How a Multifamily Developer Came to Build Its Own Valuation and Data Warehouse System

One of the classic decisions in corporate IT is the choice of building your own over buying third-party software. The reported project failure rates—estimates generally range from 50% to 70% that don’t finish on time, on budget, or providing the value they promised—push many companies to buy something that promises to deliver.

But there’s always a trade-off. A commercial application may be finished and polished, but it might not provide what a company perceives that it needs. The choice then is either to settle or to pay for modifications that can complicate the ability to upgrade to future versions.

NRP Group, a multifamily developer and property management firm, had third-party applications to run its operations, but valuation, financial modeling, and the sort was done in Excel, according to Rachel Johnson, a newly promoted principal who joined the firm in 2010 in an accounting role, then became an asset manager, and in 2013 took on the role of chief information officer.

“We had a property management system, but as we were growing, we wanted to do a lot of financial analytics and forecasting,” she tells GlobeSt.com. “Literally within 60 days of employment, I went to the CFO and said, ‘Can I hire someone? Somebody who can program and create databases for me?’ The person I hired is still with me today. He runs my software development team for the entire company now.”

Starting with one database, the IT department was charged with finding ways to help everyone in the company find “things the naked eye won’t see in separate reports.”

From Excel to a database system with Excel acting only as a front end, the ability to manipulate data became more important. But NRP didn’t want to reinvent the wheel, which became a challenging gap to cross.

“There’s lots of software and we were a little bit unique of a company,” she says. “There aren’t as many vertically integrated end-to-end multifamily companies as people might think. We built everything we developed, we managed everything we built. The property management software we were using said you can track ownership—we have this little module over here.”

A little module wasn’t going to do it. “That’s really where your unique valuation models and processes, how you’re structured, how you get your financing and approvals,” Johnson adds. 

So, there was a two-part approach. There were operational software packages that had critical data, and the data was pulled down from them into the data warehouse, but the company didn’t try to replace them. “I’m not going to go out there and reinvent the wheels on basics,” Johnson says. Instead, the approach has been to work with those vendors, get features like application programming interfaces, or APIs, that would given NRP’s systems access to the necessary information. The in-house systems became a large container that encased the third-party software.

“About ten years ago I feel like the model of mid-sized companies went to outsourcing any development,” says Johnson. “They didn’t want to keep it in house. You would hire or contract for that. Or you would buy a large product and pay a lot of money to customize that product for you. I feel we had the capability and the skillset in house and weren’t afraid to make the decision to build and have control, exactly what we needed. It creates a nimble team, an entrepreneurial spirit. “If you relied on contractors or had to ask our vendors to customize, we’d never have the time to make [things] happen.” 

Critical to the approach was Johnson’s background, as she had a practical background in accounting as well as software development. “I can interpret the business,” she says. “I understand how we value our assets and our pro formas and the financial modeling. I understand the data and its uses. So, I was able to act as the data analyst. That’s something often missing in business. You have businesspeople and programmers. You need someone who can interpret.”