Effective gross income


Effective gross income is the relationship or ratio between the sale price of the value of a property and its effective gross rental income.
The anticipated income from all operations of the real property after an allowance is made for a vacancy and collection losses. Effective gross income includes items constituting other income: income generated from the operation of the real property that is not derived from space rental.
For example, if two properties have a potential income of $15,000 if they are all filled to maximum occupancy, and the average vacancy rate of the properties in cash is $1,250. The average vacancy rate is then subtracted from the potential income from renting the properties so the total is $13,750, which becomes the effective gross income.