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Listen to the episode TranscriptMichael Frank, Prefab Review: I think we're good. Hey, everyone. Welcome to the prefab review podcast. And in this case YouTube page or video or whatever. I'm Michael Frank the host, and I'm excited to be joined by Toby Long from Clever Homes. Just a quick note on this. Toby and me have been talking about this for a while, but we're going to do a little bit at least a short series of a couple of these podcasts, trying to demystify certain parts of the prefab, building apparatus, talk about industry issues, answer questions we get a lot.

Toby came to me and said, Hey, I want to do something new as a resource for people in the industry. So hopefully we succeed at that. But please give us feedback and even suggestions for a name for this, because it's all still work in progress. Anyway, Toby, thanks for joining.

Toby Long, Clever Homes: Yeah, Michael. Thanks. I'm excited. Like you said, I think this is a chance to just share some experiences. I think both of us probably get a lot of similar questions. And I like this notion of demystifying parts of what we've been working on together and collectively for so long.

It's exciting to see the continued evolution of this process. And I think people continue to get really excited about how to apply these types of building strategies to projects. Clearly there's some current topics that I think are going to continue to drive people to explore prefabrication and offsite construction methods.

And I've always felt like a lot of the things I talk about with prospective clients or people that are motivated, at least shared by a lot of people. So hopefully this is a way to create a little repository of additional information to help people continue to think about how this might apply to their projects.

Michael Frank, Prefab Review: Yeah, totally. Just to give everyone a little context on Toby and I. Toby is a true expert in this. Toby can give his bona fides in a second, but he's been one of the leading architects in prefab and modular housing for, whether it's 20 years or more, but longer than I've been in this space.

He can give a little more context in a second, but he is intimately involved in all parts from entitlement, planning, designing and then actually helping on overseeing and working on the construction part. I and this, our site prefab review is not that. We are involved with a tremendous number of projects because we have, hundreds of thousands or millions of users a year and we help them with projects, but we really take the perspective of doing deep research, but also being hyper pragmatic.

So I expect that I'll occasionally push back, but a lot of these conversations will actually be me representing the user and kind of collectively trying to tap into Toby's expertise. With that being said there, we'll do this on a lot of topics, but unfortunately though honestly not unexpectedly, there's another fire in the news.

As I said, prefab review has been around for seven or eight years. And this is at least the third or fourth considerable fire in California alone, where we've had to deal with. There's the Tubbs fire. There's been a bunch of stuff in Wine Country. And now there's been a series of fires in different parts of Los Angeles, particularly in the Pacific Palisades area.

And unsurprisingly there's a lot of motivated people who want to rebuild their house as quickly and beautifully. Cost effectively as possible. So we've been getting a lot of inbound traffic and I know Toby has as well with lots of questions. Yeah, we're going to dive into all things fire rebuild on this podcast.

With that being said, Toby, do you think you can give people a little bit more perspective on your background and your experience with fire rebuilds?

Toby Long, Clever Homes: Yeah, for sure. And I love Michael that you also have this sort of unique perspective because you are at the front of all of this, I think people that are curious about what this industry is, which surely is something to be curious about.

They find you and they seek you out and they, benefit from your ability to see this community grow and define itself. And I think what we both know from being in this space is there's a lot of variation. There's not a lot of consistency, I think, in how prefabrication is understood.

At least in the United States I don't pretend to have worldview around this. But I think, in the. Yes. This has been a frothy churning kind of community that's tried to define itself for a long time. And certainly it's been fun to participate in this kind of renaissance moment. But being at the very front, understanding the market at large is a unique perspective.

So I hope through some of this banter that I get to ask you some questions too, because my perspective is important, but also, in a different moment where I think people have understood to some extent how these ideas and these concepts for building may apply to what they're doing and have understood to some extent where these resources live.

And then they can start to talk more specifically with me and, of course, other colleagues and cohorts in our space who have, equal and meaningful contributions as well. So like you said, a little background, I'm an architect. I'm a licensed architect. I grew up in architecture.

Pennsylvania nerdy kid, stepfather was a builder, found my way into this industry as a teenager been around it most of my life. I trained at the Rhode Island School of Design, moved out to California after school and really tried to build a practice from an early point in Professional life that was driven to things that were a little maybe less conventional, started in green building, quickly found our way into the offsite space.

And I've formed up a company and a bit of a brand working with clients on various forms of prefabrication. My sort of process is a little different because I work as an architect. We are there to help people understand different, Construction methods and technologies. We have expertise in modular building and panelized construction, even traditional construction as steel is finding its way into the marketplace might be a topic to discuss at some point.

But we, are there to help our clients from beginning to end. It has built a knowledge base of sorts, maybe some gray hair here around what it takes to be successful with building projects that involve factory partners in all their various forms. Obviously there's a big piece of this experience, which is not related to the building, and this is important for people to understand, site work, infrastructure, utilities all these things are important topics. And fire rebuilding projects also have some uniqueness, which I think is worthy to discuss or to try to understand. And then, of course, how to engage with factory partners and what the industry looks like in the kind of nature of these relationships are all things that we bring our clients through and.

Try to help people find each other in this space and ultimately put together all the details and information that's really required to have successful building projects. It's been an interesting journey to explore our space and, our place in this industry.

And I come at it through design, so my work is a little bit more I don't know, tailored, in some way to our clients needs and goals. That's not novel unto itself, but does, have a slightly different relationship to some of the more transactional models of selling buildings and utilizing prototypical designs, all of which is an important part of the industry, and, again, creates this sort of wide perspective of how prefabrication is applicable, which I love that you wrap your arms around and help people try to discover the right people and the right methods to engage with the industry.

Yeah, just a little bit back story there, but that hopefully lays a little groundwork and provide some context for things that we can talk about.

Michael Frank, Prefab Review: Perfect. Okay, so from an agenda perspective this is what I'm thinking. Tell me if you think this is okay, Toby. So Toby on his website, which hopefully you all can see.

But if not, it's Clever Homes. Just look up Clever Homes, Toby Long and you'll find the projects. Toby has a number of projects. There are fire rebuilds partly because I think it just increases credibility, but it makes it a little more tangible. I want to go through one of those three projects right now.

Then I'm hoping after that we can run through my kind of FAQs, the stuff that we're getting in through our site, the stuff I would, recommend to my mom if her home burned down. And then we can see if we have time for the other ones.

Toby Long, Clever Homes: Your mom's neighbor.

Michael Frank, Prefab Review: My mom's neighbor. Yes. My aunt. Okay. Yeah let's dive into this. So you tipped me off ahead of time. Hey, here's some projects where I've, worked on fire rebuilds in the past. So I've got the Santa Rosa project one up if that's okay, but maybe you can talk through and, provide some current info.

Toby Long, Clever Homes: Yeah, it's a good starting point. So this is a project that is located in a community called Fountain Grove that now has some notoriety. This was a community that was really devastated by the Tubbs fire. I should have prepped. I don't exactly remember what year I want to say. 2017, 2018.

Michael Frank, Prefab Review: Sounds about right.

Toby Long, Clever Homes: Yeah. Yeah. Pretty devastating fire. I don't think it's fair to compare fires. That's probably something we would avoid. But a lot of people lost their homes as we're now seeing in Los Angeles. Slightly different in that this was a community that was a little bit less dense than both Palisades and Altadena.

It wasn't so much structure fires adjacent to each other but was very much driven by a similar circumstance of high winds. I believe the start of the fire may have been PG & E or may have been electrical wires. I'm speaking a little out of turn here. So hopefully people correct us in the comments.

But anyway, this was a project that we were invited to help our clients rebuild from their loss. Interestingly, most of the projects that I've worked on were at least two of them in particular in the Santa Rosa and Sonoma County areas. Our clients had motivation to try to really recreate the house they lost which in some ways and maybe to the FAQ section of this, does play into permitting and plays into kind of the resiliency programs, or at least that's how Sonoma County was defining it as they created a department, which was specific for the approvals for building permits for fire reconstructed property.

But one of these categories, and I think we're gonna see this in Los Angeles, is gonna be related to rebuilding kind of the house that was lost. I think there's a little bit of an opportunity, I choose words carefully maybe because of the nature of these types of conversations, the people have lost homes, but to the extent there is an opportunity to build, a home which has better R values or is more resilient or whatever.

But I think in terms of, this project in particular, my client was really motivated to try to replace the building. Now interestingly, as you can see here, this doesn't look like a modular geometry, right? This is not a square building that we just dropped some boxes around.

So we had to work closely with our client to really understand how to leverage offsite construction practices and how to manage some of their expectations for both the plan geometry and this sort of bent, shaped kind of courtyard for plan - you can see those lounge chairs in the middle of outdoor space. The house kind of bends around the site around the property a little bit. And then how to also capture their imagination for the architecture of the home, which was slightly different. So I do think there's a subtle distinction here Michael, that may emerge in all of our conversations about reconstruction, where you rebuild the site.

