Effective Gross Income (EGI)
Effective gross income is gross potential rent plus other income, less vacancy and credit loss — the revenue a property actually collects, and the line above NOI.
Effective gross income (EGI) is gross potential rent (GPR) plus other income (parking, laundry, fees, reimbursements), minus vacancy and credit loss. It's the revenue the property actually collects — not the rent roll's theoretical maximum.
How it's used: EGI is the top line of the operating statement. Subtract operating expenses from it and you get NOI; NOI over price is the cap rate. Every valuation traces back to EGI, so the assumptions baked into it matter more than almost any other input.
Why it matters: the gap between GPR and EGI is where optimistic pro-formas hide. A broker quoting 100% occupancy and zero credit loss is showing you GPR dressed up as collected income; a realistic underwrite hits GPR with a market vacancy factor and bad-debt allowance. Overstating EGI by a few points cascades straight into an inflated NOI, cap rate, and price.
Formula: EGI = Gross potential rent + Other income − Vacancy & credit loss
For the quick-screen version that skips this step entirely, see the gross rent multiplier. The multifamily underwriting guide walks the full income build.
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