Effective gross income is best defined as:

Effective gross income (EGI) is an essential concept in real estate and property management, representing the actual income a property generates after accounting for potential losses. The correct definition as total annual income minus vacancy losses captures the essence of how EGI is calculated.

When managing a rental property, not all projected income materializes due to factors such as vacancies or non-paying tenants. Therefore, the EGI takes the total potential income the property could generate but then adjusts for these losses. This adjustment provides a more realistic view of the income the property is likely to yield throughout the year.

The other options do not accurately reflect this definition. Simply accounting for expenses or considering miscellaneous income and expenses deviates from the primary focus on vacancy and collection losses in determining the effective gross income. Thus, understanding the significance of Vacancy Loss is critical in accurately calculating and assessing a property’s financial performance.