Article Overview

Investors must know the value of a property before committing funds. Importantly, potential gross income (PGI) is a crucial input into value assessment. In this article, we cover:

  • The definition of PGI (aka Gross Scheduled Income)
  • The Potential Gross Income Formula
  • An Example of Gross Scheduled Income
  • Gross Scheduled Income vs Effective Gross Income
  • How Assets America® Can Help
  • Frequently Asked Questions

What is Potential Gross Income?

PGI (aka gross scheduled income) is the total income a property will produce if it fully leases the subject property at the prevailing market rents. Frankly, it is an ideal number, often different from the actual rent that the property produces. Specifically, you may not collect gross scheduled income for various reasons, including:

  • Rent is above or below market.
  • The occupancy rate is less than 100%.
  • Some tenants are not paying their rent.
  • The landlord rebates part of a tenant’s rent.
  • Part of the property is temporarily not rentable.

Therefore, gross scheduled income is a target number, achievable in some properties and not in others. Ultimately, as we shall see, gross scheduled income is different from effective gross income.

Apply For Financing


Gross Scheduled Income vs Effective Gross Income

Effective gross income (EGI) is different from gross potential income. The difference involves three main factors that affect rent collections.

1. Expense Reimbursements

First, tenants pay expense reimbursements. Generally, these may include insurance, maintenance, and real estate taxes. In contrast, an absolute net lease requires the tenant to pay all expenses.

2. Collection and Vacancy Loss

Secondly, a factor that reduces PGI to EGI is collection and vacancy loss. Collection loss is the projected amount of rent that you won’t be able to collect for the period. Alarmingly, this could stem from various factors, such as rent strikes, squatters, evictions, and deadbeats.

Vacancy loss occurs when you can’t rent out all of your available units. Alternatively, someone could move out before there is a replacement tenant.

During the lease-up phase of a new property, you must recruit and sign new tenants. Obviously, this takes time, which creates vacancy loss. Clearly, your hope is to stabilize the property at 100% occupancy as soon as possible.

3. Additional Income

Thirdly, other income sources impact EGI. These include income from laundry machines, vending machines, parking, storage units, pet fees, late fees, etc.

Notably, you can estimate the EGI factors using industry benchmarks, comparable properties, and/or historical performance. Appraisers consider all these factors when evaluating properties.

Potential Gross Income Formula

The formula for PGI is:

PGI = Σ (market-level rent per unit x number of units at that rent)

Σ means sum.

This covers all cases in which different units have the same or different rents.

How to Calculate Gross Scheduled Income

Here is how you would calculate gross scheduled income. In a spreadsheet, list all of your units in Column A. For column B, enter the monthly rent for each unit. For Column C, put the product of 12 times B. Finally, sum Column C to arrive at the gross scheduled income.

Video – How to Calculate Potential Gross Income

Examples of Potential Gross Income

Let’s assume you have six units to lease in a small, new office building. Three of the units rent for $700 per month and the other three rent for $1,000 per month. The following table shows the results:

Unit Monthly RentAnnual Rent
PGI $61,200

In this example, the potential scheduled income is $61,200.

Next let’s calculate the effective gross income for the property:

EGI Example
PGI $61,200
Vacancy Loss($1,700)
Collection Loss$0
Parking Fees$7200
Vending Machines $5000

Notice how the fees from parking and the vending machines create a positive addition to PGI. Conversely, we estimate vacancy loss of one month each for an A unit and a B unit. The result is an EGI of $71,700 per year.

Evaluating the Example Property

The example property is an existing building with triple-net leases. You (the landlord) are responsible for other expenses that amount to $10,000/year. Thus, your net operating income (NOI) is $71,700 – $10,000 = $61,700.

The property has a cap rate of 10%. Plugging into the cap rate formula, we find the property value to be $61,700 divided by 10% = $617,000. You bid that amount to purchase the property.

You qualify for a loan-to-value ratio of 70%. Therefore, you must come up with a 30% down payment, equal to 0.3 x $617,000, or $185,100. You receive a loan for the remainder, $431,900, to buy the property.

How Assets America® Can Help

Before you can worry about the rent you’ll collect, you have to own a property. Obviously, that means you must purchase one, build one, and/or renovate one. That’s where Assets America® can help.

We can arrange many sorts of financing for projects or acquisitions starting at $10 million and above. This includes construction loans, bridge loans, acquisition loans, mezzanine loans, mini-perm loans, takeout loans, and more.

Renovation Loans

Loans to renovate properties can be extremely helpful when you want to increase your rental income. With the money you borrow from Assets America®, you can:

  • Increase the potential gross income by enhancing existing units to rent for a higher market rate
  • Increase the gross scheduled income by increasing demand for your units, thereby increasing occupancy rates
  • Reduce the need to make rent concessions because your units are more desirable
  • Enhance your ability to receive higher reimbursements for expenses you pay
  • Make it easier to move expenses to tenants via triple-net leases and absolute leases
  • Increase the quality of your tenants thereby reducing credit costs

Construction Loans

But what if you want to build a new office building or apartment tower? Assets America® can get you the money you need to build upscale, high-quality properties that will command premium rents.

You may find it easier to get more funding from Assets America® than you can from a bank. With increased funding, you can take steps during construction to help ensure top rents, including:

  • Building larger properties with greater economies of scale
  • Build in the hottest neighborhoods
  • Purchase generous-sized parcels of land that allow you to build large properties without undue crowding
  • Choose top-quality materials and highly skilled labor
  • Provide spacious layouts with premium furnishings, appliances, and amenities
  • Include large lobbies, on-premise restaurants and bars, athletic facilities, retail stores, and other value adds

Frankly, that’s an incomplete list. There are many ways to employ funding to build high-rent properties.

