Effective gross income
National Real Estate Exam glossary · Math Calculations
Definition
In income-property analysis, the potential gross income from a property less an allowance for vacancy and collection loss, plus other income such as parking or laundry. Operating expenses are then subtracted from EGI to arrive at net operating income.
Effective gross income in plain English
Effective gross income (EGI) is the rent money a property realistically brings in during a year, after admitting that some units sit empty and some tenants never pay — plus any bonus income like coin laundry or paid parking. You start with the 'perfect world' number where every unit is rented and everyone pays, then subtract a chunk for those empty/unpaid units, then add the side income. It's like a lemonade stand expecting $100 in sales but knowing a few cups get spilled or given away, so you honestly plan on maybe $90 plus a couple bucks from selling cookies. After EGI, you subtract the costs of running the place to see what's actually left over (that leftover is called net operating income).
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