Azure Tide Realty Practice Test

The resulting figure after deducting vacancy and collection losses from potential gross income and adding income from other sources is known as Effective Gross Income. This term is crucial in real estate, as it provides a more accurate representation of the income that a property is anticipated to generate.

Effective Gross Income reflects the reality of rental income by factoring in the potential loss of income due to vacancies and tenant delinquencies while also accounting for additional income from other operations, such as parking fees, laundry facilities, or storage rentals. This holistic view allows property managers and investors to understand the actual income a property will yield, aiding in financial forecasting and property valuation.

In contrast, the other terms do not encompass the same calculated adjustments. Gross Income refers to the total income before any deductions, and Net Income typically implies the income remaining after all operating expenses have been deducted. Annual Income broadly encompasses income earned over a year but lacks the specificity regarding vacancy and collection losses that Effective Gross Income provides.