If you’d like to find out more about how Assets America® can help, contact us for a confidential consultation.

Frequently Asked Questions

What is GSI in real estate?

GSI, or gross scheduled income, is a synonym for potential gross income. It’s the income you can earn from a rental property under ideal circumstances of market rents and full occupancy.

What should the gross rent multiplier be?

Gross rent multiplier (GRM) is the price of a property divided by its annual rental income. It is in years, and ideally, you’d like it to be four to seven years. That is a typical amount of time to recoup your investment in the property.

What is the monthly gross rent multiplier formula?

The monthly gross rent multiplier is the GRM multiplied by 12. It is in months. It is the number of months it will take to earn back your investment in a rental property.

What are potential pitfalls when using potential gross income?

The biggest pitfall when using PGI is self-deception. Many investors want to picture a large income stream from rent. Therefore, they adopt a rosy scenario involving market rents and extremely high occupancy rates. A good lender like Assets America® can help save you from the risks of self-deception.

Related Articles


Eric D.
Pleasure to work with and extremely knowledgeable

Ronny was a pleasure to work with and is extremely knowledgeable. His hard work was never ending until the job was done. They handled a complex lease and guided us through entire process, including the paperwork. Not to mention a below market lease rate and more than all the features we needed in a site. We later used Assets America for a unique equipment financing deal where once again Ronny and team exceeded our expectations and our timeline. Thank you to Assets America for your highly professional service!

exp MFGroup
Great experience with Assets America

Great experience with Assets America. Fast turn around. Had a lender in place in 30 minutes looking to do the deal. Totally amazing. Highly recommend them to anyone looking for financing. Ronny is fantastic. Give them a call if the deal makes sense they can get it funded. Referring all our clients.

William P.
Assets America guided us every step of the way

Assets America guided us every step of the way in finding and leasing our large industrial building with attached offices. They handled all of the complex lease negotiations and contractual paperwork. Ultimately, we received exactly the space we needed along with a lower than market per square foot pricing, lease length and end of term options we requested. In addition to the real estate lease, Assets America utilized their decades-long financial expertise to negotiate fantastic rates and terms on our large and very unique multimillion dollar equipment purchase/lease. We were thankful for how promptly and consistently they kept us informed and up to date on each step of our journey. They were always available to answer each and every one of our questions. Overall, they provided my team with a fantastic and highly professional service!

Bob B.
The company is very capable, I would recommend Assets America

Assets America was responsible for arranging financing for two of my multi million dollar commercial projects. At the time of financing, it was extremely difficult to obtain bank financing for commercial real estate. Not only was Assets America successful, they were able to obtain an interest rate lower than going rates. The company is very capable, I would recommend Assets America to any company requiring commercial financing.

Ricardo L.
Assets America was incredibly helpful and professional

Assets America was incredibly helpful and professional in assisting us in purchasing our property. It was great to have such knowledgeable and super-experienced, licensed pros in our corner, pros upon which we could fully rely. They helped and successfully guided us to beat out 9 other competing offers! They were excellent at communicating with us at all times and they were extremely responsive. Having them on our team meant that we could always receive truthful, timely and accurate answers to our questions. We would most definitely utilize their services again and again for all of our real estate needs.

Assets America is a great company to work with

Assets America is a great company to work with. No hassles. Recommend them to everyone. Professional, fast response time and definitely gets the job done.

DAC Team
Great experience

Ronny at Assets America has been invaluable to us and definitely is tops in his field. Great experience. Would refer them to all our business associates.

MF Group
We were very pleased with Assets America’s expertise

We were very pleased with Assets America’s expertise and prompt response to our inquiry. They were very straight forward with us and helped a great deal. We referred them to all our business associates.

Manny C.
Worked with this company for decades

I’ve worked with this company for decades. They are reputable, knowledgeable, and ethical with proven results. I highly recommend them to anyone needing commercial financing.

David B.
Top-notch professional

Ronny was incredibly adept and responsive – top-notch professional who arranged impressive term sheets.

Monte M.
Assets America helped us survive a very difficult time

Assets America helped us survive a very difficult time and we most definitely give them 5 stars!

Brent G.
Gave me direction to go

Ronny was very friendly and though we were unable to make something happen at the moment he gave me some direction to go.

Allan E.
Highly recommend them for any type of commercial financing

My business partner and I were looking to purchase a retail shopping center in southern California.  We sought out the services of Ronny, CFO of Assets America.  Ronny found us several commercial properties which met our desired needs.  We chose the property we liked best, and Ronny went to work. He negotiated very aggressively on our behalf. We came to terms with the Seller, entered into a purchase agreement and opened escrow.  Additionally, we needed 80 percent financing on our multimillion-dollar purchase.  Assets America also handled the commercial loan for us.  They were our One-Stop-Shop. They obtained fantastic, low, fixed rate insurance money for us.  So, Assets America handled both the sale and the loan for us and successfully closed our escrow within the time frame stated in the purchase agreement.  Ronny did and performed exactly as he said he would. Ronny and his company are true professionals.  In this day and age, it’s especially rare and wonderful to work with a person who actually does what he says he will do.  We recommend them to anyone needing any type of commercial real estate transaction and we further highly recommend them for any type of commercial financing.  They were diligent and forthright on both accounts and brought our deal to a successful closing.