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Gross Scheduled Income in Commercial Real Estate
Gross scheduled income (GSI), sometimes referred to as gross potential income (GPI), is the amount of money a commercial property can generate, assuming 100% rental occupancy. It is often compared to gross potential rent (GPR), but gross scheduled income includes other, non-rental sources of income, such as parking spots or income from vending machines.
What is Gross Scheduled Income for a Commercial Property?
Gross scheduled income (GSI), sometimes referred to as gross potential income (GPI), is the amount of money a commercial property can generate, assuming 100% rental occupancy. It is often compared to gross potential rent (GPR), but gross scheduled income includes other, non-rental sources of income, such as parking spots or income from vending machines.
Gross Scheduled Income vs. Gross Potential Rent Example
For example if an apartment building has 15 units, each which rents for $2,000/month, the gross potential rent would be $30,000/month, or $360,000/year. However, if the building also has 35 parking spots, each which rents for $100/month, and can expect a vending machine income of an additional $250/month, than the gross scheduled income would be $33,750/month, or $405,000/year.
Gross Scheduled Income vs. Effective Gross Income
Another metric, effective gross income (EGI), reflects the income that a property owner is actually earning. It can be calculated by taking a property’s gross scheduled income and subtracting vacancies and credit loss, which occurs when a tenant does not pay part or all of their rent. While an investor may not immediately know the exact vacancy rate of a commercial property, an estimate of 5% is generally a good place to start.
In the same example mentioned above, if we estimate that the building has a 5% vacancy rate, for both apartments and parking spots, (assuming the vending machine income remains the same), the effective gross income would be approximately $385,000. In addition, EGI is one of the main metrics used to calculate net operating income (NOI), which itself is used to calculate debt service coverage ratio, cap rate, and other essential CRE metrics.
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Related Questions
What is gross scheduled income in commercial real estate?
Gross scheduled income (GSI), sometimes referred to as gross potential income (GPI), is the amount of money a commercial property can generate, assuming 100% rental occupancy. It is often compared to gross potential rent (GPR), but gross scheduled income includes other, non-rental sources of income, such as parking spots or income from vending machines.
For example if an apartment building has 15 units, each which rents for $2,000/month, the gross potential rent would be $30,000/month, or $360,000/year. However, if the building also has 35 parking spots, each which rents for $100/month, and can expect a vending machine income of an additional $250/month, than the gross scheduled income would be $33,750/month, or $405,000/year.
How is gross scheduled income calculated in commercial real estate?
Gross scheduled income (GSI) is calculated by adding up all of the potential rental income from the property, as well as any other sources of income, such as parking spots or income from vending machines. For example, if an apartment building has 15 units, each which rents for $2,000/month, the gross potential rent would be $30,000/month, or $360,000/year. However, if the building also has 35 parking spots, each which rents for $100/month, and can expect a vending machine income of an additional $250/month, than the gross scheduled income would be $33,750/month, or $405,000/year.
What factors affect gross scheduled income in commercial real estate?
Gross scheduled income in commercial real estate is affected by the number of rental units, the rental rate for each unit, and any additional sources of income, such as parking spots or vending machines. For example, if an apartment building has 15 units, each which rents for $2,000/month, the gross potential rent would be $30,000/month, or $360,000/year. However, if the building also has 35 parking spots, each which rents for $100/month, and can expect a vending machine income of an additional $250/month, than the gross scheduled income would be $33,750/month, or $405,000/year.
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What are the benefits of gross scheduled income in commercial real estate?
The benefits of gross scheduled income in commercial real estate are that it provides a more accurate picture of the potential income of a property. Gross scheduled income includes not only rental income, but also income from other sources such as parking spots and vending machines. This allows investors to get a better understanding of the potential return on their investment. Additionally, lenders may use gross scheduled income to determine the loan amount they are willing to provide for a property.
What are the risks associated with gross scheduled income in commercial real estate?
The risks associated with gross scheduled income in commercial real estate include the potential for vacancies, tenant turnover, and unexpected expenses. Vacancies can occur when tenants move out and the property owner is unable to find a new tenant quickly. Tenant turnover can occur when tenants move out and the property owner is unable to find a tenant willing to pay the same amount of rent. Unexpected expenses can occur when the property owner has to make repairs or upgrades to the property in order to attract new tenants.
It is important to note that gross scheduled income is an estimate and not a guarantee of income. Property owners should always be prepared for the possibility of vacancies, tenant turnover, and unexpected expenses.