In commercial multifamily real estate, there’s a language that is spoken when you are connecting with brokers, property managers and other investors in the profession. To avoid sounding like a novice, an investor must be fluent with the real estate terminology to be taken seriously. Let’s take a minute to breakdown one of those terms.
Effective gross income is also referred as EGI which is nothing but the true positive cash flow of an apartment in the community. EGI can be derived by the sum of the gross potential rent and the other income minus loss-to-lease, concessions, the income lost due to vacancy, employee units, bad debts and model units.
- For example, if a 200-unit apartment has a gross potential rent of $2,000,000, loses $140,000 due to vacancy and $166,000 in credit costs (including loss-to-lease, employee units, model unit, concessions, bad debt, etc.) and collects $134,000 in other income, then EGI is $1,828,000.
By learning these concepts and terms, you’re separating yourself from the novice investor looking to be more active than passive. Here’s where you can learn more multifamily investing terms.
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