Collection Allowance

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A Collection Allowance is deducted from Potential Gross Income for the loss of income for the failure to collect rent due or for tenants' bad checks.

 

The collection allowance is usually estimated as a percentage of potential gross income and is based on historical collection problems or abstracted from the market.

 

It is likely that the collection allowance will vary with each property appraised so no set formula or percentage is appropriate.

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