Property Valuation
What is 'effective gross income' (EGI) in income property analysis?
ANet operating income before tax
BPotential gross income minus vacancy and collection losses✓ Correct
CGross income after all operating expenses are paid
DTotal income from all sources including non-rental income
Explanation
Effective Gross Income (EGI) is calculated by taking the Potential Gross Income (PGI—assuming 100% occupancy at market rents) and subtracting vacancy and collection losses. EGI represents the income the property is expected to actually collect. The next step is to subtract operating expenses from EGI to arrive at Net Operating Income (NOI).
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