What is included in potential gross income (PGI)?

Potential Gross Income (PGI) encompasses the total income a property could generate if it were fully occupied and all rents were collected without any deductions for vacancies or other losses. This figure provides an important benchmark for evaluating a property’s income-generating capabilities, serving as a starting point in income assessments for property appraisals and financial analyses.

By considering PGI, property owners and investors can understand the maximum income potential before accounting for operational costs, vacancies, or other deductions that may later reduce actual income. This makes it a critical component in real estate strategies and forecasting financial performance.

Some of the other choices do address aspects related to property income but do not accurately capture the complete definition of PGI. Net income after expenses, for example, refers to income remaining after operating costs have been deducted, which is not what PGI represents. Similarly, adjustments for vacancy losses alone only give a partial view of income potential, as they don’t account for the total possible income at full occupancy.