Property Valuation
A property's 'potential gross income' (PGI) in the income approach differs from 'effective gross income' (EGI) because:
APGI includes only residential units; EGI includes commercial units
BPGI is the maximum income if fully occupied at market rents; EGI subtracts vacancy and credit loss from PGI✓ Correct
CPGI is the income before taxes; EGI is the after-tax income
DPGI and EGI are synonymous terms used interchangeably
Explanation
Potential Gross Income (PGI) is the total income a property would generate if 100% occupied at market rents, plus other income sources. Effective Gross Income (EGI) adjusts PGI downward for vacancy and credit loss (uncollected rents). EGI = PGI - Vacancy & Credit Loss. Net Operating Income (NOI) = EGI - Operating Expenses. This income chain is fundamental to the income capitalization approach used for Illinois investment properties.
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