reAlpha is a proptech company that aims to democratize short-term rental investments. They do so by allowing users to buy a fractional ownership on an Airbnb home for as little as $500 instead of having to spend hundreds of thousands of dollars to purchase a property and get it ready for Airbnb. To be able to do this, reAlpha needs to build a portfolio of properties that they can list on Airbnb.
Initially, reAlpha employed a group of analysts to review and assess the properties that were up for sale. The analysts would create financial projections estimating the rental income the property can bring and the valuation that the property can reach in the future. This, together with the understanding of the broader market trend, went into making the decision of whether to buy the property or not.
However, this process was slow. An analyst could barely evaluate 4-5 properties in a day. They had to look up multiple sources to find information relevant to the property, search for similar properties that were sold recently to derive the right value of the property and compare one property with another to ensure that they are buying the property with the highest return on investment.
This is when Naamche partnered with reAlpha to help solve this problem with AI. We helped reAlpha to ideate and build a proprietary AI technology called reAlpha BRAIN which had the capability of assessing 500-600 properties a day. The result of each assessment was to assign a score (called “reAlpha score”) to each property. The higher the score, the greater the likelihood of it yielding a good return as a short-term rental property. The reAlpha BRAIN technology increased the efficiency of reAlpha’s operations team in the following ways:
The reAlpha BRAIN technology has integrations with different third party data providers to fetch all the data relevant to a property. This includes data about the property’s structure like the bedrooms, bathrooms and square footage of the property as well the data about the neighborhood and market like the property valuation trend, walkability, demographics, list of tourist attractions, etc. Instead of having to scour the internet repeatedly to find the information for each property, the analysts can now view all the necessary details conveniently on the same platform.
Taking it one step further, once the data is collected for a property, the AI algorithm of reAlpha BRAIN analyzes a property and outputs an analysis report. The report provides the reAlpha score for the property together with important metrics and indicators like cap rate, cash flow, 5 year revenue projections, estimated expenses in tax, insurance, maintenance and repairs, etc. This allows analysts to easily compare one deal with another and choose the deal with highest return. reAlpha BRAIN also automatically filters out properties that do not meet reAlpha’s criteria. There are certain properties that might be in markets that do not interest reAlpha or properties that are too expensive for the amount of returns they generate. Removing such properties from the decision making process early on helps the analysts to not get overwhelmed by abundance of choices.