rent assumptions well above recent comparable leases

•        Vacancy below 3% in a market running near 4%

•        No management fee or capital reserve lines

•        Repairs and maintenance well below the T12

•        A T12 that's actually annualized from three or six months

•        Rent roll showing many recent move-ins at unusually high rents right before listing

 

Frequently Asked Questions

 

Underwrite the Building You're Actually Buying

The discipline is simple, even if it's not always easy: rebuild every pro forma from the T12, the rent roll, and real quotes. Put your offer on that number. Then decide how much of the upside you can realistically capture and on what timeline.

If you're evaluating an Edmonton apartment building, our guide on how to analyze a multi-family property goes further on each metric, and we're happy to review a specific deal with you.