# How do you calculate effective gross income?

**The formula for calculating Effective Gross Income is Potential Gross Rental Income + Other Income - Vacancy & Bad Debt Allowance.**

**Calculate**the annual potential**gross income**.- Gather information about the other
**income**you receive from the property such as**income**from vending machines, laundry machines or parking fees.

Likewise, people ask, when figuring effective gross income which expenses are deducted?

**Effective Gross Income**, or EGI, can be calculated by taking the **Potential Gross Income** from an investment property, add other forms of **income** generated by that property and subtract from it vacancy and collection losses.

Also, what is the difference between potential gross income and effective gross income? In short, **potential gross income** is the total rent a property could generate is 100% leased at market rent, while **effective gross income** is a net figure that considers expense reimbursements, vacancy and collection loss, and other **income**.

Besides, what is effective gross income multiplier?

A **gross income multiplier** (GIM) is a rough measure of the value of an investment property that is obtained by dividing the property's sale price by its **gross** annual rental **income**.

How do you calculate profit potential?

For example, if you make widgets which sell for $10 each, and it costs $3 to build and $3 to market them, your **profit potential** is $4 for every widget you sell. Multiply that **figure** by the amount of widgets you expect to sell during a given period, and you'll have a projected **profit potential**.