Gross Equity Income for Landlords

The annual gross equity income, or GEI, for an investment property is the real (before tax) income produced by the property.

Being able to determine this figure for your rental property is quite handy for getting an accurate account of the property's financial performance. It goes one step further than the gross spendable income, or cash flow, produced by the property. And don't worry, an MBA isn't required for you to determine you property's GEI.

In a nutshell, GEI is simply the annual gross spendable income (cash flow) produced by the property combined with the annual principal payments made on the mortgage. It's a method of treating your mortgage principal reduction as a form of income, even though you actually don't get that money back from the lender.

Example:

A property produces an annual net operating income of $30,000. Annual mortgage payments are $20,000, with $3,000 of that being principal reduction. Determine the GEI for the property.

For more in-depth information on how to use GEI and other financial analysis tools, please visit The Landlord's Library book collection. It's the ultimate, one-stop source for practical, in-depth information on the entire subject of residential landlording.

Return from Gross Equity Income to Investment Property
Cash Flow Analysis