As it was or you rebuild the plan like the floor plan as it was and then do you also rebuild the style or the architecture as it was. I think people are going to judge each of those a little differently. As far as I understand, and our experiences go we didn't really see restrictions emerge around architecture. There were restrictions around

Michael Frank, Prefab Review: Where you're usually stay within about the same envelope in the same. There's a kind of leniency around

Toby Long, Clever Homes: Styles. Exactly. It's like where it goes on the site and how big it is and where you gain access and that kind of stuff. But, if you made your house modern or you went more traditional or you brought a vernacular, I think for the most part, there's little controls around that or maybe even a little concern around that.

And, we can judge it and we can be critical of that. As people will be, but I think that, may also present this sort of opportunity in some way to reimagine the building. So that was really much the case here. Our clients, unfortunately had been through some recent remodels and really made some improvements in this home.

And we we're asked to map that against a modular geometry and a relationship to offsite construction so that we could build this project as a fully modular assembly which is what we're seeing here. But then we dosed that with this idea for architecture and how the roof lines work and some of the expressive timbers and structural elements that kind of characterize the look and feel of the building.

Of course, the exterior of the project was, important for us to understand. And to try to build the resiliency requirements that our client had. And of course, that the building code now requires of new structures. So that kind of came to be. Now, this also had unique site conditions, which is another thing that we can talk about quickly is just what happens to the site, right?

Are you cleaning it up? And so we did need to deal with the change in topography. The site was actually lowered a bit after the cleaning. There's a lot of soil that's contaminated. The driveway access was too steep for their preferences. So we actually reimagined how we were going to sit on this little knoll that The existing home was on, but this is a good example of just a home that was rebuilt on the same place, essentially with the same plan geometry but working through a different construction method than just simply site built

Michael Frank, Prefab Review: I have a bunch of questions here. And by the way, that's a beautiful house. It looks like you did a great job. So kudos on that. Definitely think the butterfly roof is cool. Okay, so a bunch of questions. One when did you get involved? Did you get involved right after the fire? Had there already been like a year of site cleanup or something to that effect to make the site even ready for pre construction?

Toby Long, Clever Homes: More or less right away. I think that it will benefit people to have some professional guidance as they work through these early stages. I want to convey to people that as hard as it may be to hear, patience is important in this process because there's a lot of moving pieces in some ways familiar to construction, in other ways quite different.

So we got involved basically right as the property was being cleaned. Yeah. Most of Fountain Grove was cleaned up by FEMA.

Michael Frank, Prefab Review: I was about to ask was it FEMA or was it some kind of private contract?

Toby Long, Clever Homes: Yeah, there were sort of two options, right? There's, you can hire people, they'll do it, you can do it yourself or FEMA will come in and clean up and then you get it.

This was done by FEMA, I believe. This was cleaned up by the government. Yeah. They were moving through the neighborhoods and cleaning and then testing the soil. It was built in that and to make sure that, what you're building on doesn't have contaminants, as cervical.

So that's what we got involved. And I don't know that we influenced like how it was cleaned or how much was removed. That was very logistic, but we certainly started to tease out some of the early considerations for the project at a conceptual level so that when the property was ready to be rebuilt we could move into that pretty quickly.

Michael Frank, Prefab Review: So then we're first steps, the standards, get a new survey, get a new geotech, et cetera.

Toby Long, Clever Homes: Yeah, to touch this sort of what do people expect of this process, sometimes folks don't really understand that while we will see relief on permitting and fees and timelines and all of that kind of stuff, buildings in California are obligated to be constructed to current code standards. And the process for rebuilding will involve a similar and familiar set of steps.

Michael Frank, Prefab Review: Did they waive Title 24 in this situation? I forgot if they did that or not.

Toby Long, Clever Homes: No, it's still a requirement under the building code and the energy code that we meet those requirements.

And maybe I'll you know, eat my words later that there will be some changes to this. Sometimes there's yeah, we didn't see it here. It was still obliged to meet the current code where cycle and to meet all of the standards of the local community.

Michael Frank, Prefab Review: Sorry, just so everyone understands Title 24.

I'm going to do a terrible job of explaining. It's a set of standards for a new home construction in California. It includes, most homes having to have solar that basically offsets the energy needs of that. So it's essentially a net zero home. And I think there's a number of other standards involved as well.

Toby Long, Clever Homes: Yeah, it covers a variety of building requirements. One of which is energy compliance. And so through mathematical models that are authored by the state, we plug in a bunch of variables about, the house and the windows and the doors and the envelopes and the heating and cooling systems and the way you heat domestic water and it comes up with the right compliance criteria and we meet that for all new buildings in California.

It's not particularly rigorous per se. But it definitely influences the kinds of decisions we make about design and specification. So there are some obligations there. You can see the modest solar panels there on this house. Yeah, as a result of the requirements. I think they'll expand this as time goes on.

But we have a decent array that was placed onto the building. But yeah, to get back to your point. The first thing is your house creates this sort of toxic problem in the soil. And then we remove that soil and that inevitably changes the relationship of the site. There's also, the interface between the building and the public infrastructure, in all of the homes in Los Angeles, we have sidewalks, we've got curb cuts, we've got utility connections, we've got water lines and sewer lines and things that did survive the fire that we're going to plug into and all of this creates important information for us to understand when you design an engineered building, we need to know how all those things connect with each other.

So the first thing is you get the site survey done, which is an important thing to really understand, because I think that's going to be a valuable resource for people in the Los Angeles area and really can't happen until you've got the site clean and geoteched.

Michael Frank, Prefab Review: All right. Quick guidance, because everyone's going to ask this, generally a local civil engineer will do those types of things or, and I'd say costs on that kind of thing vary a little bit, but I'd say you're probably looking at a couple thousand dollars to $10,000 per thing, depending on the complexity of the site, is that basically it?

Toby Long, Clever Homes: That's what I see in the market more or less.

Yeah. And I think that there's a variety of models for this. Like surveying is a licensed trade craft in California, civil engineers often perform land surveying services.

There are also standalone surveyors. There's no requirement to be a local person, which I think is going to be ongoing kind of from Los Angeles, Houston, or wherever licenses there's sort of two functions of this. You've got the boundary, so just where is the property line in the world that comes from legal, deed, deed language and how lots have been created in the state.

There's some complexity there that might be another good podcast talk about just the creation of lots and certificate of compliance and these kinds of things people may hear about as you wander into this conversation. And then there's topography, which of course is the obvious relationship of the land forms now changed by the cleanup.

I also group topography with other natural and built features. So just where are the old fences, where's the sidewalk, where's the utility cleanouts, various things that are also part of that physical environment that get put together with the boundary to create a really accurate map that we can use to then design and engineer buildings.

And I think your pricing is generally there. I think more or less land surveying seems to fit into a $3,000 to $5,000 kind of zone for kind of urban infill style lots and reliable monuments that can be used to find those boundaries to something much more expensive as you get into the hills.

And now we've got acreage or you've got less reliable boundaries and the surveyors need to do more work. But I think that's a fair approximation. A quick interesting thing that may emerge here on this question of survey, not to get off topic here, but a lot of rural properties get surveyed using like lasers from planes.

You can do like LIDAR surveys there. You can fly over and take pictures of the ground. And if you've got lots of acres that's an easy way to create a map of the site. I don't know that people should expect that for some of these suburban lots. More or less, that's the guys out with the fluorescent vests and the poles and it's all digitized now and GPS.

But probably doing disservice to the surveyor craft. But more or less it's an onsite kind of thing. And it usually takes surveyors about a day to do the reconnaissance in the field, and then usually there's a week or two about putting together the CAD files in a computer environment.

So something people will understand as they start to wander into the world of surveying, something architects can help with as we tap our networks, but there's also a whole industry around this too, that's pretty easy to access.

Michael Frank, Prefab Review: Let's get into some specifics on, we can either do this house or you can give me sort of general answers on your portfolio of three or four of these fire builds that you've done.

So timing wise, and I understand this varies a little bit from project to project. What in this specific situation or in your portfolio were you seeing in terms of time to design the house time for permitting and then the different aspects of the construction part period.

Toby Long, Clever Homes: Yeah. I think there's a faster version.

That's right. And not to speak to specifics, but I think that in terms of the faster side of this, I think that, the kind of prototypical models where people can source buildings from fabricators that they can plop down is going to be a pretty fast way to do this.

It may lead to other questions about tying in some of the site relationships. That's something we could talk about. And obviously manufacturers and fabricators that have a more transactional model have different ways of providing or not providing some of those resources. But I think you've got that fast version, I would probably expect that's, all but, a month of work or so that people would be able to access pre existing designs and it's important to understand that there's still a little bit of engineering that happens for buildings. Like you mentioned, Title 24 is a process that looks at North, South, East, West. So even taking prototypical things and placing them down still has a little bit of follow through to make sure that the building is going to be appropriate or compliant for the particular property.

In our work, we look at this as, like fast track or something that's a little bit more careful and considered. And that's just a judgment. On a fast track level, it's not unreasonable to think that we could, design a house in a month or so that you could come up with the engineering in another month or so.

Sometimes that will rub up against the challenges of budget planning, which it involves builders and other partners that may want a little bit more space to work through some of those questions. And then I think, on the fast that you could do a project in two, three months, I think that's realistic for people that are moving

Michael Frank, Prefab Review: quickly.

