Effective Gross Income (EGI)
Effective Gross Income (EGI) is the total income generated from a property after accounting for potential vacancies and any other income sources, such as parking fees or laundry facilities. EGI is an important metric in real estate investment, as it provides a realistic estimate of the income that a property can generate. It helps investors and property managers evaluate the financial performance of a property and forecast cash flow more accurately. EGI is used to assess the profitability of rental properties, guiding decisions on pricing, management, and investment strategies.
Example
A rental property with gross potential income of $100,000 and expected vacancies of $10,000 would have an EGI of $90,000.
Key points
• Reflects total income from a property, accounting for vacancies and other income sources.
• Used to evaluate the financial performance of rental properties.
• Important for forecasting cash flow and assessing profitability.
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