Free calculator · Real Estate
Income Waterfall
Calculates effective gross income for a rental property by walking gross potential rent down through vacancy, loss to lease, credit loss, and concessions, then adding other income. Inputs include unit count, market rent, vacancy and credit loss percentages, loss to lease, concessions, and other income, with presets for stabilized, lease-up, and stressed properties.
By Devon Coombs, CPA, MBA · Assistant Teaching Professor of Finance, Santa Clara University · Reviewed October 2026
From the author: Devon Coombs, CPA, MBA teaches finance at Santa Clara University and works with corporate teams on practical AI.
Finance questions & answers · Student career guide · AI training for finance teams · Consulting · The 10 Laws of Finance
How do you get from potential rent to effective gross income?
Effective gross income (EGI) starts with gross potential rent, subtracts vacancy, loss to lease, credit loss, and concessions, then adds other income. It is income before operating expenses; it is not net operating income (NOI) or cash available to the owner.
Interactive Tool
Income Waterfall Calculator
Try an illustrative scenario
This model starts with every unit at market rent for a full year. Vacancy and credit loss are each a percentage of that same gross potential rent. Enter loss to lease, concessions, and other income as annual dollars; count each loss only once. These assumptions are teaching examples, not typical market rates.
Starting from actual contract rents instead? Do not subtract loss to lease again. Refundable deposits, tenant improvements, and leasing commissions do not belong in rent concessions.
Inputs
Waterfall
Gross Potential Rent
100 units × $2,000/mo × 12
$2,400,000
Physical Vacancy
4.0% of GPR
−$96,000
Loss to Lease
Below-market contract rents
−$60,000
Credit Loss
1.5% of GPR
−$36,000
Concessions
Free rent / move-in specials
−$100,000
Other Income
Parking, RUBS, pet rent, storage
+$120,000
Effective Gross Income
Net rental revenue + other income; before expenses
$2,228,000
Revenue Loss
−$292,000
12.2% of GPR
Final EGI
$2,228,000
92.8% of GPR
Per Unit / Month
$1,857
EGI, including other income
EGI is property revenue. Deduct operating expenses to reach NOI; debt service and capital spending come later.
Understand the numbers
A worked example, step by step
Enter 10 units at $2,500 monthly market rent, 5% vacancy, $10,000 annual other income, and zero for loss to lease, credit loss, and concessions.
This fixed teaching example is separate from your saved calculator inputs. Enter the assumptions above to reproduce it.
- Gross potential rent = 10 × $2,500 × 12 = $300,000 per year.
- Vacancy allowance = $300,000 × 5% = $15,000.
- EGI = $300,000 − $15,000 + $10,000 = $295,000.
$295,000 effective gross income
What the result tells you
You still need to deduct property operating expenses to reach NOI, then consider capital spending, debt service, and other owner cash flows separately.
Assumptions to check
In this calculator, vacancy and credit loss are percentages of gross potential rent. Dollar adjustments and other income are annual. Define each loss consistently so the same unpaid rent is not counted twice.
Try one change
Raise vacancy from 5% to 10%. EGI falls by $15,000 to $280,000. Translate that lost income into its effect on NOI before changing a valuation assumption.
Test it in the calculator ↑Learn the concept
This calculator comes from the free Real Estate Finance course, where the concept is taught with readings, worked examples, and practice questions.
When to use this measure
Embed this calculator on your site
Free to embed on any site; the widget includes an attribution link back to this page.
One useful finance email a week
A tool, a number worth knowing, and what it means for your money or your business. From Devon Coombs, CPA, MBA. No spam, unsubscribe anytime.
Built by Devon Coombs, CPA, MBA, Assistant Teaching Professor of Finance at Santa Clara University.