What factors are included in the calculation of Effective Gross Income (EGI)?

Effective Gross Income (EGI) is a crucial metric in real estate and property management, used to assess the potential income that a property can generate after accounting for certain deductions. The correct calculation of EGI includes three main components: the Potential Gross Income (PGI), vacancy losses, and miscellaneous income.

When calculating EGI, it starts with the Potential Gross Income, which represents the total income a property could generate if it were fully occupied and all rents were collected. From this figure, you subtract anticipated losses due to vacancy and collections, which reflects the reality that not all rental units will be occupied all the time or that some tenants might not pay their rents. Lastly, you may add any additional income sources (miscellaneous income), such as fees for parking, laundry, or other services, that contribute to the overall revenue of the property.

Therefore, the formula accurately captures the gross income that can be realistically expected and is a key indicator of a property's financial performance, making this answer the most comprehensive and correct for determining EGI.