Potential gross income differs from effective gross income in that PGI assumes:
Correct Answer
A) Full occupancy at market rent with no collection losses
Why this is correct: As the original explanation states, Potential Gross Income (PGI) is the theoretical maximum income assuming 100% occupancy at current market rents with no collection losses. It represents the income ceiling before any deductions. Why the other choices are wrong: 'The property has been sold at the end of the projection period' describes a reversion, not an income measure. 'All operating expenses have already been deducted from receipts' describes Net Operating Income (NOI). 'Only the units currently occupied by paying tenants are counted' describes actual collected income, not PGI. Exam tip: PGI = Perfect world income; EGI = Real world income after vacancy/collection loss.
Why This Is the Correct Answer
Why this is correct: As the original explanation states, Potential Gross Income (PGI) is the theoretical maximum income assuming 100% occupancy at current market rents with no collection losses. It represents the income ceiling before any deductions. Why the other choices are wrong: 'The property has been sold at the end of the projection period' describes a reversion, not an income measure. 'All operating expenses have already been deducted from receipts' describes Net Operating Income (NOI). 'Only the units currently occupied by paying tenants are counted' describes actual collected income, not PGI. Exam tip: PGI = Perfect world income; EGI = Real world income after vacancy/collection loss.
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