Understanding the Personal Financial Statement
Wednesday, March 12, 2025
Real estate investing is a team sport. Success often depends on leveraging the collective financial strength of a deal team. If you are getting a loan for a multifamily investment, then a personal financial statement (PFS) can help. It is also useful for building trust with brokers and sellers because it gives a clear view of your personal finances.
A personal financial statement for individuals is a valuable tool that provides a clear snapshot of an investor’s financial health. Keeping your financial statement up to date is not only beneficial, but essential. It increase your chances of securing loans, but also plays a key role in financial planning. By regularly reviewing your personal finances, you can make informed decisions, track progress toward your financial goals, and ensure long-term financial stability.
In this article we’re going to go through what is a personal financial statement, how to create a personal financial statement, and how to fill out a personal financial statement for individuals.
A personal financial statement is a document that outlines an individual’s financial condition. It details their assets, liabilities, and income sources. It serves two primary purposes in multifamily real estate investing:
When getting a loan, lenders usually ask for a personal financial statement. This helps them see if the investor can afford the loan. In multifamily lending, loans fall into two categories:
To qualify for multifamily lending, lenders typically require:
If multiple investors are involved, these requirements apply collectively.
A personal financial statement reassures brokers and sellers that an investor has the financial capacity to close a deal. This credibility is essential in competitive markets where multiple buyers may be vying for the same property.
Maintaining an updated financial statement can give investors a competitive edge, showcasing their financial preparedness.
Creating a personal financial statement (PFS) is simpler than you think. You don’t need fancy software. Just grab a free template online or use a basic spreadsheet. Start by listing everything you own (assets), like cash, real estate, stocks, and cars. Then, write down everything you owe (liabilities), such as mortgages, credit card balances, and loans. Subtract your liabilities from your assets, and boom! That’s your net worth. Finally, jot down your monthly income (salary, rental income, dividends) and expenses (mortgage, bills, debt payments) to see how much cash flow you have. Keep it updated, and you’ll have a clear snapshot of your financial health whenever you need it.
A personal financial statement consists of several sections, each providing a detailed breakdown of an individual’s financial health.
This section includes:
If multiple sponsors are involved in a deal, each should complete their own personal financial statement.
Assets represent everything of value that an individual owns. The personal balance sheet within the individuals financial statement divides assets into two categories:
Liquidity is critical because it represents readily available cash. Lenders often prioritize cash flow over long-term assets when assessing financial strength. Key liquidity categories include:
Liquidity Requirement: A combined post-transaction liquidity of at least 10% of the loan amount is preferred.
Long-term assets are investments that take longer to convert into cash. So, while not as critical as liquidity, they still play an essential role in a personal financial statement.
Pro Tip: Real estate investors should document asset valuations using third party estimates to ensure credibility.
An individual’s financial statement must also include all financial obligations, categorized into:
Net Worth Calculation:
Net worth is determined using the formula:
Total Assets – Total Liabilities = Net Worth
Lender Requirement:
In multifamily lending, the total net worth of the loan guarantors should match or exceed the loan amount.
Contingent liabilities are indirect financial obligations, such as personal guarantees on loans for other properties. They add financial risk and are categorized into:
Lenders carefully evaluate contingent liabilities because they want to ensure that an investor is not over leveraged.
A personal income statement is a critical part of a personal financial statement, detailing an individual’s income and expenses.
Net Cash Flow Formula:
Total Income – Total Expenses = Net Annual Cash Flow
A negative cash flow may require an explanation, such as an expected property sale or refinance.
Lenders, brokers, and sellers may also request:
Providing full transparency ensures trust and credibility in financial transactions.
Need a blank financial statement? CLICK HERE for a sample personal financial statement template.
A personal financial statement is not just for lenders, its also a financial planning tool that helps individuals:
Pro Tip: Update your personal financial statement annually to reflect current cash flow, assets, and liabilities.
A personal financial statement isn’t just a document, it’s a powerful tool that separates successful investors from those who struggle to scale. If you’re serious about building wealth through real estate, this isn’t something you fill out once and forget. It’s a roadmap that helps you track your net worth, understand your financial position, and present yourself as a credible and bankable investor.
I’ve seen firsthand how having a well organized PFS opens doors to deals, secures financing, and builds trust with brokers, lenders, and partners. When you understand your financial standing inside and out, you make smarter investment decisions and position yourself to capitalize on opportunities before others even see them coming.
The real takeaway: your personal financial statement is a reflection of your financial discipline. If you’re not actively updating and reviewing it, you’re flying blind. Know your numbers, take control, and use this tool to fuel your real estate empire.
If you’re ready to level up your investment strategy, join me at my next Multifamily Bootcamp, where I’ll show you exactly how to structure your investments, finance deals, and scale with confidence. Let’s build something great together!
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