Property Valuation
In the income approach, 'effective gross income' differs from 'potential gross income' by:
AOperating expenses
BSubtracting vacancy and credit losses✓ Correct
CAdding the land value
DDividing by the cap rate
Explanation
Effective Gross Income (EGI) = Potential Gross Income (PGI) − Vacancy and Credit Loss. PGI assumes 100% occupancy; EGI accounts for realistic vacancy rates and uncollected rents.
Related Massachusetts Property Valuation Questions
- A Massachusetts appraiser using the cost approach values a building at $320,000 (replacement cost new). The total accrued depreciation is $80,000. The land is valued at $95,000. The total property value indicated by the cost approach is:
- An appraiser uses three comparable sales to estimate the value of a subject property. The adjusted values of the comparables are $415,000, $422,000, and $418,000. Which value should the appraiser most likely assign?
- The 'effective gross income' (EGI) of a rental property is calculated as:
- An appraisal performed for a Massachusetts estate settlement purpose is most likely to use:
- In Massachusetts, an appraiser analyzing an investment property with expiring below-market leases would use what approach to capture their impact?
- The gross rent multiplier (GRM) is calculated as:
- A Massachusetts appraiser must retain a workfile for a non-federally related residential appraisal for at least:
- The principle of 'substitution' in real estate appraisal states that:
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