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Determining the net operating income (NOI) is a crucial first step in valuing a commercial property, as it provides a clear picture of the property's earning potential. NOI is calculated by subtracting operating expenses from the gross income generated by the property. This figure not only reflects the operational efficiency of the property but also serves as a baseline for various valuation methods, particularly the income approach.

Once the NOI is established, it can be used to estimate the property's value by applying a capitalization rate, offering a more accurate view of what the property is worth from an investment perspective. This foundational step ensures that subsequent analyses, such as applying the cost approach or utilizing the sales comparison approach, are grounded in an understanding of the property's income-generating capabilities.

Other methods, like the cost approach or sales comparison approach, may rely on different sets of data and assumptions, but determining the NOI is essential for a focused evaluation of a commercial property's financial status. Lastly, reconciliation of values typically occurs after various valuations are performed; it synthesizes the different results into a final estimate, making it a subsequent rather than initial action in the valuation process.