What is Effective Gross Income (EGI) for real estate investors? “I keep seeing EGI, what’s it mean?”

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This is a quick video I to answer the question about EGI and “Effective Gross Income” please let me know if you have any other questions.

What is Effective Gross Income and what does it mean for real estate investors?

There’s are a lot of different terms and formulas used in the world of real estate investing.  To a new investor they can all kind of run together at first and get confusing.  Even seasoned investors take a moment from time to time to look back on things they didn’t know when they started out, as a fresh look on how to explain them to clients better.

One of the terms you’re going to hear about is “effective gross income” or EGI. 

Effective Gross Income, or EGI, is the Potential Gross Rental Income (an upcoming lesson!) plus other property income, minus vacancies. 

Here’s the basic formula for EGI:

Gross Potential Rental Income is the amount considered when you are simply taking your rent amount and multiplying it by 12 (months). 

So if your rent was $1,000 a month then your gross potential rental income would be $12,000.

There are other income sources or things that you are charging tenants for other than rent like laundry services, parking spots, pet fees, late fees, etc.  Remember, we’ve talked a lot about this in our other lessons, and how to ‘beef up’ these income generators.

The “deductions” piece of the equation…

Vacancies are usually only going to be able to be ‘forecasted’ at best.  Unless you’ve owned the property for some time and have a good idea of the average number of vacant days each year that the property will have.

For example let’s say that you have a multifamily property that generates $34,000 each year in gross potential rental income.  Then you’ve added extra sources of income on the property that generate an extra $10,000 a year.  We’ll also say that you’ve averaged out an annual vacancy amount of $6,000. 

This would mean…

Your Effective Gross Income is…

$34,000 + $10,000 – $6,000 = $38,000.

Remember as an investor this is part of your determining positive cash flow matrix.  You really need to determine if your current income generating property or a potential one is generating positive cash flow and at a sufficient rate.

There is a great post and class on the 38 Ways to Buy Apartment Buildings Zero Down with Pet Policies

The post is HERE.  There’s also another great class on how to buy apartment buildings zero down that you can check out as well.  This relates directly to growing income on rental properties.

Also here is a post on how I did this and I flipped a house off Zillow for 30.  Also you can check out the post on five steps to flip a house right off Zillow for 40.  You can also check out our other epic post on 57 ways to make money with vacant land.

Here’s another post on how a Hero flipped a house off Zillow and made 40k in a few weeks while he was learning to read.  Also you want to check our post on the EPIC $25 million letter and the copy writing lessons for real estate investors, you’ll love it.  Also you can see how ONE letter is making me $9,000 a month.

And don’t forget our EPIC page on 100 FREE ways to find motivated sellers, we are making the number one page in the world on FREE ways of finding motivated sellers.

Go to BigReia.com and you’ll become allergic to being an LC and addicted to improving the world and creating Social Mobility for you and yours… 

Thanks so much!  = )

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~ Indy Anna
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