Property Valuation
In the income approach, what does effective gross income (EGI) represent?
AThe maximum potential rental income if fully occupied at market rent
BPotential gross income minus vacancy and credit losses✓ Correct
CNet operating income before depreciation
DGross rental income after deducting all operating expenses
Explanation
Effective Gross Income (EGI) = Potential Gross Income − Vacancy and Credit Losses. It represents the income actually collected after accounting for empty units and non-paying tenants.
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