Quick, just to be clear, are we saying two to three months for a custom designed house from someone like Toby, who's obviously doing really high end work? Relative to maybe a little bit shorter if you're using a company for, I can't think about a good example of like a company that's historically let's look at Connect Homes or something like that, where you're taking a pre designed plan that's hopefully been built before that you can look at a rendering or ideally, and already, in the ground home on, and they're really just doing some kind of light specification to your house. Honomobo, another example that I think still exists. Yeah,

Toby Long, Clever Homes: I think a systematized approach, which is how we work, because the work's built around a specific construction process, may provide a certain acceleration.

I think people that are going to work with a local architect just do conventional building projects there might be a little bit more time involved because of just the nature of discovering the decisions that would go with the project of how to recreate the architecture. I think that's also a little different, Michael, if you're going to try to recreate the house that was there, as a starting point, versus trying to do something, which is entirely new that you may want to discover the architecture. I think that's going to take a little bit more.

Michael Frank, Prefab Review: So before our break you were talking about timing and you were talking about how on a design basis, we typically we'll see, a couple of months in terms of design and engineering for a beautiful custom home like this and then what do you, what did you end up seeing in this scenario, which isn't completely analogous but a little bit analogous in terms of the speed of permitting and entitlements on this project or these projects in wine country?

Toby Long, Clever Homes: Yeah, I think that's fair, Michael. I think that, like I said, there's going to be different tracks, different motivations people will find, and the timing to get through engineering will vary for folks as they look at different solutions. I do think permitting is going to be pretty consistent for everybody, more or less regardless of what you're proposing.

There's not existing records that we're working off of. These are all, 2025, 2026, 2027 buildings that will go through a review, if you will, with regard to compliance. But for the rebuilding that's been taking place in most of the areas we've been working a lot of the permit requirements just all but, went away.

A lot of the enforcement actions are being pushed to the field instead of on paper. What we did see in the Sonoma and Napa projects was controls around septic and well systems. So there was a little bit of demonstration that the infrastructure was still adequate. This is going to be different for Los Angeles.

Obviously, being in some municipal systems is going to be a little bit of a relief of having to propose or provide information about the adequacy of those connections. But these permits were, all but two weeks. It's a submittal that went in. I think this was on paper. It will all be digital for the next submissions that are going to be taking place in Los Angeles.

At least that's my expectation. They'll all be digital. And so usually there's a quick review that the documents contain the necessary information and it wasn't a review for compliance or a review for detail, but just that you had a site plan, there's a foundation plan, there's the floor plans, there's some electrical information, an assembly detail, some structural drawings, of course.

And then it will vary for the rest of it. If it's a modular building, it will be very detailed in this nature. If people were building traditionally, they'll get some relief on mechanical systems and other kinds of design build opportunities. But I think we saw like a week of submission and then, we may have had a comment or two that comes back mostly about completeness within the package and then they would issue the permit.

Michael Frank, Prefab Review: Then you're saying the building permit.

Wait, so just so people understand, that's impressive to me. I'd say on our typical project in a tony neighborhood like this or Palisades in a non fire scenario, I would say fast would be two or three months and median to slow could be six to nine maybe five to nine. I don't know, something like that.

So that's actually quite fast. And then, yeah, sorry.

Toby Long, Clever Homes: Los Angeles is a rigorous place. All of our work through the every part of Southern California has been pretty difficult. Big city, lots of moving pieces obviously some, jurisdictional controls that are a little smaller throughout L.A. that have different experiences. But from the city to the county in particular pretty rigorous and lengthy process. And so I think the acceleration that we're going to see is a very much needed moment of this process for sure to get people back on their feet pretty quickly.

Yeah, dramatic adjustment. And then the fees are usually waived both for permit fees. Also in terms of school fees, the road, I can see this all the way. I think we may have had a modest fee that just went into some level of processing, but it was very small. Hundreds, not thousands or tens. And so for this project in particular, and this may happen in other places this is a community.

It does have an HOA, right?

Michael Frank, Prefab Review: So there was some design review as there?

Toby Long, Clever Homes: It was an HOA process that was formed around it, but it happened in one meeting. There wasn't really a review. We just sat down with the HOA representatives that were responsible for managing the process. A little bit of a page turned through the drawings, looked Q& A on some aspects of the project.

At least all of our projects were basically through, in that hour that we had with the HOA. I think it was there.

Michael Frank, Prefab Review: You didn't have to do a letter writing campaign or whatever?

Toby Long, Clever Homes: Yeah, exactly no political consultants were involved.

Michael Frank, Prefab Review: And then yeah, and then let's talk about, so these were modular homes? So I think of this sort of modular process as twofold, right? There's the queue, right? Which is these, some of these modular companies start to get backed up, right? So sometimes you have a year wait on some of them and then there's like the actual process, which I. Usually I've seen take a couple months, but what did you see in these scenarios?

Toby Long, Clever Homes: Yeah. So I think the fabrication schedule for this project was probably about four to five months. And so relatively fast, this project has some, some unique detailing four to five months in the factory. In the factory. Yeah. And then, we had a kind of ramp quickly that went into the building of the site.

Foundation work went pretty fast, getting the cripple walls in place. I know getting the mods delivered was pretty quick. What happens after that for everybody's benefit? It our knowledge is a little bit more of a traditional kind of experience. Once you have modular buildings that are set onto the foundation, we start going back into kind of a critical path schedule with trades coming in, doing their various disciplines and, getting things ready to go.

What took this project a little longer was just rebuilding the landscaping. Still growing in, obviously, in these photos that were taken fairly after, fairly close after the owners moved in. But just getting the flat work in, getting the plantings in place. There's some seasonal relationships, certainly in northern California, that impact that a little bit.

We also had a decent amount of work that was taking place on site. And so the eave constructions all get built on site. This project also has a low level kind of basement ADU sort of thing that was an open space that we built on site. So there were still some things that happened on site.

Michael Frank, Prefab Review: You built the garage on site?

Toby Long, Clever Homes: The garage portion was built on site.

Michael Frank, Prefab Review: Oftentimes that happens a lot with prefab.

Toby Long, Clever Homes: It really makes sense. Yeah, we've done a few kind of modules.

Michael Frank, Prefab Review: Or else you'll do the kits offsite and then install them.

Toby Long, Clever Homes: Yeah, right. Or we'll drag the mod boundary like across the garage and try to pick up part of it. Yeah, it comes down to cost benefit analysis on whether or not we're spending too much on framing or transportation costs for a space that's not particularly utility intense, but yeah, the project went relatively quickly through most of the building portions of it. And then, the stuff that happens after you start building out the landscaping and hardscape work will just follow its own schedule.

These guys were a little bit more intimately involved in it just for what it's worth, because I think people will pick up on it. So this project obviously has some resiliency built into it, which is visible in some of these materials. It also does use wood.

Michael Frank, Prefab Review: And I was going to say , I just built a house, by the way, in a fairly high fire risk area. And I lost the battle with my wife about whether we use Cedar or not. So we also used, this looks like some kind of clear Cedar or something on the outside. What which, it looks beautiful, but tell me about the decision to do that versus, use maybe a less flammable material.

Toby Long, Clever Homes: For sure. Personal choices, right? This is the kind of architecture, the way people feel about the project looking for in their rebuilding process. I, think having the experience of Palisades, maybe a little different from people that were on acreage that lost land your perspective on what fire is might be a little bit different.

Obviously the outcome is similar. But this was, this is wood that, does have requirements for maintenance. A ll of the wood is built on a fire sheathing, right? So this is required by code and, provide some elements of resiliency. So all of this is on top of a non combustible board.

There's various ways to do it, but mostly involves sheet rock or a cementitious material that is underneath the wood siding. All of the elements which are exposed are timber in nature, so they have minimum dimensions. It's usually four inches, which allows it to largely be noncombustible. The eave construction of this building also was really important for our clients to have the softness of wood underneath the roof.

So that's all also built on top of fire sheathing. That provides a little bit of the resiliency. The rest of the materials of the project are non combustible, so it uses a lot of stucco and metal paneling all of which, provide a little bit of resistance to fire. And of course, all of the project's openings are either closed off, so we use a lot of closed cell foam to avoid venting into the roof structures or for crawl spaces, right? To try to close them off and seal them. Or we use a technology which is essentially an ember proof vent that kind of melts itself shut when it's exposed to heat which prevents the ember intrusion, which is so common in older homes and really created a lot of the problems that we've been seeing.

Yeah. And then I know the answer to this, but just because we obviously do a lot with a lot of the same factories that probably built this home.

Michael Frank, Prefab Review: S o for a really beautiful high end home like this, what do we, what do you end up seeing from a cost perspective? And I think a lot of times the way I think about this is breaking this down so it's most relatable as like breaking down on the cost of the mods, the cost of the site work, et cetera, et cetera.

Again what we're seeing these days, I don't know if it's what you're seeing is like high end mods are pretty expensive, like $300 a square foot. I don't know if that's the range that you're seeing, but that's what we're seeing. Is that kind of similar?

