In determining income and expenses, what is the first step?

The first step in determining income and expenses in an appraisal context is to conduct a lease and rent analysis. This analysis provides a foundational understanding of the current rental market, enabling the appraiser to assess the income potential of the property accurately.

By analyzing existing leases and comparable rental properties, the appraiser can discern the amount of rent being paid for similar properties, any concessions being offered, and the typical lease terms in the area. This initial step is crucial, as it informs subsequent estimates of effective gross income and operating expenses based on realistic market conditions.

Conducting a lease and rent analysis allows the appraiser to establish a well-supported baseline income, which is essential as they progress to other analyses like calculating effective gross income, estimating operating expenses, and conducting market evaluations. This foundational information influences not only the income aspect but also the overall value and investment viability of the property.