What does potential gross income assume about the property?

Potential gross income refers to the total income a property could generate if it were fully leased and operating at maximum capacity, without accounting for any operating expenses or vacancy losses. This concept assumes that all available rental units or spaces are rented out at market rates. When evaluating potential gross income, the focus is on the best-case scenario for income generation, which represents the highest income the property could realistically produce under ideal leasing conditions.

In this context, the assumption is not about the presence of multiple tenants or the current market value of the property, nor does it factor in any consistent loss from vacancies. Instead, it strictly considers the income potential based on the property being fully leased, highlighting its capacity to generate financial returns. This is critical in real estate valuation and investment analysis, as it provides a baseline for assessing the income potential before expenses or market fluctuations are taken into account.