Every Seller Pro Forma Is a Marketing Document. Here's How to Rebuild One.

TL;DR

✦ Sellers, agents, and wholesalers all win when your offer is high. Their pro forma reflects that. ✦ The 7 systematic inflations are predictable. Each fixes the pro forma in 5-10 minutes. ✦ Operators rebuild from raw inputs. Hobbyists trust the OM. ✦ The rebuild adds 30-90 minutes. It saves $20K-$80K per deal.

The structural problem

A pro forma — the seller's offering memorandum, broker's marketing book, or wholesaler's pitch deck — is written to sell the property. The numbers tilt toward yes.

This isn't malice. It's incentive alignment. The seller wants the highest price. The agent wants the commission. The wholesaler wants the assignment fee. None of them is your fiduciary.

So your job isn't to read the pro forma. Your job is to rebuild it.

The 7 systematic inflations

Inflation 1: Listed rent vs. achievable rent

The lie: the rent column shows peak-summer asking prices or aspirational increases.

The fix: pull rent comps from your local market. Class B SFR 3-bed in Cleveland 44109 should rent at $1,180-$1,320, not the $1,495 listed. The $200/mo difference compounds across 12 months and across multiple units.

Method:

• Zillow Rent Estimate
• Rentometer
• Local Section 8 FMR (HUD published rates)
• Spot-check craigslist + Facebook marketplace for current listings

Take the median, not the high.

Inflation 2: Vacancy assumption

The lie: "5% vacancy" — the national average from 2010-2020.

The fix: pull the actual local vacancy rate by class and zip. Class C Memphis 11-14%. Class B Boise 4-6%. Class A urban Atlanta 7-9%.

Method:

• US Census Bureau ACS data (free)
• HUD vacancy rate publications
• Local property management data (some PMs publish quarterly market reports)

Inflation 3: Expense line — all of it

The lie: "operating expenses 22% of rent" or specific dollar amounts that look reasonable.

The fix: rebuild every line:

• Property tax: from county assessor, post-reset
• Insurance: from binding quote, lender-spec
• Property management: 8-10% of rent (whether you self-manage or not)
• Maintenance: 5-8% of rent (operating, not CapEx)
• CapEx reserve: 8-12% of rent
• Vacancy reserve: 5-14% of rent (local)
• Utilities (vacancy or common areas): line by line
• Trash, lawn, snow: by season
• Legal/eviction reserve: $25-40/mo per unit

The operator's expense line on a typical 4-unit comes in 25-40% higher than the seller's. That difference is the pro forma's biggest lie.

Inflation 4: Cap rate

The lie: the seller computed cap rate using their inflated rent and deflated expense numbers.

The fix: recompute cap rate using your rebuilt NOI. The "9.4% cap rate" listing usually becomes a 6.2% cap rate after honest math. That's still a fine asset — but at the asking price, it's not the deal it claimed to be.

Inflation 5: ARV (for value-add deals)

The lie: "ARV $475K" pulled from a single Zestimate or a friend-of-the-seller appraisal.

The fix: pull operator-grade comps. 0.5mi, 90 days, sqft/bed/bath/condition adjusted. If the seller's ARV is more than 6-8% above your comps, the value-add story is compromised.

Inflation 6: Rehab budget

The lie: the seller's "estimated rehab" line is usually 30-50% below contractor reality. Sometimes it's a guess from a non-contractor.

The fix: get bids from 2-3 actual contractors on the actual scope. Average the lower two (not the cheapest — the cheapest is usually the unrealistic one).

Inflation 7: Time on market for exit

The lie: "Sells in 30 days" or "rents in 14 days."

The fix: pull median DOM in your submarket. Phoenix mid-2024: median 47 days. Cleveland: median 31 days. Charlotte: median 22 days. Build your model with the real number; holding cost differences are $1K-$5K per month.

Worked example: rebuilding a 4-unit OM

The seller's OM:

Asking: $385,000
Gross rent: $5,800/mo ($69,600/yr)
Operating expenses: $1,520/mo ($18,240/yr) [22% of rent]
NOI: $51,360
Cap rate: 13.3%
Listed cashflow: $1,830/mo

The operator's rebuild:

After the rebuild: same property, half the NOI, half the cap rate. The deal is still potentially fine — but at the seller's $385K asking price, it's not. To clear an 8% cap rate, you'd need to buy at $329K.

That's the offer the operator makes: $325-$335K. The hobbyist offers $385K based on the OM.

How long the rebuild takes

For a typical residential deal:

• Local rent comp pull: 10-15 min
• Vacancy data lookup: 5 min
• Tax assessor: 5 min
• Insurance binding quote: 30-90 min wait, 5 min effort
• Operating expense rebuild: 15-20 min
• ARV comp pull (if value-add): 15-20 min
• Rehab bids: 24-72 hour wait, varies

Active time: 60-90 minutes. Calendar time: 1-3 days for full rebuild.

For multi-million dollar commercial, multiply by 3-5x.

Run this in Vricko

Vricko's Underwriter pre-pulls rent comps, assessor tax data, vacancy by zip, insurance benchmarks, and rate feeds — collapsing 60-90 minutes of manual rebuild into 60-120 seconds. The output is pro-forma-grade, with the seller's numbers shown side-by-side.

Try Vricko →

When to walk on the rebuild itself

If your rebuilt NOI is less than 70% of the seller's NOI, the deal is structurally mispriced — you'd need to negotiate down 25-30% to make it work. Most sellers won't move that much.

The walking decision often comes before underwriting. The rebuild reveals it.

Keep reading

• The 7 Inflations Sellers Always Make
• Pro Forma vs Real Numbers: A Side-by-Side Teardown
• The 8 Numbers Every Deal Must Pass

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