effective gross income

Definition

Total potential rental income minus vacancy losses and credit losses, representing what an investment property actually generates. Reality's sobering answer to your optimistic rental projections.

Example Usage

The property's effective gross income was $84,000 after accounting for typical 5% vacancy rates in the area.

Origin

Investment property analysis terminology from mid-20th century commercial real estate

Fun Fact

Rookie investors often forget to subtract vacancy losses and end up with inflated cap rate calculations that make terrible investments look brilliant.

Source: Appraisal Institute income property valuation standards

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