Property Valuation
A Mississippi property's 'potential gross income' (PGI) is defined as:
AActual rent collected in the prior year
BThe total income the property would generate if 100% occupied at market rents✓ Correct
CNet operating income plus vacancy allowance
DThe income after all expenses are deducted
Explanation
Potential gross income (PGI) is the maximum income the property could generate if it were 100% occupied at market rental rates with no vacancy or collection losses.
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Key Terms to Know
Gross Rent Multiplier (GRM)
A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Math Concepts
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