Toby Long, Clever Homes: Yeah, I'd break it maybe into just these sort of chunks that I I'd be a part of, right?

I think there is a market that's serving this, so obviously there's an inexpensive version of our world.

Michael Frank, Prefab Review: Yes, there's Champion and companies. There are mass market and more typically built to manufactured spec, not modular spec.

Toby Long, Clever Homes: They don't have design elements, and that's great, and that's going to serve a big market. It always has and will continue to do and there's the others that are trying to get into this a little differently. So I think there is a version of projects like this that are getting to lower specification, being a little bit more modest with some of the design and specifications in the project.

And I think you can see this in kind of a $250 to $300 a square foot kind of industry, what they call freight on board, right? FOB kind of app factory. I think the really healthy market right now in the modular space is in this $300 to $350 a square foot kind of chunk, which is where we see some design elements. We see a little bit higher specification scale helps, smaller homes.

I think people need to realize it sometimes costs more per square foot because bathrooms, et cetera, are expensive. So yeah, you got to build the kitchen. You have to do your bathrooms. And you've only got a thousand square feet to do it on that ends up looking more expensive than a 2000 square foot home with the same bathrooms and the same kitchen. So I think there's a little bit of that. I think there's a healthy market, which is this sort of $350 to $400 square foot zone, which is really where you start to get into a higher degree of finish, more cabinets different HVAC systems, better quality doors and windows.

I think it starts to push over $400, that $400, $450 a square foot modular building really starts to touch kind of the high end of the market. That's where we see a lot of the really nice specifications.

Michael Frank, Prefab Review: You are talking about the mod costs alone?

Toby Long, Clever Homes: Yeah, just where does that live?

And I think you're doing rough justice on this. So at least in my experience, probably, it's about a 50, 50 investment for the most part.

Michael Frank, Prefab Review: You're saying site costs are about the same. So yeah, so you're saying if you do a $400 I see site costs just incredibly variant based on the complexity of the site also meaning this site that's fairly hilly is probably a lot more challenging.

And this also looks like it is more challenging tha n some of the urban infill stuff. Yeah.

Toby Long, Clever Homes: Yeah. And I think this is going to bear out, across Los Angeles too in its current moment. And I think some of the infill stuff is going to be pretty straightforward because the infrastructure is hopefully more or less intact, or at least, that's ready to plug into, we don't have to do a lot of grading, you've already got curb cuts and you've got things that are in the public domain that are already dealt with.

So I think that's going to be beneficial to people for sure. But I think more or less I advise.

Michael Frank, Prefab Review: So we're saying the math is $600 to $800 a square foot on hard costs before soft costs. Is that right?

Toby Long, Clever Homes: I look at it as the modular budget and then everything else. I think that's where this breaks around this 50 50 investment and to see about 50 percent of the costs going offsite.

We said about 50 percent of the costs in the everything else bucket. And I incorporate soft costs into that where you've got low permit fees inside. I think that's right. And I think if somebody's building a, a $300 a square foot modular project, I think you're gonna see a total budget that's five to $600 a square foot.

Yeah. If you're gonna build a $400, $450 a square foot module, you're gonna see an $800, $900 square foot, kind of investment. And it's just gonna measure out not only in site work, but also amenities. We see a lot of costs going into swimming pools and outdoor kitchens and spa and landscaping alone, which is gonna be an important part of reconstruction for sure, and something that people shouldn't underestimate. So I think that's again, a rough, justice estimate. I think you get this spread this, $250 to $450. That's a pretty wide range, but I think that's where the modular world lives.

I think once you go below this, you're getting into that higher volume stuff. I think once you go above that, I think people start to look at whether or not off site construction is even the right thing to do. There's different options available to people. That's what I see in the market and where we help our clients fit on the spectrum.

More or less, most of our projects are in this $300, $350 a square foot kind of target is what we're aiming towards and then people will bend it north or bend it south depending upon different preferences.

Michael Frank, Prefab Review: That makes sense. Okay. So now just going away from this project and more specifically towards what are the kind of sort of short form FAQs that whatever I'd want to tell my unfortunate aunt or, someone coming to our site who has these earnest questions.

We're telling everyone, tell me what we should add, who comes to our site right now, get your insurance claims in, if that's going to be variable in figuring out your budget. If you're really gung ho on figuring out design at this moment before even understanding the timing on getting your site cleared, get to the extent your like house, like in this case, has been renovated recently and probably already has some kind of existing survey.

Because again I'm not even honestly positive if people, if surveys are allowed on land at this moment, it probably will be. If you could at least get an old survey that probably provides a lot of helpful stuff in terms of being able to start to get designs together.

What else do you think we should be giving people as really fast actionable advice right now?

Toby Long, Clever Homes: Yeah. I look at this as like the three different investments we make into building projects like Financial, intellectual, and emotional. And I think there's different ways of approaching each one of those, right?

Obviously the financial side, you're speaking to it now. It's just get ready for the investment or reinvestment into the property insurance companies. I don't underestimate what's involved in that. And I have deep empathy for people going through that negotiation. I'm sure there's some that are easier and some that are harder.

I hope everybody manages to find their way through that. I think the intellectual part is really just preparing for what you need to do, right? So this is getting back into cleaning a lot, getting it surveyed. Geotechnical analysis is something that has to be done on all sites to prepare information to design the foundation.

Also in the same kind of investment category as the survey itself. So about the same order of magnitude, about the same amount of time, more or less. We'll see how this shakes out also a licensed trade craft in California and doesn't require local people per se. So I think as we stretch our arms, we can start to find resources throughout the state that will be able to help.

But I think that's the two kind of important pieces of this to some extent, understanding the utility conditions can be really critical to help people plan for their expectations. And I don't underestimate what, So Cal Edison and some of these other utilities are going to have to go through to get things done.

I am interested to see, as we've been talking about, do you underground all these lines?

Michael Frank, Prefab Review: I expect everything's gonna be grounded, right? Like if stuff's burned out already, right?

Toby Long, Clever Homes: I would think so. It's all crispy, right? So I think it's gotta go below grade, but that's gonna take time to figure out. Really it's the survey that geotech and the utility assessment, which I think are the three things to generally prepare for in this intellectual way. And the emotional investment is going to be hard for everybody for sure. I think the urgency to understand reconstruction is really high.

I think starting to dabble in concepts or beginning to understand the architectural side of the project is a place to begin to invest. I would encourage people to do the inspiration finding and understand what kind of home is going to be rebuilt. And I see it as like the opportunity you didn't ask for but I think part of the emotional element to this is trying to find the new house and try to get excited about that however possible.

And so I think, but I also think that patience is important because a lot of these other elements do need to take shape before people are ultimately going to move into the house. So I think, in the short form, it's really survey, geotech, and trying to understand the condition for the utilities.

In some regards people that have trees that are remaining on site, I would probably put an arborist into that same category. So doing an arborist consultation to determine if a signature tree is worth keeping. Surprisingly, some trees do quite well in fire. Oaks in particular have some resiliency. I think palms and pines, people are going to question given what's happened, certainly in Southern California.

But maybe putting an arborist into that same category to just understand if that becomes an element that you would design around or work around or just prepare to remove. But I think those are the good first investments. And then of course, I know everybody's going to be trying to build networks and reach out to friends and family and colleagues to try to understand, who are the builders and how do I connect with them and what's that timing look like and, hopefully architects are going to be able to participate in some of that network building as well.

So I think the architectural community is going to be a place for people to lean on to try to get good guidance on how to really prepare themselves for the launch into the new project.

Michael Frank, Prefab Review: In terms of building a team so what are the components, whether it's a GC, an architect, a modular, like, how would you think about the priority there? And yeah, how did I think through that?

Toby Long, Clever Homes: I do think, I'm assuming I'm coming at this from a slightly biased position that, architects are going to be central to this. I've always told my clients that, I think architects know, a little bit about a lot of things.

There's a lot of things we don't know, but I think we're a great hub of information to, find answers and to help people come together around building projects. Reaching out to the AIA, reaching out to other architectural organizations is a lot of this in Los Angeles is a good place to start.

I think from an architect, we can start to understand the others around us, but certainly you've got a design team. I would not underestimate, although it's not maybe the priority profession, but interior design is a rigorous process, as for building your house and sometimes trying for people to really understand interiors.

But there's a little bit of that can also come through architecture from a really technical perspective. You've got an architect or a designer. A structural engineer is going to be, of course, quite important in a project. There are mechanical, electrical, and plumbing trades that also can come to bear. Certainly for modular building, this is an important part of the team.

Michael Frank, Prefab Review: Do you see homeowners being involved? My experience is typically homeowners are not the person recruiting those people. And it's usually the builder or the architect who has established relationships with people.

Toby Long, Clever Homes: I think so. I think so. Yeah, I think so. And sometimes it comes through subcontractors. It's more of a design build process. But I think structural engineers maybe are a little bit different. I think people have a sort of awareness potentially of who engineers are, but I think you've got your building team, right?

