(EGI) Effective Gross Income


Effective gross income, (EGI), estimates the total income of the project while taking vacancy loss and other (non-rent) revenues into account.

Many properties supplement their revenue from rents with revenue from other services they provide residents, such as access to laundry machines, parking, storage, etc. The amount of other income increases each year at the rate you specified.

Example 1: Commercial Office Building

An office building rents for $12 per square foot and contains 100,000 leasable square feet. A 5% vacancy and collection allowance is expected. A small concession stand provides $1,000 of annual revenue. The effective gross income would be:

$12 x 100,000 = $1,200,000 - 5% vacancy allowance ($60,000) + Concession ($1,000) = $1,141,000

Example2: Apartment Building

A 10-unit apartment building with each unit renting for $1,000/ month and coin laundry income of $200/ month produces a potential gross income of $10,200/month. Assuming a 5% vacancy factor, the effective gross income would be:

$10,000 - 5% = $9,500 + $200.00 = $9,700