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

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.