What does effective gross income include?

Effective gross income is a key concept in real estate and property valuation that reflects the total income a property generates, accounting for various factors affecting its earning potential. This includes the total income from rent and other sources, adjusted for any expected vacancy losses, which are the amounts the property may lose due to unoccupied units or non-paying tenants. Additionally, it encompasses any miscellaneous income that can be derived from the property, such as fees from services offered to tenants or leasing space for events.

By focusing on the total income after accounting for these vacancy losses and including miscellaneous incomes, effective gross income provides a more accurate picture of the property's financial performance compared to simply looking at gross rental income or total income before deductions. This comprehensive income assessment helps property managers and investors understand the actual revenue they can expect to receive and plan accordingly.