what is effective gross income 
effective gross income egi is the potential gross rental income plus other income minus vacancy and credit costs of a rental property egi can be calculated by taking the potential gross income from an investment property add other forms of income generated by that property and subtract vacancy and collection losses understanding effective gross income egi egi is a key variable in determining the value of a rental property and the true positive cash flow that property could generate rental cash flow is not a simple calculation but includes all forms of income generated by the property minus the realistic costs involved with rental income if we look at the variables of the egi formula we can see how rental income plays out in the real world egi formula explainedgross potential rental income is the hypothetical amount an investor would receive without any of the rental headwinds that are commonplace in the real world it assumes that your rental property will be rented every day of the year and that renters will pay the agreed to rent documented in the lease for example if the agreed to rent is 2 000 a month the gross potential rental income is 24 000 