Property Valuation
Under the income approach, 'potential gross income' in Wisconsin refers to:
AIncome after deducting vacancies and operating expenses
BTotal rent if the property is 100% occupied at market rents✓ Correct
CNet income after debt service
DIncome actually collected from tenants
Explanation
Potential Gross Income (PGI) is the maximum income a property could generate if 100% occupied at market rental rates with no vacancies or collection losses.
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Key Terms to Know
Gross Rent Multiplier (GRM)
A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Math Concepts
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