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Complete glossary lessonNational exam concept

Effective gross income

Effective gross income, or EGI, is potential gross income minus vacancy and collection loss, plus other property income.

Official area

Valuation and Market Analysis

Knowledge cluster

Income valuation

Learning sequence

Define, distinguish, apply, retrieve

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Exam purpose

Recognize the rule, then reject the nearest look-alike.

Georgia lens

Apply the state distinction only when the facts call for it.

Connected terms

Connected to 4 terms and one official content area.

What does Effective gross income mean in real estate?

Effective gross income, or EGI, is potential gross income minus vacancy and collection loss, plus other property income. It is the income actually expected to be available before operating expenses.

How is Effective gross income different from the closest exam answer?

Potential gross income assumes full occupancy and collection. EGI adjusts for vacancy and adds other income. NOI then subtracts operating expenses from EGI.

What is the Georgia-specific rule?

This national income-property formula is unchanged in Georgia. Keep annual and monthly periods consistent and follow the sign of each adjustment.

Worked exam example

Scenario

Potential rent is $180,000, vacancy and collection loss is $9,000, and laundry income is $6,000. EGI is $177,000.

Decision rule

Potential gross income assumes full occupancy and collection. EGI adjusts for vacancy and adds other income. NOI then subtracts operating expenses from EGI.

What is the most common exam trap?

Trap correction

Other income is added after vacancy loss, while operating expenses are not subtracted until the NOI step.

Memory cue: Other income is added after vacancy loss, while operating expenses are not subtracted until the NOI step.

Original exam check

Apply the definition

Which statement correctly explains Effective gross income?

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Related terms to learn next

Net operating income

Net operating income, or NOI, is annual effective gross income minus operating expenses, before debt service, income taxes, depreciation expense, and owner-specific financing costs.

Capitalization rate

Capitalization rate, or cap rate, is the annual net operating income divided by the property's value or price.

Gross rent multiplier

Gross rent multiplier, or GRM, is the relationship between a property's sale price or value and its gross periodic rent.

Appraisal

An appraisal is an independent, supportable opinion of value developed by a qualified appraiser for a stated property interest, effective date, intended use, and set of assignment conditions.

Recommended next complete lesson

Continue with Valuation and Market Analysis complete lesson. It places this term inside the full rule, worked examples, exam traps, and mixed practice required for mastery.
Previous termDebt-to-income ratio

Effective gross income quick answers

Facts checked against the current PSI Candidate Information Bulletin and GREC sources. Editorial standards.

What is Effective gross income?

Effective gross income, or EGI, is potential gross income minus vacancy and collection loss, plus other property income.

What is Effective gross income commonly confused with?

Potential gross income assumes full occupancy and collection. EGI adjusts for vacancy and adds other income. NOI then subtracts operating expenses from EGI.

How does Georgia treat Effective gross income?

This national income-property formula is unchanged in Georgia. Keep annual and monthly periods consistent and follow the sign of each adjustment.