What is Net Income in the context of real estate?

Net Income in the context of real estate refers specifically to Effective Gross Income minus the building expenses. This calculation is crucial for real estate investors and property managers as it provides a clear picture of the profitability of a property. Effective Gross Income represents the total income generated by the property after accounting for vacancies and rent losses, while building expenses include operating costs such as maintenance, property management fees, property taxes, and insurance.

By subtracting these expenses from Effective Gross Income, investors can determine the actual income that remains after all costs are taken into account. This figure aids in evaluating the financial performance of an investment property and is essential in calculating metrics like cash flow and return on investment. Understanding net income is critical for making informed decisions regarding property management and investment opportunities.