Saturday, June 26, 2010

New ONEprop Office in Houston? Why Houston and Why Now?

Two posts from me in one day.  I have already posted a copy of the press release about our new office in Houston.  Here is an explanation on why we are opening the new office.

You may or may not be aware, but we are constantly on the lookout for opportunities to expand our services to more clients.  We do this in two primary ways, 1) we add more clients in an existing market or 2) we open into a new market.  When ONEprop was first started we focused on a small subset of the Dallas/Fort Worth real estate market, specifically the North Dallas/East Dallas area.  We knew these areas very well and we already had a portfolio of homes to manage because the founders of ONEprop owned investment properties in this area.

Over time we grew by adding new areas of the Dallas/Fort Worth market to our service area.  During these growth periods we developed processes for effectively analyzing where market specific issues needed to be customized and where we could standardize.  We developed enhanced training processes so new staff could be added who would bring the core values and expertise to focus for our clients, no matter where they had an investment property.

Our next stage of growth was when we added our first branch outside of the Dallas area by opening an office in Tulsa.  This allowed ONEprop to further understand how to offer superior service in a cost effective manner in new markets which are not physically adjoining a current market.  We also had to understand the challenges of different states laws and regulatory entities into an existing infrastructure.  Based on this experience we learned that we have to be selective in the states where we operate, choosing markets whose landlord/tenants laws allowed us to leverage our existing business processes.

So why Houston?  To paraphrase the famous bank robber Willie Sutton; when asked why he robbed banks, he is reported to have explained, "Because that is where the money is".  ONEprop is opening in Houston because we recognize Houston as a key market where investors in single family homes can make a profit by having the home as a rental property.  This goes back to a basic ratio we analyze when determining if an asset can perform for profit, what we call the rent/value ratio.  We are opening in Houston because that is where the need is and we can provide this service in a cost effective manner as a viable long term provider.

ONEprop's focus is the investor owner who holds a piece of income producing real estate over a longer period of time usually 10-15 years.  In order to hold a property for this long the property must produce enough income to cover the cost to purchase the asset and ongoing expenses.  These investors are the people who need our services.  Additionally, we operate in a low margin business where the start up costs (to us) of a new client are fairly high compared to profit we receive, so we need situations where a client holds the asset for at least five -ten years.  We cannot provide our services at the level we demand of ourselves in markets where a client has a large negative cash flow or is a buy and flip investor.  Actually, we could, but we would not be in business very long since it would be a money losing proposition.  The simple truth is that we need to have our clients make money, but we need to make money as well.

Houston, Denver, Las Vegas (with the current, past-crash, cost to acquire a single family house) and Salt Lake City are all location we recognize as potential markets for us to offer our services to our target clients.  The question for us is how and when do we start in these new markets.  In Houston our start up costs are lower then starting in a new state because we are already a licensed Texas business and licensed Texas Real Estate Broker.  We have partnered in Houston with an asset management firm, and this allows us to open our office with an immediate city wide presence, providing full staffing required to offer coverage to a very large city.

In 2011 we expect to open in Denver in April as well as one other city (most likely Salt Lake or Las Vegas).  Ideally it would happen with a partner which could provide an immediate revenue stream (like Houston), but ONEprop is prepared to make the start up investment regardless.  In preparation we have already hired staff into our training program.  We have experienced employees in our Dallas office who are already trained and ready to go into these new areas, and we will partner with experienced Realtors in these new markets when we open the new offices.  It is a system which we have proven works, and we have the processes and support structure to make these new opportunities successful.

So, ONEprop open new offices and we become larger.  How does this benefit a single owner of a single home in a single city?  The fact is that as we have become larger each and every individual client benefits.  Our experience and procedures are developed and refined so that the extraordinary becomes ordinary.  With over 3,000 different properties actively under management we see things on a daily basis which are unusual for smaller firms.  As a result we have experience and tried and tested solutions, we are not learning at your expense.  Additionally, we better  leverage our marketing presence in each and every market to locate more and better tenants.  As a recognized thought leader in our industry we have access to resources a smaller firm cannot tap into.  Lawyers, accountants, software developers, insurance underwriters and other experts in the fields which impact you, these are people we deal with on a day to day basis.  This expertise stands behind everything we do.

How big will ONEprop become?  Our goal is not size for the sake of size.  It is to find the proper opportunities where we can bring a difference that matters.  I seriously doubt we will ever open an office in New York or Boston.  The laws are too different in these states, the product is too different and our business processes do not conform to what would be a successful service provider.  It is more likely we shift our focus from west to east and work in other Sunbelt states like Georgia, Florida or the Carolina's, but that is likely many years away, it takes time and money to develop the resources and experience to provide our services at the level we demand.

To close, I want to thank all of our clients who have supported us through the 20+ years we have been in business, especially over the past 7-8 years of expansive growth.  You have help shape ONEprop into the superior service provider in our field.  Our first goal is always to take care of you and your needs.  Our clients have pointed out when we may have fallen short of our goals, but you have allowed us to fix problems as they occurred.  We are more confident than ever of our ability to help new clients without a negative impact on those clients who have committed their investments to us until now.  If this ever turns out to not be true, please let me know so we can solve new problems as they occur.

1 comment:

Anonymous said...

Congratulations on opening in Houston. I hope that you are looking at Southern California as well, it is difficult to find a professional property management company in the Los Angeles/Orange/Riverside Counties Market. Maybe there is a company that is 'ripe' for a take over!?!?