What is a critical first step in the income approach for property evaluation?

The critical first step in the income approach for property evaluation is identifying the gross income of the property. This is because the income approach bases property value on the income-generating potential of the property. By starting with the gross income, which includes all potential income before any expenses are deducted, the assessor sets the foundation for understanding the property's financial performance.

Identifying the gross income allows the assessor to assess how much revenue the property could generate under optimal conditions. It provides a baseline figure that can then be analyzed further by accounting for operating expenses, net income, or any potential losses, such as vacancies or collection losses. Hence, it is essential to establish the gross income first, as subsequent calculations regarding expenses or losses are made in relation to this figure.