Effective Gross Income (EGI) is a key financial metric in real estate and property management that represents the total income generated by a property, after accounting for potential losses from vacancies and collection issues. It is used to evaluate the income-producing potential of a property.

Here’s how it is calculated:

1. Gross Potential Income (GPI): This is the total income a property could generate if it were fully rented out without any vacancies or rent losses.
2. Less Vacancy and Collection Losses: Deduct the expected income losses due to vacant units and uncollected rent (e.g., tenants not paying rent).
3. Add Other Income: Add any additional income from the property, such as parking fees, laundry facilities, or other services provided to tenants.

The formula for EGI is:

\[
\begin{align*}
\text{Effective Gross Income (EGI)} &= \text{Gross Potential Income (GPI)} \\
&\quad – \text{Vacancy and Collection Losses} \\
&\quad + \text{Other Income}
\end{align*}
\]

EGI provides a more accurate picture of the actual income a property is generating, which is crucial for making informed investment decisions.