Architects, structural MEP. It's important. People know you're going to have fire sprinklers in your house. It's not a bad thing. But that's required under the building codes now, and then there's the site group, right? And so you've got your surveyor and your civil engineer your geotechnical engineer and a landscape architect, is going to be important.

There are water efficiency requirements under the code. So having some awareness of landscaping is important. And I think the consultation on what we're calling fire-scaping is a worthy topic to understand how to build a resilient landscape for our ever changing climate. And so this is the group, right, that's going to be involved in the project. If you can manage it yourself, or if you've got motivation to reach out, I think that sort of becomes the team that you're going to put together. I think more or less, as you're saying, it's going to come through the hub of architects and architecture and design firms that will be able to help obviously different manufacturers and fabricators have different relationships to that process and some support it. Others don't. And so that will just be something people will talk about as they discover, potential building partners. And I think a general contractor like you said Michael are really great source as well. Of course they're going to be doing a lot of the heavy lifting for the building project, both, onsite for modular projects after they're delivered and trying to understand their network is a really great thing to know. Builders have a lot of folks in their whatever, Rolodex.

Michael Frank, Prefab Review: How would you think about this? So one of the things that I get a little concerned about it on behalf of clients is I call it getting queued. Which is, hey, you become path dependent on someone who gets really busy. And then you have a deposit with someone where you're just in line.

So meaning name your high end construct like modular builder, let's say Method, right? I don't know exactly what their queue is. You probably do, but let's just say it's eight months right now. It would not surprise me at all if that gets considerably longer than that over the next year as a lot of other high end modular architects start sending them their projects, obviously, like that can be understandable, but also difficult if you were like, hey, I was planning on moving in here in a year and we can't even get into the factory for 10 months longer than I was originally hoping. Are there some tactics to mitigate that? Which is right, like part of the argument for using architects that you get to play the field a little bit more on this stuff. But yeah, how do you think about that? And I think the same thing honestly applies to general contractors if they're not kind of paper general contractors but if they're actually like bringing on a small team of carpenters or something like that.

Toby Long, Clever Homes: Yeah, I think it's not hard to understand, but I think there's a few.

One is just, patience, that's easy to say, hard to do, but just understanding that people are going to be busy. And I do think that working with the people that you trust or want to trust or that you believe are the right partners is probably important enough to say that having a little bit of a cue is okay. I don't know that I would recommend to people that we work with fabricators that we don't like only for schedule and having a longer project, even if you're dealing with things after the fact or more in the field of change orders. Exactly. Having a quality builder is really important.

I think, so patients, I think proaction is really critical. I think it's just representing who you are. Try to be introduced to these entities, get engaged in pre construction processes is super important. We advocate for pre construction relationships in all of the projects that we work on.

I think a big part of the value I bring to our projects is just understanding the cues in the industry. People are busy. That is true. The timing is critical of knowing how to intersect them and when. I do think people should be careful about really big deposits that go into companies that don't have availability right away.

We've already seen in some companies that there are people that get caught in the teeth of that doesn't come to bear. It can be challenging to get deposits back from people if you change your mind. So I think people need to be careful about that. Obviously that's for fabricators to sell through.

Michael Frank, Prefab Review: Oh, just a quick interjection on that, everyone. We can do another bigger session on that. I think partly what he's referring to is there's been quite a lot of companies, oftentimes they're venture backed companies, they're in the modular space that have had less than whatever the opposite of not messy is, that have had messy dissolvement processes where you've had individual stories of customers like, okay, basically putting in considerable deposits because of the way the modular draw system works, you oftentimes fund stuff before it gets built.

And then honestly, like not getting their stuff back and being in various forms of like ugly legal action. Trying to avoid that as much as you can, we'll get more into details on how you might be able to do that later, but it's not an easy thing.

Toby Long, Clever Homes: Yeah, I think that's right. And then this might sound a little funny, but I also think that people shouldn't be hesitant to challenge the cue.

One of the things that we know about the modular space is that it is not super predictable, certainly factories, and people get excited and it looks like a big thing. And then all of a sudden that next project that you were going to do as a factory goes away for any number of reasons.

And so the permit takes longer, the HOA had concerns, the client needed to see a lower interest rate. Who knows? And so those spots open up. And so there is a little bit of being opportunistic. I think that can play into this space. So just making yourself present, making yourself known. Making sure that the industry is aware that you're motivated, you're out there.

That's the advocacy that we try to bring to our projects is just, helping the community understand that these are people that are ready to go and are going to try to seize an opportunity. And every now and then I'll get a call from, so and so factory that says, " Hey, we just had a client drop out. Do you have anything that's ready to build?" And, factories are operating on this very flow like process, the house goes out the door, the next one's coming in and, anytime you've got empty square footage on the factory floor that's just burn on the companies revenues.

I think there's a little bit of that, that people should be mindful of. I don't want to oversell it, but I just found that the opportunities are sometimes a little bit more present than the people may think.

Michael Frank, Prefab Review: A couple of quick things I wanted to add on costs. I realized we didn't talk much. One thing wrapped in, if you do modular, you typically are going to have a transport costs and crane costs of the module. Quick, you can probably provide better info than I can. $20k ish for a crane is not crazy and I guess probably , again, depends on the distance, the size of the mods, et cetera. But a lot of times we'll see $50 to a $100 dollars, maybe even a little more per square foot for shipping mods. Is that about what you're seeing?

Toby Long, Clever Homes: Yeah. The metrics that I like are $10 to $15 a mile per box. Though, people can project a little bit obviously as we start getting far away, that becomes a significant issue for modular building. And I think people will judge the value proposition. If my transportation costs start to get really, six digits starts to sound a little heavy. Obviously that's going to put a strong emphasis on, there's a number of factories in the Riverside, California, San Bernardino area.

That's going to put an emphasis and pressure on people that are regional. That's true. Any building project. Then so I think we're going to start to see, those cues are going to start to fill. And I think there's going to be some entrepreneurship that continues to show up. We're talking a lot to a lot of people about that there's people that are really motivated to try to serve these rebuilding markets. That seems positive. That may also be a little challenge because working with new companies, again, another topic, might have some unique characteristics in terms of how people outreach and introduce themselves and become familiar with those operations.

But I think 10 to 15 bucks a mile is realistic. I think in the current market, obviously it will fluctuate with oil costs, et cetera. But I think that's real. And then I'm in the same way. I think usually advocating it's about a $10,000 to $15,000 investment for most cranes that are going to set modules within a month. Small buildings can sometimes go less than that, but people have to understand that cranes are sold by the hour. And the rigging of the crane, maybe another topic on logistics someday, the rigging of the crane takes a lot of time. And so even if you've got a small box, it's likely that you're going to have a crane there for half a day at the minimum, and that can be a fairly expensive proposition as a metric, more or less, I expect that we're going to try to set between six to eight boxes in a day. Eight's really pushing it, but with a good set crew and a reasonable design, that's very, possible. Some multifamily guys will go even faster than that, but I think that's reasonable for people to expect. And we can talk about the modular breakdown and how to do some math on this maybe as another topic.

But I think those are reasonable expectations people should have about this process and about what would be required in order to have the logistics.

Michael Frank, Prefab Review: Make sense. Yeah. I guess one last or two last quick topics, I guess one thing is, do you have a quick answer on thinking through, again, me and Toby both want most people to build whatever makes the most sense for them. It's not we're fans of prefab and offsite construction techniques, but there's a lot of different ones. How do you think about the decision to do like a stick built site, built home, a modular, a kit home, et cetera?

Toby Long, Clever Homes: So I have a kind of rigorous opinion about this. And again, it comes from my own experiences and the way that I practice and how we work with our clients.

But modular construction is the most rigorous form of prefabrication. It is driven by very tight controls. Obviously, transportation in nature and what factories can actually build. So I happen to think that if we want to build a modular project, you need to start there. I think that's how you start to conceive of the building.

But, modular construction in most places is still a form of traditional building. It just takes place off site. And the systemization changes from shop to shop, and the technologies used to do it are obviously quite different. And, we're seeing robotics and automation, which is a whole other topic to begin to discuss.

But at the end of the day, construction is pretty consistent. So I think for that reason, there are other ways to build the same house. And we start with modular in my office and then we'll evolve it into something different, whether or not that's panelized or kit style construction or even just being smart about traditional building.

I've liked this sort of slogan that, build a prefab house, even if you don't prefabricate it, right? Disciplines that go into this are valuable for every part of the construction process. It forces a discipline for detail and problem solving and front loading all of the information so that the construction stage can be smooth and fast or as efficient as it can be.

But I think people should keep it all on the table, that these are all really good options. Modular is a great way to build. It's not a panacea in my experience, and it doesn't work everywhere. There's certainly a lot of places where we can't get modules easily or power lines, which may or may not be a situation after these fires are a real impediment to modular construction in a lot of instances, the queue, as you mentioned, might be discouraging.

