Real Estate Math
A Utah apartment building has an economic vacancy rate of 7% and physical vacancy of 3%. EGI is used by investors to calculate NOI because it reflects:
AOnly the physical vacancies
BTotal income reduced by both vacancy and credit (non-collection) losses✓ Correct
CTotal income increased for market rent
DGross income without any deductions
Explanation
Economic vacancy includes both physical vacancy (empty units) and credit loss (collected but unpaid rent). EGI = Gross potential income × (1 − economic vacancy rate).
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