Every pro forma I’ve ever seen has one thing in common: it looks fantastic. Steady rent growth, full occupancy, no surprises. That’s not because the deal is actually that clean – it’s because the spreadsheet was built to sell the deal, not underwrite it.

I’m not saying anyone’s lying on purpose. Most of the time it’s optimism, not deception. But the gap between what a pro forma assumes and what actually happens is where deals – and investors – get into trouble.

What the Spreadsheet Almost Always Assumes

• 100% occupancy, or close to it – every unit rented, every month, no lease-up period, no turnover gaps.
• Zero vacancy loss – even seasoned operators budget for some vacancy. Pro formas frequently don’t.
• No repairs, no surprises – no roof, no furnace, no burst pipe.
• Rent growth that never slows – projected increases that assume the market climbs in a straight line forever.

Why This Matters More Than Most Investors Realize

When you present a deal to a lender, they’re not underwriting your optimism – they’re underwriting realistic income. Most lenders apply their own vacancy assumption regardless of what your spreadsheet says. If your numbers only work at 100% occupancy, the lender’s number comes in lower than yours, and your actual borrowing capacity follows it down.

In a realistic multi-unit example: a $180,000 pro forma gross rent, once you apply a standard 5% vacancy allowance and a normal annual maintenance reserve, comes down to roughly $163,800 in adjusted NOI. That’s not worst-case. That’s just a normal operating year – and it’s already $16,000 below what the spreadsheet projected.

What to Do Instead

• Build two numbers – your upside case, and a realistic underwriting case with vacancy and repair reserves built in.
• Ask what vacancy rate the lender will actually use before you’re mid-underwriting.
• Budget a real maintenance reserve, not a token line item.
• Present the realistic number to lenders up front – it builds credibility and avoids surprises mid-file.

None of this means the deal is bad. It means the number on the spreadsheet was never the real ceiling – the realistic one was.

Read the full breakdown, with the worked example, on MortgageClarity.ai →

I look forward to hearing from you in regard to your mortgage needs.
902-465-5533. I answer.
Patrick

p.s— You can click on this link to start the process whenever you are ready. Schedule your meeting with me here.
p.s.s— I should tell you that I am licensed in Nova Scotia Brokerage (2025-3000179) Broker (2025-3000180), Ontario (M23006699).
p.s.s.s— You can download my new mortgage app here

Patrick Sawler is a mortgage broker and owner of Craigburn Capital, licensed in Nova Scotia and Ontario, with private financing available in New Brunswick and PEI. He answers his phone.

Ready to have a real conversation? Call 902-465-5533 or start your application here.