What does "effective gross income" refer to in real estate appraisal?

Effective gross income in real estate appraisal refers specifically to the projected income from a property, adjusted for anticipated vacancies and collection losses. This concept recognizes that not all rental income will be collected due to potential vacancies when units are unoccupied or tenants fail to pay their rent on time. By factoring in these expected losses, the effective gross income gives a more realistic picture of the actual income a property can generate.

This metric is crucial for appraisers and investors because it allows for a better assessment of a property's performance and helps in making informed decisions about investments. Other choices, while related to income calculations, do not encapsulate the specific adjustments for vacancies and collection losses that define effective gross income. For instance, total expected rent income after expenses does not account for these losses, while net income after property taxes looks at post-expense scenarios rather than the initial expected gross. Income from all property-related activities is broader and may include different revenue streams, but does not specifically target the adjustments needed to achieve effective gross income.