Which term describes the potential income generated from rental property before deductions?

The correct term that describes the potential income generated from rental property before any deductions is "potential gross income." This figure represents the total income that a property could generate if it were fully rented and all tenants paid their rent in full without any vacancies or collection losses. It provides an indication of the maximum revenue a property can achieve under ideal conditions.

Understanding potential gross income is essential for property investors and real estate professionals, as it serves as a baseline for evaluating a property’s financial performance. From this amount, other deductions like vacancies, repairs, and operating expenses can be subtracted to arrive at net operating income, which gives a clearer picture of actual cash flow.

Contextually, other terms in the options relate to income calculations but with different implications. For instance, net operating income involves deductions for expenses, while effective gross income accounts for anticipated vacancy losses. Annual net income typically reflects actual profits after all expenses, which would be less than potential gross income and not what the question is asking for.