What is "potential gross income (PGI)"?

Potential Gross Income (PGI) represents the maximum income a property could generate under ideal conditions, assuming full occupancy and at market rent rates for all spaces. This figure does not take into account any deductions for expenses, vacancies, or concessions such as leasing inducements.

Understanding PGI is crucial for investors and property managers because it serves as a benchmark to evaluate a property's income potential. When assessing a real estate investment, knowing the PGI helps in comparing it to actual income streams and understanding how various factors like vacancies or tenant negotiations impact the overall profitability of the property.

In contrast, the actual income generated after expenses refers to net operating income, which reflects the real financial outcome once costs have been deducted. Income expected from vacant spaces typically relates to projected rents that could be earned if those spaces were leased, but it does not represent PGI itself, as that would apply only to occupied units at prevailing rates. Regular income before leasing inducements are deducted is also not equivalent to PGI, as those inducements are a form of expense that can affect the revenue realized from leasing.