is the annual "income" in the income approach formula.

The calculation of the net operating income (NOI) begins with the calculation of the potential gross income (PGI) – which is the maximum income the property is capable of generating. Next, effective gross income (EGI) is calculated which is equal to the PGI minus the appropriate vacancy and collection losses for the type of property. The NOI is the result of reducing the EGI by the operating expenses as shown in the following:

PGI – Vacancy and Collection Losses = EGI
EGI – Operating Expenses = NOI