How Kelsey Management Used AI to Efficiently Evaluate Deals

Kelsey Management faced a complex challenge in the rental real estate market: efficiently analyzing extensive financial data from various properties owned by different landlords across the U.S. The primary objectives were:

• Comprehensive Analysis: To perform an in-depth analysis of the expenses and revenue generated over the past year for these properties.
• Identifying Opportunities: Uncover areas or strategies to enhance Net Operating Income (NOI) for landlords.
• Dealing with Data Diversity: The data was inconsistent, with varying formats and layouts, making standard analysis methods ineffective.

To tackle these challenges, Kelsey Management employed an innovative, AI-driven approach:

• Data Parsing and Extraction: Developed flexible algorithms for scanning and extracting financial data from raw Excel files, irrespective of format.
• Dynamic Field Recognition and Normalization: Implemented algorithms that dynamically recognized and categorized income and expense fields, normalizing the data despite format inconsistencies.
• Utilizing OpenAI's GPT-4: Leveraged the advanced capabilities of GPT-4 for matching raw fields with predefined standard fields, ensuring accurate data categorization.
• Comprehensive Temporal and Comparative Analysis: Performed detailed analysis to observe trends over time and across different properties.
• Outlier Detection and Confidence Reporting: Applied advanced techniques to identify anomalies and report confidence levels.

The application of AI and machine learning technologies yielded significant results:

• Standardized Data Format: Achieved a uniform and consistent format across diverse datasets, facilitating easier analysis.
• Identified Opportunities for NOI Enhancement: The analysis provided actionable insights for landlords to maximize profitability.
• Human-in-the-Loop Learning: A system involving continuous improvement through human feedback was established, enhancing accuracy and efficiency.
• Metrics of Success:
• NOI Margin Improvement Rate: Percentage increase in NOI margin.
• Vacancy Rate Reduction: Decrease in unoccupied units, maximizing rental income.
• Operating Expense Ratio Optimization: Lowered operating expenses as a percentage of total revenue.
• Rent Growth Rate: Annual increase in rental income.
• Average Days to Lease: Reduced time to lease properties.
• Tenant Retention Rate: Increased rate of tenants renewing leases or staying on.
• Maintenance Cost Efficiency: Decrease in maintenance and repair costs relative to property value and total revenue.
• Portfolio Diversification Impact: Measured the effect of diversifying rental property types on NOI growth.

Kelsey Management effectively utilized AI to transform complex and varied financial data into actionable insights, leading to enhanced profitability in the rental real estate sector.