Property Valuation
In the income approach, 'effective gross income' is defined as:
APotential gross income multiplied by the cap rate
BPotential gross income minus vacancy and credit losses✓ Correct
CNOI divided by the capitalization rate
DGross rent minus operating expenses
Explanation
Effective Gross Income (EGI) = Potential Gross Income − Vacancy and Credit Losses. It represents the income the property is expected to actually generate after adjusting for vacancies and uncollected rents.
Related Arkansas Property Valuation Questions
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- Which appraisal approach is most commonly used for appraising special-purpose properties such as churches or schools?
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