📊 Definition
Effective Gross Income (EGI) is the actual collectible rental revenue after accounting for vacancy, credit loss, and concessions, plus other income. It's the real revenue available to cover operating expenses.
The Formula
The real revenue available for operations
Example Calculation
A property with $345,000 monthly GPR after accounting for losses and adding other income:
Where Does the Data Come From?
EGI requires integrating multiple data sources from your PMS:
- Gross Potential Rent: Sum of all unit market/scheduled rents
- Vacancy Loss: Revenue lost from unoccupied units
- Concessions: Free rent and discounts given
- Bad Debt/Credit Loss: Uncollected rent from delinquencies
- Other Income: Parking, pets, utilities, fees
EGI is typically reported on monthly and annual income statements in all PMS platforms.
Who Uses This Metric?
Finance Teams & Accountants
Use EGI as the top line for NOI calculations. EGI minus operating expenses equals NOI—the fundamental measure of property financial performance.
Asset Managers & Owners
Track EGI to measure total revenue realization and identify improvement opportunities. EGI growth drives NOI growth and property value appreciation.
Lenders & Appraisers
Use EGI for debt service coverage calculations and property valuations. It's the realistic revenue number for underwriting, not theoretical GPR.
Why This Metric Matters
1. Real Revenue Performance
EGI shows actual collectible revenue, not theoretical potential. It's the money available to pay operating expenses and service debt. All financial projections and valuations start with EGI.
2. NOI Foundation
EGI is the numerator in all key performance ratios: OpEx ratio (OpEx ÷ EGI), NOI margin (NOI ÷ EGI), management fee (% of EGI). Improving EGI by 5% flows directly to improving these metrics and NOI.
3. Property Valuation Driver
Property values are based on NOI ÷ cap rate. Since NOI = EGI − OpEx, every dollar of EGI improvement (assuming flat OpEx) adds $20 in property value at a 5% cap rate.
💡 Pro Tip
Calculate EGI as % of GPR to benchmark revenue realization. Industry target is 92-96% (4-8% total loss to vacancy, concessions, bad debt). Below 90% signals significant revenue leakage requiring investigation.
Frequently Asked Questions
How is EGI different from gross rent collected?
EGI includes other income (parking, pets, utilities) beyond rent. It's total collectible revenue from all sources. Gross rent is just the rent component. EGI is the complete revenue picture used for NOI calculations.
What's a healthy EGI to GPR ratio?
Generally, 92-96% is strong, meaning 4-8% total loss to vacancy, concessions, and bad debt. Below 90% indicates excessive revenue leakage. Above 97% suggests very strong performance (low vacancy, minimal concessions, excellent collections).
How do I improve EGI?
Four levers: (1) Improve occupancy to reduce vacancy loss, (2) Reduce concessions through better pricing/demand, (3) Strengthen collections to minimize bad debt, (4) Grow other income through new revenue streams. Optimize all four simultaneously.
Is EGI the same as NOI?
No—EGI is revenue before operating expenses. NOI is EGI minus operating expenses. EGI is the top line; NOI is the bottom line after covering property operations. Both are critical for property valuation and performance evaluation.
Should replacement reserves be included in EGI calculations?
No—replacement reserves are below-the-line items deducted after NOI. EGI calculation stops after adding other income. The progression is: GPR → EGI → NOI → Cash Flow (after reserves and debt service).
Maximize Effective Gross Income
BubbleGum BI tracks EGI trends and breaks down revenue leakage by cause via our financial dashboard—identifying where to focus efforts for maximum NOI impact.
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