Advanced Tools for Real Estate Professionals

Effective Gross Income (EGI) Calculator

Show the true income a property generates after operating expenses

Provide an accurate revenue baseline by factoring in vacancy, concessions, and other income adjustments.

Rental Income — Monthly

Other Income — Annual

Gross Potential Income
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Income from Other Sources
$0.00
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Vacancy & Credit Losses
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Effective Gross Income (EGI)
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Effective Gross Income Formula

\begin{align} \text{EGI} &= \text{Gross Potential Income} \\ &\quad - \, \text{Vacancy Loss} \\ &\quad + \, \text{Other Income} \end{align}
  • Gross Potential Income — total potential rental income
  • Vacancy Loss — typically 5-10% of Gross Potential Income
    For example, if a property is vacant 4 weeks per year, the vacancy rate is 7.69% (4 ÷ 52 × 100)
  • Other Income — total non-rental income

What is Effective Gross Income?

Effective Gross Income (EGI), also known as Gross Operating Income (GOI), is a crucial metric for real estate professionals, offering a realistic and conservative view of a property's income stream. Unlike Gross Potential Income (GPI), which assumes full occupancy and perfect rent collection, EGI takes into account the operational realities of property ownership. It deducts anticipated vacancy and collection losses while incorporating other income sources, such as parking fees, storage rentals, laundry services, and amenity charges. This results in a more reliable baseline for evaluating an asset's financial performance and determining its value.

For brokers, agents, and investors, the strength of EGI lies in its practicality. It connects theoretical income projections to what a property is likely to produce under typical market conditions. This grounded approach makes effective gross income an essential figure when presenting assets to sophisticated buyers or preparing investment analyses for institutional decision-makers. Utilizing EGI rather than inflated GPI figures enhances credibility in negotiations, indicating that the analysis accounts for common risks and operational inefficiencies.

From an investor's perspective, EGI is a foundational input for critical downstream calculations, such as Net Operating Income (NOI) and the Debt Service Coverage Ratio (DSCR). Since these metrics directly influence valuation, loan sizing, and investment feasibility, having an accurate revenue baseline is essential. Overestimating income at this stage can significantly distort the entire financial model, leading to poor acquisition decisions or excessive leverage. EGI mitigates this risk by incorporating a vacancy factor that aligns with market averages or an asset's specific performance history, along with any concessions or incentives offered to tenants.

Lenders prefer EGI during underwriting because it reflects the income stability of the asset. A property's GPI might suggest strong cash flow, but if historical occupancy is below market levels or if tenant turnover is high, the actual income available to service debt could be significantly lower. By basing projections on effective gross income, lenders gain a clearer understanding of repayment capacity, leading to more accurate risk assessments and loan terms.

Developers and value-add investors also rely on EGI when evaluating projections after renovations or lease-ups. While a newly repositioned asset may eventually achieve high occupancy, the initial lease-up period often involves concessions, marketing incentives, or staggered move-ins that suppress early cash flow. Incorporating these realities into EGI ensures that pro formas align with achievable performance timelines, preventing overly optimistic return expectations.

Market analysis becomes more precise when EGI is aggregated across multiple properties or submarkets. Trends in vacancy loss, ancillary income potential, or rent collection efficiency can reveal underlying shifts in demand, competition, or tenant demographics. Professionals who track these changes gain an advantage in acquisition targeting, leasing strategies, and asset repositioning.

Ultimately, effective gross income is more than just a line item; it serves as a reality check in income analysis. By starting with a conservative yet realistic figure, brokers, investors, and lenders can make more informed decisions, structure deals with appropriate risk buffers, and uphold credibility in relationships with clients and capital partners. In sophisticated real estate practice, EGI is the revenue measure that grounds projections in the operational truths of property ownership.

How to Calculate Effective Gross Income?

  • First, calculate the Gross Potential Income, which is the total potential rental revenue assuming full occupancy (i.e. 0% vacancy loss) and no rental concessions.
  • Next, add Income from Other Sources, such as amenity charges, parking fees, laundry services, storage rentals, etc.
  • Finally, subtract Vacancy & Credit Losses, which typically range from 5% to 10% of the Gross Potential Income.

What Counts as "Other Income"?

Other income includes revenue from all non-rent sources, such as:

Administrative Costs

  • Application fees
  • Credit check fees
  • Security deposit interest
  • Renewal and termination fees
  • Move-in and move-out fees
  • Pet fees and pet rent
  • Late payment, returned check, and NSF fees
  • Key replacement fees
  • Cleaning fees

Parking & Storage

  • Parking space fees
  • Guest parking fees
  • Storage rental fees

Laundry & Vending

  • Laundromat revenues
  • Vending machine commission

Services & Amenities

  • Pool access fees
  • Gym membership fees
  • Clubhouse rentals
  • Concierge services
  • Business center rentals
  • Cable or internet markups

Utility Reimbursements

  • Ratio Utility Billing System (RUBS)
  • Tenant utility reimbursements
  • Utility connection fees
  • Excess utility charges
  • Meter reading fees

Miscellaneous

  • ATM commission
  • Internet provider commission
  • Tenant insurance commission
  • Signage rental income