The equation, Gross Potential Income minus Vacancies and Collection Losses, provides what figure?

The equation Gross Potential Income minus Vacancies and Collection Losses results in Effective Gross Income. This figure represents the actual income that a property is expected to generate after accounting for potential income loss due to vacancies and any other collection losses that may occur.

Effective Gross Income is a crucial metric for property investors and loan originators, as it provides a more accurate picture of the property's income-generating capability. It reflects the realistic cash flow that can be expected rather than just the theoretical maximum income based on full occupancy. Understanding Effective Gross Income helps in assessing the viability of a real estate investment and is a foundational element in calculating other key financial indicators, such as Net Operating Income.