Property Valuation
In the income approach to valuation, 'effective gross income' is calculated by:
AMultiplying potential gross income by the cap rate
BSubtracting vacancy and collection losses from potential gross income✓ Correct
CAdding operating expenses to net operating income
DDividing net operating income by the property value
Explanation
Effective Gross Income (EGI) = Potential Gross Income (PGI) minus vacancy and collection losses. EGI represents the income a property is expected to actually collect after accounting for the reality that units may be vacant or tenants may not pay.
Related New Hampshire Property Valuation Questions
- An appraiser in Nashua, NH determines that the highest and best use of a commercial corner lot is a mixed retail/residential development rather than single-family residential. This conclusion:
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