The transportation costs certainly can be a real challenge. And so for these reasons, I like the idea of having different ways of building the same house. But it's really hard to get into modular if you don't really have a modular geometry to start with. I think our collective experience is probably that people are happy to say, "Oh, I've got my plans. Can I build them as a modular project?" You look at this thing and it doesn't have the right shape and the right joinery. And those are always too efficient and too costly to do in a factory context. And I think traditional construction should always be there. And in my opinion, it's a way of, lowering the bar a little bit on exploring these ideas.

Now that changes from operation to operation. A lot of the, static stuff, the prototypical homes, that are being provided by a factory there really isn't another way to do that. Sometimes. design oriented stuff has a little bit more options, but I think people should be open minded about how to bring this to bear.

We could talk about the differences in another podcast, but, panelization can be great. Certainly it's going to accelerate some of the trades that are going to be in high demand in LA. Carpenters in particular bringing in panels. Some of them are smarter than others. Some of them are a little bit more sophisticated and finished than others.

Can really have some real benefits and surely there's a whole movement afoot to improve the performance of buildings and panelization is really pushing a lot of the innovation in that direction. There's some cool stuff in the market.

Michael Frank, Prefab Review: They're also, by the way, sometimes panelization or kits, again there's a whole spectrum of how these can be easier to finance too, because it can be considered stick build homes.

Toby Long, Clever Homes: So you have a product that is like a fancy two by four. A panel and it's got insulation and some of them are pushing for utilities and systems and finishes into these types of panels too. Again, it's from an open minded perspective. I would keep all of these ideas in motion and certainly want to help people discover the right way to build and it's not always modular.

It's a good thing to do, but, it doesn't work everywhere.

Michael Frank, Prefab Review: Toby, thank you so much. You've been a wealth of knowledge on this. Again, everyone Toby's from Clever Homes. You can find him and email him directly on the site. He's extremely responsive. But me and Toby are going to do, or Toby will do a number of these.

Hopefully we're not going to do most of them on fire rebuild stuff, but if there are subsequent questions, maybe we'll do a few more of those. But yeah, we are excited to dive into a lot of topics over the next couple of months. So thanks again for listening.

Toby Long, Clever Homes: Thanks. Michael, this is great.

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Listen to the episode TranscriptPrefab Review

Hi, my name is Michael Frank, and this is the Prefab Pod, presented by Prefab Review, where we interview leading people and companies in the prefab housing industry. Today, we're speaking with Cole Painter of New Primitive.

Cole, how's it going? Thanks for joining us.

New Primitive

It's going good. Thanks for having me on.

Prefab Review

Yeah, we're excited to have you. You're the first non-house ADU provider, so we're definitely excited.

Just to kick things off, do you want to talk a little bit about what New Primitive does?

New Primitive

So we build luxury, outdoor, sauna and cold plunge setups. And we build these here in a manufacturing facility here in West Jordan, Utah, and we ship them all across the states.

Prefab Review

Do you have any, I think I mentioned this to you before, I can share your screen too. Do you have any photos or videos you want to show? Just kind of walk us through them.

New Primitive

Yeah, it's kind of niche. So when you’re first saying it, it doesn't really give it justice. Can you see that?

Prefab Review

Yeah, now we see your Instagram.

New Primitive

Okay, cool. So yeah, here's our Instagram page. We do three different types of sauna and cold plunge setups.

They're all modular so that we can meet the space requirements that the client needs and the intention for the space. So you can see here, this is our NP 1, our all-in-one sauna and cold plunge combo. So it's a two room setup and you can rotate through hot and cold.

This is perfect for gathering spaces. A lot of residential clients will sit this next to their pool or commercial projects will put them as just kind of a centerpiece that people can come to and reserve and have that be part of their experience.

Prefab Review

How big, I'm assuming the cold plunges are a one person thing, but how large are the saunas?

New Primitive

Yeah, it's a very spacious sauna. So this is a six to eight person sauna, true size. Like a lot of people will say their saunas fit four to six people, but they really only fit like three.

So these are really spacious saunas. I'll get a picture of the inside. These are the heaters we use.

Prefab Review

And is the heater, is it electric? Is it propane?

New Primitive

It's electric and it's wifi controlled. So you can turn it on remotely and have it set on a heat up period. And yeah, you can pour water on the rocks.

It's a traditional dry sauna heater. So you're getting up to temperatures from 175 to 212 degrees in our saunas. That's where the research recommends it should be for all the benefits.

And then, yeah, this is our 212 sauna. It's our mid-size. So it's basically the NP 1 cut in half without the changing room and the cold plunge inside.

Prefab Review

Got it. So this is just standalone sauna?

New Primitive

Yep.

Prefab Review

What are the footprints of these things?

New Primitive

So the NP 1 is 16 foot by 8 foot deep.

Prefab Review

Interesting. That 8x16 is the bigger one.

And then the standalone one is 10x8 feet. Okay. And from a permitting perspective, do these require permits in most jurisdictions? I assume for electrical, they probably do, right?

New Primitive

They don't. So the nice part about our saunas is they're all less than 200 square feet. So no permitting is required.

And I guess in some power, in some cities, if you had to upgrade your power panel or whatnot, that might be something you have to get permitted, but all of these require a 220 volt.

Prefab Review

Okay, Interesting. Cool.

And then in terms of the cold plunge, there's obviously plumbing for the cold plunge, or how does that work?

New Primitive

It's just your standard hose connect.

Prefab Review

Okay.

New Primitive

We can do a direct plumbing connection. Our cold plunges are just a 110 volt that you can plug into the wall and just have a full, self-regulated chilling system in there.

Prefab Review

Got it. Cool. And what are the kinds of situations people are buying these in? Is this like urban infills, ski houses, like kind of like vibey Airbnbs? Where are you seeing this happen?

New Primitive

Yeah, we've done a little bit of all of them. So we get a lot of residential projects, but one emerging market that we've seen a lot of traction in is extended stays, Airbnbs, unique boutique resorts, ski homes, places that are outside that people are going to go out and reconnect. That's kind of the whole mission for New Primitive is to enhance the experience in the outdoors and be able to get people inside of a hot sauna and be able to just allow them to reconnect with themselves and the nature around them.

Prefab Review

And what do these cost?

New Primitive

Yeah, so our pricing ranges from $16,500 to $48,000 for our NP 1.

Prefab Review

And that's coming out of your factory, that's on the ground at the site? What does that encompass?

New Primitive

That's the build of the unit.

Prefab Review

Okay.

New Primitive

And then shipping and installation is all kind of specific to the client. But one thing that makes us unique is we will walk with you throughout that planning process to help it get installed on time and on budget.

Prefab Review

And what do you see in general as kind of the shipping plus crane plus foundation sort of cost for something like this?

New Primitive

Yeah, I would say I see it range between $4,000 and $5,000.

Prefab Review

Oh wow, okay, that's actually nice. The base I'm looking at is like for full houses. Again, we are involved in a ton of modular builds. You actually see that the mods are about 50% of the cost of the overall project. In this case, it sounds like your part is like 90% plus of the full project on the more expensive one. So, that's interesting. And it looks like these are mostly installed via crane?

New Primitive

Yep, our preferred method is crane. Some of our smaller units, you can use a telescopic forklift.

Prefab Review

Yeah, it makes sense.

New Primitive

And yeah, here's a couple of sites just to give you an idea of where people are placing them. This is at a cabin in the mountains.

Prefab Review

And it looks like, what's on the exterior? Is that kind of like a wood or a hardy board?

New Primitive

It's a board and batten. So, cement board, it's very durable. That's how we've approached our builds. We've actually crafted these around being able to be out in the harsh elements and last a long time with low maintenance.

Like I think when a lot of Airbnb-ers or extended stays, they're looking at what amenities to add to the experience. I think first and foremost, if you talk to anyone that owns a hot tub, they know how big of a headache those can be. And so a lot of people are drawn to our saunas just because they're super low maintenance and they're meant to last you for forever.

Prefab Review

Makes sense. As a hot tub owner at a ski house, I can concur with that experience. Cool. All right. That makes total sense. So walk me through it. So I say, “hey, I want to go put this at one of my houses or put this on my Airbnb.” What are the next steps with you all from the kind of, okay, I'm interested in buying this to when it's in my backyard?

New Primitive

So you'll book a call with us. You'll place a deposit and when you're ready to move forward, we'll get it put into our production line. Typically our turnaround time is eight weeks and then we'll ship it out to you and help with the installation.

We can work with your general contractors. We can work with whoever's kind of heading up your projects to make sure it's done, like I said, on budget and effectively.

Prefab Review

Got it. Do you have any networking or is it mostly people find their own local contractors for the contracting? Because again, it's not a very big kind of local site work contract. And depending on where you are, it can actually be hard to find general contractors to do a $4,000 project.

New Primitive

If it's a residential place or justan Airbnb, a lot of times, we'll assist with that install.

Prefab Review

That makes sense. How'd you get into this?

New Primitive

I started out with the vision to create an outdoor wellness retreat and build luxury tiny homes out in the middle of Utah and just create this whole retreat experience. And then I ended up pivoting and it turned into providing that retreat experience at people’s homes.

At the time, this was during COVID when there was a lot of chaos going on, I think there was a big step back as far as connection goes with people and ourselves. And so this was kind of this tool, the most powerful tool that I thought I could provide to people that they could just go be in quiet and heal. I mean, that's what sauna and cold plungers do.

