Effective gross income
What is effective gross income?
Effective gross income (EGI) is the amount of income generated by a property, including collection losses, miscellaneous income and less vacancy cost. When it comes to an investment property, effective gross income is the measure used to determine the value.
Where have you heard about effective gross income?
If you’ve ever invested or thought about investing in property, you may know about effective gross income. Whilst researching to purchase an investment property, possible investors will use the EGI method to estimate how much they are inclined to pay based on the potential earning quality of the property.
What you need to know about effective gross income.
If you have a property that was bought or handed to you as an investment, whether to rent or to use as alternative space, the effective gross income is the money that you are left with after all outgoing costs are covered. There are many factors that can effect the effective gross income. The housing market can make rates for vacancy costs and collection losses go up or down. An investor will need to measure the cost of lost income against the income that can be generated.
Find out more about effective gross income.
To better understand effective gross income, see our page on investment properties.