Property Valuation
In the income capitalization approach, 'effective gross income' (EGI) equals:
ATotal potential gross income minus operating expenses
BPotential gross income minus vacancy and credit losses✓ Correct
CNet operating income plus operating expenses
DPotential gross income minus debt service
Explanation
EGI = Potential Gross Income (PGI) − Vacancy and Credit Losses. EGI represents the income the property is expected to actually collect. From EGI, operating expenses are subtracted to arrive at Net Operating Income (NOI).
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