And so that's what really motivated me. It started with a mission and then I've just filled in the details from there.

Prefab Review

All right. So in terms of the details, right, you don't own a factory? Or do you use a third-party factory or is it your own factory?

New Primitive

Yeah, we were partnered with a tiny home factory.

Prefab Review

Got it, okay. So you were like, I want to do this and then your product, did you meet with a couple of factories about, “hey, here's what we want to produce”? How did that work in terms of like, “I want to do this” to like, the beautiful solution you have now?

New Primitive

Yeah, it was quite the journey. I started from nothing. I found a builder, just a random mom-and-pop builder out of his shop and I gave him a picture of what I wanted to build and he started building it and I started selling that picture to influencers and people that I thought would be interested and started to get some sales.

It took off really quick. Within short time, we were doing five to eight units a month and then it came time that we were really looking at scaling this and turning it into a full factory deal and so we ended up upgrading to a custom home builder as our builder and manufacturer. Their name is Roderick Home Builder and they're amazing.

They do like $20 to $30 million homes and they had interest in the project and so they got involved. And now we've got crews just building each of these units out and the offering has progressed because at first we started out with the 212 and that was kind of our go-to size and then it evolved to adding in the NP1 where people wanted it all enclosed and then we found out that there were a lot of space limitations on where these were going and so that's when the Nook got added to the product mix.

Prefab Review

Got it. Interesting. So is the builder you're working with, were they a traditional modular builder? Because these are built in a factory, right?

New Primitive

Yeah. So they were also building tiny homes. It was Wheelhouse.

Prefab Review

In Salt Lake or Jackson Hole? I think they have couple of locations?

New Primitive

Yeah, Salt Lake was where they were. So they had a lot of success with Wheelhouse and obviously, with outdoor or with these ADU type modular buildings, there's a lot of permitting that is required. And for saunas, you just don't have that. It's pretty plug-and-play.

Prefab Review

Makes total sense. Cool. And then again, I stay at a hotel with a sauna, I go skiing or something and I enjoy it, but I don't have any expertise in this. What separates a well-made sauna from a not-well-made sauna? Are there specific sort of, you know, for the sauna dorks or the sort of aspiring sauna dorks, what should they be looking for? And same with cold plunges.

New Primitive

I think number one is heat, like the experience inside. If the sauna is struggling, there's a lot of kits and lower-end saunas out there that are going to struggle to get to 175 degrees. And at that point, you're kind of feeling like you're in a lukewarm sauna and there's nothing worse than that. So one thing I think you're looking for is a well-insulated sauna. And any kit is going to have less insulation. It's just a trade-off with the way that you construct them.

Prefab Review

What are yours? Are you like R30? What are you insulating?

New Primitive

Yeah, R30. And then we have a vapor barrier. And then we have another sheet on the outside, then our exterior cladding. So everything's sealed up really tightly. Our doors are sealed up very tight. So you're not going to let air out.

Another thing about saunas that you wouldn't really guess is like a lot of people, I think upon first thought of a sauna, they're like, oh, it's just a hot box, right? It's just about sticking some warm heater inside it and it's good to go. But when you're putting a structure like this outside and it's in the harsh elements, there's a lot of expansion and contraction that goes on.

And so if you don't invest in a high-quality sauna, there will be cracks and crevices that pop up around the sauna that release air. And so that's one thing I think you're looking for is just you have to have someone that knows the skillset of building a sauna because you have to leave gaps for that expansion and contraction and have the insulation and all that to build them.

Prefab Review

That makes sense. So what scale are you at now? You got to like five to eight saunas a month pretty quickly. Are you sort of still there? Have you expanded beyond that?

New Primitive

Right now we're doing about 25 batches of 25 per quarter.

Prefab Review

Sorry, you're doing 25 batches of 25 per quarter?

New Primitive

No, sorry, sorry. For our batches, we're doing batches of 25.

Prefab Review

Okay, and you're doing that once per quarter?

New Primitive

Yeah.

Prefab Review

Okay, so you're doing like eight a month. That's awesome. And then what about cold plunges? Do you guys make your own cold plunges or do you work with a third party that makes cold plunges? How does that work?

New Primitive

Yeah, initially when we started out, we were collaborating with another partner for our cold plunge, but as of recently, we build our own. We learned a lot. Saunas and cold plunges were new and there was a lot of excitement around it. There was a lot of kinks that I didn't love about the cold plunge systems that were out there.

They were just hard to drain, hard to keep clean. There's a lot of maintenance that still went with them. And I think that's why a consumer is investing in a cold plunge like these is so that they don't have to deal with all the maintenance.

Prefab Review

Right, because it's less work than putting a bunch of ice in your bathtub, right?

New Primitive

Yeah, and you don't have to bring out an ax and like be chopping the ice. Our cold plunge is designed to be more like a hot tub and it can be hot or cold. So it has that dual function. But yeah, we build our own now.

Prefab Review

Cool, that's super interesting. And then obviously it sounds like this has been kind of an evolution, right? Like you sort of started with something smaller, you've gotten bigger and that's awesome.

Is there like, as you sort of think, like when you say like relaxation pod, I don't know what the other things are, whether it's steam room or, you know, I can come up with other like kind of bad ideas in my head. As somebody who thinks about this a lot, are there sort of next steps and next evolutions beyond where you're at now?

New Primitive

Yeah, for sure. I think this is where rubber meets the road. Sauna is how we're really telling the, we're creating vigilantes through the sauna and cold plunge experience and finding people that align with what, with the experience and message. After that, I think it expands into doing micro sites, like outdoor thermal bathing experiences out in nature. And then I'm really passionate about creating community and bringing people together around this.

And so that's something I wanna build in the future. And then the tiny home wellness retreats. I would really love to be able to build the spaces for corporate groups and people to bring out people they care about and work with to these experiences.

So it could be this kind of whole ecosystem of wellness where you can have a subscription model to our experience. You can come out and stay at our stays for like the ultimate new primitive experience. And then we could, if you like it, then we have these models that you can take home and put at your house.

Prefab Review

Right, right, right. I feel like that happened with exercise bikes for a while. People started using them in studios and then everyone got them at home too.

That makes total sense. So we've learned a lot about your product. This is available everywhere in the US, right?

We have what's called a sort of a fire round, where on our site, I think we get like, I don't know, 50 or 100 questions a day, and we have a very small segment of our readership that is interested in learning about saunas and cold plunges. So is it cool if I fire a few at you? And you can say pass to anything you don't want to answer, but nothing too hard.

guess question number one is, we do get a lot of people putting stuff in their own homes, but we also get a lot of our readers aren't interested. And to your point, like I have a set of tiny homes where I have an Airbnb. Have you looked at all about, and one of the questions we always ask is, or get asked that we don't always have answers to is, what is the positive effect of this on like ADR, like average daily rate? Or basically like the economics of this sort of mini business I have?

You know, we've actually, we've dove into this a bit on the hot tub side. And what we've seen is quite positive in ski towns and other towns. Have you looked at that or have people looked at that for these as well?

New Primitive

Yeah, we've worked with a few Airbnbs . So this is called South Fork Springs. It's a Airbnb in Idaho and it sits on these 40 foot cliffs.

They have hot springs, a sauna, our sauna. And we use these guys as a case study. And what we've seen with Airbnbs we've worked with, that there's about a $45 per night increase for the Airbnbs we've worked with for their average nightly rate. And then their occupancy was also, because they ranked higher on SEO and on Airbnb platforms, they also saw an increase in average occupancy rates.

Prefab Review

Cool, that's awesome. So, okay, so let's just say there was zero increase in occupancy and whatever it is, like, I don't know, 20 nights a month. You might actually be like increasing your gross revenue by a thousand bucks.

How much power do these end up using? Does this end up being like a major consumer?

New Primitive

I would say they're paying, it really depends on how often you use it, and that definitely ranges, but I would say on average, probably spending a hundred bucks in utilities.

Prefab Review

Monthly?

New Primitive

Monthly. And that's with a sauna and a cold plunge. And if you just look at it in the eyes of the consumer, like when they're going out to these retreats or to get away, right?

To get away, this is something that draws them because it makes them feel comfortable. It makes them feel like it's part of this whole experience outdoors where the sauna is outside. It's away from the home.

They're in nature. It gives people that disconnection and allows people just to kind of, yeah, I think it enhances the experience.

Prefab Review

Makes sense. When we rent ski houses, I feel like we don't even look at places without hot tubs. So maybe this is the next amenity. Makes total sense. Okay. So I guess the question on that site that you just pulled up, if you want to pull it back up, was that site built? How did you get that to that point? Or just a crane?

New Primitive

No, it was, we were actually able to forklift this one into place.

Prefab Review

Okay. I mean, it's always hard to tell on these photos, but is that super far from the road? It looks like it's pretty far from a road.

New Primitive

It's actually really central.

Prefab Review

I see. It makes it look from that photo, like you're pretty far into nature, which is cool.

