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.
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).
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.
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).
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