In the income approach, 'effective gross income' (EGI) is calculated as:
Why Potential gross income minus vacancy and credit loss Is Correct
Answer B: Potential gross income minus vacancy and credit loss
Exam Tip: Property Valuation
Valuation questions focus on the three approaches to value: sales comparison, cost, and income. Know which approach is best for which property type. The income approach uses cap rate and NOI — memorize these formulas.
Key Property Valuation Terms in This Question
People Also Study
Related Alaska Questions
- A 10-unit apartment building in Anchorage generates $1,200/month per unit. Vacancy and credit loss is 5%. What is the Effective Gross Income (EGI) per year?Real Estate Math
- Under the income approach, effective gross income (EGI) is calculated as:Property Valuation
- An Alaska property generates annual gross rental income of $36,000. The vacancy and collection loss is estimated at 5%, and operating expenses are $12,000. What is the net operating income (NOI)?Property Valuation
- An Alaska property generates annual gross rents of $72,000. The vacancy rate is 5% and operating expenses equal 40% of effective gross income. What is the NOI?Real Estate Math
- An Alaska commercial property has a potential gross income of $200,000, vacancy rate of 5%, and operating expense ratio of 45% of EGI. The NOI is:Property Valuation
- An Alaska property has a gross potential income of $96,000. After deducting a 5% vacancy allowance and $32,000 in operating expenses, the NOI is:Property Valuation
- A building in Anchorage has 12 units, each renting for $1,650/month. Annual operating expenses are $42,000 and vacancy is 6%. What is the NOI?Real Estate Math
- An Alaska investor purchases a fourplex for $600,000. Each unit rents for $1,200/month. The vacancy rate is 8% and annual operating expenses are $28,000. What is the NOI?Real Estate Math
Key Terms to Know
The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
DepreciationA reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Math Concepts
Study This Topic
Practice More Alaska Real Estate Questions
1,400+ questions covering all exam topics. Start free — no signup required.
Take the Free Alaska Quiz →