What is encompassed by the term 'gross potential income'?

Gross potential income refers to the total income a property could generate if it were fully leased at current market rates, without considering any vacancies or collection losses. This measure is essential in real estate appraisal as it provides a baseline for assessing a property’s earning capacity.

By focusing on 'leased at market rates,' it highlights the maximum income achievable under optimal conditions. This perspective is crucial for investors and appraisers to understand the potential performance of a property in a competitive market, as it establishes expectations that can be analyzed further against actual performance metrics.

Other terms like 'net income' or 'effective gross income' would factor in expenses or vacancies, while historical income refers to past performance which may not be indicative of future potential. Thus, while historical data is important, it does not define the gross potential income unless it reflects the maximum achievable income under current market conditions.