Which component contributes to potential gross income for a rental property?

Which component contributes to potential gross income for a rental property?

• A. Operating expenses
• B. Mortgage payments
• C. Rental income from tenants
• D. Income tax refunds

Answer: (C)

Potential gross income is the maximum rent the property could bring in if it were fully leased at market rates. The component that contributes to this top-line figure is rental income from tenants, since that is the actual money expected from leases. Operating expenses are costs of running the property, mortgage payments are financing costs, and income tax refunds are not rental revenue. In practice, vacancies and credit losses can lower the potential gross income to the actual figure, known as effective gross income.

Potential gross income is the maximum rent the property could bring in if it were fully leased at market rates. The component that contributes to this top-line figure is rental income from tenants, since that is the actual money expected from leases. Operating expenses are costs of running the property, mortgage payments are financing costs, and income tax refunds are not rental revenue. In practice, vacancies and credit losses can lower the potential gross income to the actual figure, known as effective gross income.