EGI
Effective gross income
Effective gross income is gross potential income minus vacancy and credit loss. It is the money that realistically arrives in the account. Everything downstream — NOI, cap rate, DSCR — is built on EGI rather than on the rent roll, because nobody collects 100% of scheduled rent forever.
EGI = (scheduled rent + other income) − vacancy and credit loss
Worked example
$31,800 of scheduled rent plus $900 of other income is $32,700 of potential; a 5% allowance takes $1,635 off, leaving $31,065.
Rental metric examples use the default $265,000 duplex at $2,650 monthly rent, 25% down and 6.75% over 30 years. Strategy and tax examples use the assumptions stated above rather than that rental deal.
The mistake to avoid
Where this is calculated
The noi calculator computes this from your own numbers and shows the arithmetic expanded. Net operating income built line by line from gross scheduled rent, and why the mortgage never appears in it.
Related terms
- Net operating incomeNet operating income is what a property earns after vacancy and operating expenses but before any mortgage payment, depreciation or income tax.
- Operating expensesOperating expenses are the recurring costs of running the property: taxes, insurance, management, maintenance, utilities the owner pays, HOA dues, and a reserve for capital replacement.
- Vacancy rateVacancy rate is the share of available rental capacity that sits empty over a measured period.
- Occupancy rateOccupancy rate is the complement of vacancy: the share of available capacity that is occupied, so 95% occupancy and 5% vacancy describe one fact from two sides.
Back to the full glossary — 21 terms with formulas and worked examples.