Unlike many speculative investments, the financial projections for commercial real estate can be determined with a greater degree of certainty. The financial forecasts for a commercial real estate project are generally performed over a five-year period or at least three years in which the development project is cash flow positive. These will be used by investors in order to determine the potential IRR/NPV or risk level if the investment is being made by a lender.
The most effective way to perform the financial projections is to base it on the existing performance of the real estate project in light of the new capital injection. If it lacks prior operating history, comparable investments will be analyzed with a similar site layout and regional demographics.