Property Valuation
A Vermont appraiser applies the income approach to a 12-unit apartment building. The appraiser determines the gross income, deducts vacancy and credit losses, and adds other income to arrive at:
ANet Operating Income
BEffective Gross Income✓ Correct
CCash Flow Before Taxes
DAdjusted Sale Price
Explanation
Effective Gross Income (EGI) = Potential Gross Income − Vacancy & Credit Losses + Other Income. The EGI is then reduced by operating expenses to arrive at Net Operating Income (NOI), which is capitalized to produce a value estimate.
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