With a Potential Gross Income of $45,600 and a 3% vacancy loss, what is the Effective Gross Income?

With a Potential Gross Income of $45,600 and a 3% vacancy loss, what is the Effective Gross Income?

• A. $43,056
• B. $44,232
• C. $45,600
• D. $42,500

Answer: (B)

To determine the Effective Gross Income (EGI), one must first account for the vacancy loss from the Potential Gross Income (PGI). The PGI represents the total income an income-producing property is expected to generate if fully occupied without any losses. In this scenario, the Potential Gross Income is $45,600. A vacancy loss of 3% should be calculated from this amount. First, calculate the vacancy loss: Vacancy Loss = Potential Gross Income x Vacancy Rate Vacancy Loss = $45,600 x 0.03 Vacancy Loss = $1,368 Next, subtract this vacancy loss from the Potential Gross Income to arrive at the Effective Gross Income: Effective Gross Income = Potential Gross Income - Vacancy Loss Effective Gross Income = $45,600 - $1,368 Effective Gross Income = $44,232 Thus, the Effective Gross Income, after accounting for the 3% vacancy loss, is $44,232. This aligns with the correct option provided, illustrating how vacancy loss directly impacts the income expected from a property.

To determine the Effective Gross Income (EGI), one must first account for the vacancy loss from the Potential Gross Income (PGI). The PGI represents the total income an income-producing property is expected to generate if fully occupied without any losses.

In this scenario, the Potential Gross Income is $45,600. A vacancy loss of 3% should be calculated from this amount.

First, calculate the vacancy loss:

Vacancy Loss = Potential Gross Income x Vacancy Rate

Vacancy Loss = $45,600 x 0.03

Vacancy Loss = $1,368

Next, subtract this vacancy loss from the Potential Gross Income to arrive at the Effective Gross Income:

Effective Gross Income = Potential Gross Income - Vacancy Loss

Effective Gross Income = $45,600 - $1,368

Effective Gross Income = $44,232

Thus, the Effective Gross Income, after accounting for the 3% vacancy loss, is $44,232. This aligns with the correct option provided, illustrating how vacancy loss directly impacts the income expected from a property.