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Effective Gross Income illustration

Real Estate · Income

Effective Gross Income

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Use effective gross income to bridge ideal rent potential and realistic collected income.

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Interactive workbench

Collected income bridge

Gross Potential Income−Vacancy and Credit Loss+Other Income

$600,000 potential income less $45,000 losses plus $12,000 other income equals $567,000 EGI.

Step 1 of 4

Variables and units

  • Gross Potential Income

    Maximum possible annual income.

    currency

  • Vacancy and Credit Loss

    Expected annual loss from vacancy and nonpayment.

    currency

  • Other Income

    Laundry, parking, fees, or other property income.

    currency

Common mistakes

  • Adding other income before applying vacancy assumptions without a consistent model.
  • Treating EGI as NOI before expenses are removed.

Step-by-step example

Collected income bridge

  1. 1. Start with the example inputs

    • Gross Potential Income$600,000
    • Vacancy and Credit Loss$45,000
    • Other Income$12,000

  2. 2. Apply the formula

    Gross Potential Income−Vacancy and Credit Loss+Other Income

  3. 3. Run the numbers

    $567,000.00

    $600,000 potential income less $45,000 losses plus $12,000 other income equals $567,000 EGI.

What this result means

Effective gross income of $567,000.00 is the income realistically collected once vacancy and credit losses are subtracted and other income (parking, laundry, fees) is added. It bridges the gap between the rent roll's best case and what actually lands in the account, and it is the starting line for calculating net operating income.