Effective Gross Income (EGI) in Commercial Real Estate: Complete Guide

What It Means

Effective Gross Income represents the actual income a property is expected to generate after accounting for vacancy and credit losses, but before operating expenses. EGI bridges the gap between what a property could theoretically earn (if 100% occupied at market rent) and what it actually earns in practice.

How It's Calculated

Gross Potential Rent: Total rent if all spaces were leased at current contractual rates. Other Income: Parking revenue, storage fees, laundry income, antenna/billboard revenue, late fees, application fees. Vacancy & Credit Loss: Physical vacancy (unleased space) + economic vacancy (free rent, concessions) + credit loss (uncollectable rent from delinquent tenants).

Common Mistakes

Confusing gross potential rent with actual collections; not including all income sources (parking, storage, ancillary); underestimating vacancy and credit loss in strong markets (the market can turn); using market rent instead of contractual rent for in-place tenants.

Connection to Lease Abstraction and Financial Spreading

Accurate EGI requires complete lease abstraction (for contractual rent across all tenants), financial spreading (for other income classification), and rent roll analysis (for vacancy and credit loss quantification).