Video: Commercial Real Estate – Calculating Effective Gross Income (EGI) Let’s explore each component of the effective gross income formula. Gross Potential Rent + Other Income – Vacancies – Credit Loss – Loss to Lease = Effective Gross Income If you’re interested, check out this guide to Scheduled vs Effective Gross Income. You can figure the EGI of a property in its current condition or estimate a post-renovation (after repair) EGI. In a nutshell, effective gross income is all the income a property generates. Therefore, you should be keenly interested in the precise EGI of any property rental property you consider for purchase. Effective gross income (EGI) is the figure you use for the revenue portion of the NOI calculation. Arriving at an accurate NOI requires knowing both revenues and operating expenses. The most common procedure for determining bid price is to divide the property’s net operating income by cap rate. When you consider acquiring an existing rental property, you’ll require a good deal of information to form a bid. Finally, we’ll answer some frequently asked questions about effective gross income. From there, we’ll explain the effective gross income multiplier (EGIM) and how to use it. Then, we’ll show you how to calculate EGI using the effective gross income formula and work through an example. In this article, we’ll review the meaning of effective gross income and its components.
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