Which term describes the income before accounting for vacancies and operating expenses?

The term that describes income before considering vacancies and operating expenses is known as Potential Gross Income. This figure represents the maximum income that a property could generate if it were fully rented out and had no vacancies or unpaid rents. Essentially, it reflects the theoretical revenue generated from property rental at full occupancy, minus any deductions for possible vacancies and operating costs.

By distinguishing Potential Gross Income from other income metrics, it becomes clear that this measure serves as a benchmark for assessing the property’s income potential. It is foundational in income property evaluation, often utilized in the appraisal process to project future revenue streams.

In contrast, Effective Gross Income accounts for actual vacancy rates and other income loss factors, while Net Operating Income subtracts operating expenses from Effective Gross Income. Market Rent refers to the current rental rates in the market and does not encompass broader income considerations without factoring in potential vacancies or operating overheads. Therefore, Potential Gross Income accurately conveys income generation in an ideal scenario, setting it apart as the correct choice.