Rental Deal Analysis Glossary

Potential Rental Income

Potential rental income is the total amount of rent a single family or multi-family property could generate if it was 100% leased at competitive rates.

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VACANCY AND CREDIT LOSSES

Vacancy and credit loss allocations are used to account for anticipated income lost due to tenants vacating the property and/or tenants defaulting on their lease payments.

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Gross Operating Income

Gross Operating Income (also called Effective Gross Income) is the potential rental income less any vacancy and credit losses. This is the amount of rental income that the owner can reasonably and realistically expect to collect after accounting for property vacancies, tenant concessions and other income opportunities.

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OPERATING EXPENSES

Operating expenses include all expenditures required to operate the property including real estate and personal property taxes, property insurance, management fees, repairs and maintenance, utilities, and other miscellaneous expenses (accounting, legal, etc.).

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NET OPERATING INCOME

The Net Operating Income is the amount of income a property can generate after deducting Operating Expenses.​  The Net Operating Income is a strong indication of a properties revenue generating potential. 

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DEBT SERVICE

Debt Service is the total amount paid in interest and principal on a monthly and annual basis.  

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