Property ValuationIntermediateDelaware Exam
In an income property analysis, 'potential gross income' (PGI) is:
AThe income actually collected after vacancies and credit losses
BThe maximum income a property could generate if fully occupied at market rentsCorrect
CThe net income after all operating expenses
DThe income reported on the owner's tax return
Why The maximum income a property could generate if fully occupied at market rents Is Correct
Answer B: The maximum income a property could generate if fully occupied at market rents
Potential gross income (PGI) is the total rental income a property would generate if it were 100% occupied at market rents for the entire year. It does not account for vacancies, credit losses, or expenses.
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.
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