What is Potential Gross Income?

Potential Gross Income (PGI) refers to the total income that a property could generate if it were fully rented and operated at full capacity, without accounting for any deductions such as vacancy losses or operating expenses. This concept is crucial in the appraisal and assessment process as it provides an estimate of the maximum revenue potential of a property.

When considering the income generated by a property, PGI represents an optimistic view of what could be earned under ideal conditions. It includes all possible income from rent, as well as any additional income streams that the property may offer, like fees for amenities or services.

Understanding PGI is fundamental for appraisers as it lays the groundwork for further calculations, including effective gross income and net operating income. It encapsulates the revenue potential before any overhead or operational costs are factored in, making it a critical metric in property valuation.