Okay, cool. One of the questions we also had, which I guess is actually really similar, is have you dealt with access issues before?

It's one of the issues we have on doing modular homes sometimes on these sites. Has that been a thing that you've had to deal with in kind of these sort of more remote relaxation settings? Or is it just big cranes can kind of get to a lot of places?

New Primitive

Yeah, I think what I've learned and that's probably been the biggest learning experience of growing this business is the installation and logistics aspect. And I would say at first there's, well, there's always a big enough crane. It's just how much you're willing to pay.

But to give you some parameters, I would say shoot to have the sauna within a hundred feet of where a crane can park. And no obstructions as far as like power lines and trees. And basically if you can do that and there's a flat place, a leveled surface for the crane to park, we can typically get these into place.

And that's when I told you our growth, like we were doing five to eight, like we were saying at the beginning, our first year. Why I think I've stayed at eight saunas a month is just because I've tightened down a lot more on the site qualification.

Prefab Review

Right.

New Primitive

Just making sure that everything is going to be smooth and efficient and that we can get it in there safely.

Prefab Review

One of the things that we've seen is like, you know, increasing amounts of, I would say you talked about tiny homes, but basically things that like wheelhouse is a good example. Maybe not meant to be moved frequently, but are actually on a chassis and could be moved.

Is there a version of yours, that actually, especially if you think about kind of like this retreat aspect where it's like a temporary or sort of like a month or two pop-up. Is there a version of your home that works in like that kind of scenario where you're on a bed or does it really need more of a permanent foundation?

New Primitive

It doesn't need a permanent foundation. It's really flexible as far as the foundation goes. You can do a gravel base with just a few inch pavers that keep it propped up.

You could do a cement pad. It just has to be leveled and solid to that it's not going to sink down into the soil. But other than that, they are removable structures. You could take them out just as you put them in.

Prefab Review

You mentioned a little bit about Wi-Fi. The last question we had here was how's technology affecting this space? Like we see a lot of technology affecting a lot of home building at this point. How do you all think about that?

New Primitive

So technology, as far as just being able to control it with your phone?

Prefab Review

It could be that. It could be building practices. Are there certain ways where you're like, “oh, right, you know, beyond the Wi-Fi, that this is sort of touching the space in a way that wasn't done, you know, five or 10 years ago?”

New Primitive

I would say the vision that I see for technology, I mean, as far as in the modular building world, there is some cool technology with steel framing that's really cool to learn about. But as far as technology goes, I would say this, at least for us, what we're seeing more and more interest from the outside is for like a meditation assistant on the inside. Saunas basically stimulate your five senses. And so you're getting people into a very relaxed, meditative state. And there's not a lot of places that you can, that you have intentional meditation.

And so this, I think, could be a really powerful tool for people to get in and be able to like, this is where you discover you. You have your creative thoughts, you have your inspiration of what is going to bring you fulfillment or is going to be important to you in the project that you're doing. And so having a journaling feature inside that you could say, hey, this is what I'm thinking.

Prefab Review

Yeah, that makes total sense. I was thinking through the sort of next steps there. You can totally imagine, right? The sort of personalized aspect of this, whether it's journaling it, right? Whether it's like giving you your mantra, whether it's like, okay, this is your temperature and this is how much time you stay, which is different from your wife, husband, friend.

New Primitive

Exactly. You could liknk it with your biometrics, like your Garmin. And it coul dsay, “hey, you’re looking depleted today.” And it could take you through this breathwork exercise, this temperature, rotate through sauna dna cold plunge in this order. And then you could have a journaling feature after that is like, “how do you feel?”

Prefab Review

This is a quick fire question that I should have asked before. What’s the amount fo time people spend in these? 5 minutes in the cold plung, 15 minutes in the sauna?

New Primitive

So the researchers that we follow, like Dr. Andrew Huberman or Dr. Susana Somberg and what they recommend is from anywhere from 175 to 212 degrees, they do say just 57 cumulative minutes a week. But, if you’re going in there for one time, they recommend 15 to 20 minutes.

And I think if you’re listening to this and you’re trying sauna, you’re looking for that uncomfortable feeling that you get around 15 minutes, where your mind or body is telling you to get out. I always recommend people stay 5 minutes longer once they feel that.

Prefab Review

Got it. That makes sense. Well I really appreciate the time, Cole. The question we ask everyone who is on our podcast is, “what are you most excited about regarding your company or industry for the near future?”

New Primitive

That’s a good question. I’m really excited to bring this to the U.S. I’m excited to see it get adopted into our culture. And I hope it flourishes here. But I’m really excited to create these thermal bathing experiences out in nature. I think that’s what really gets me excited - being able to host people at a really cool space. Similiar to this cabin, where I could add in sauna or cold plunge, or infared, or salt rooms. I want to create this whole experience around thermal bathing. And I think that’s what gets me really excited.

Prefab Review

Awesome. Thank you for your time. For everyone listening, if you want to learn more about New Primitive, newprimitive.io is their website. As always, you can find out about them and many other interesting companies at prefabreview.com. Cole, thanks again.

New Primitive

Thank you, Michael. Thanks for having me.

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Listen to the episode TranscriptPrefab Review

Hi, my name is Michael Frank and this is The Prefab Pod presented by Prefab Review where we interview leading people and companies in the prefab housing industry. Today, we're speaking with Herb Rogove and Wayne Norbeck of Liv-Connected - a modular and tiny house provider out of New York. Herb is the CEO and Wayne is a partner and the director of business and design strategy. Thanks for joining guys.

Liv-Connected

Thank you for having us. Great to be here.

Wayne Norbeck

Yeah, great to be here.

Prefab Review

To start off, it would be great to hear a little bit about Liv-Connected and what you actually do.

Liv-Connected

Sure, I'll jump in. About five years ago or so, I spoke to Jordan Rogov, my son and CEO of the company and also a partner Wayne in the architecture firm, and asked how we could bring architecture, design and health care together; based upon that we sat down and had a lot of discussions. I know Wayne and George have done some work in Namibia and Haiti with their architecture firm so they have some health care experience then we figured out we put that together with a nice modular well-designed system and take it to market, and we've been active now about eighteen months with our products and things are starting to pick up and we're there to fill a gap and hopefully help a lot of people with great housing, quality housing.

Prefab Review

That's awesome, you can see their models at Liv-Connectected.Com. So according to your website, this is sort of manifested through, basically, I don't know what you call them lines or products or whatever. You have your Conexus and your Via lines. Can you talk a little bit about them and how you decided on those as sort of your two initial models?

Liv-Connected

Sure, I'll just start and I'll leave Wayne who's the expert with the details. We decided that there's an interest, especially near the factory, of folks looking for tiny homes and of course there's a big movement across the country. We felt that that would be a great offering. Then some people were looking for larger homes, larger than five hundred square feet or starting at five hundred square feet. The market brought us to that conclusion: both interest and disaster homes to replace the FEMA trailers as well as people who want homes that are a little bit larger, or second homes, or people who're downsizing retirees. And then Wayne and Jordan and Joe, our third partner, came up with a great concept known as the click system and I'll turn over to Wayne to give you more details than the architectural significance of why and how we came up with that.

Wayne Norbeck

Yeah, so when we were designing this prototype and thinking about sort of you know, how disaster relief works in particular. The typical FEMA trailers are sent out on a single truck bed and they're shipped as space so to speak, so it's about eight and a half feet wide, eight and a half feet tall and they're brought out as a single unit, brought to the site and there's been a lot of sort of building science issues with them: mold and so forth, they haven't been a very uplifting type of environment to live with. So our goal was: we take the same type of shipping, that single truck, for the initial prototype and say what size house can we get on it and we developed this click system that Joe Wheeler, our other partner, had pioneered through his work through different initiatives of Virginia Tech and the solar decathlon. And so we're thinking about modular as a set of cartridges or components that can be, instead of shipping the space, you're flat packing everything and you're compressing all the space and therefore, when you come out to the site, you're taking these sort of big chunks of walls and bathrooms and kitchens and you're locking them together. But what you end up with is a house that's almost double the size of what you would get if you just had a single unit on the truck and that's the sort of secret sauce of what we're providing here.

Prefab Review

I may have missed that, that's Interesting. So for your multimodule homes, I was under the impression that everything was built modularly, or are those built on site?

Wayne Norbeck

Yeah, so well, it’s that the sort of components are all built in a factory.

Prefab Review

Right

Wayne Norbeck

So what we'll do is you'll have like for example, the whole bathroom is done as one component, the kitchen wall that contains the cabinetry and the cooktop and so forth is all one unit and then, there's sort of two solid components at either end of the house and then in between them there's roof panels that are kind of like eight feet by eight feet or so, wall panels like that floor panels. And so what you do is you come out on site and you have all these larger scale components…

Prefab Review

Right.

Wayne Norbeck

… that have been done in the factory, that's the kind of modular aspect. But it is a different approach to modular in that you're coming out and then you're assembling very quickly these other components to make the house. So when we did our very first prototype, which was a one-bedroom, we put it together in about 4 hours on site but the great thing is, is that the shipping is so much less and so much more efficient with this model and it allows for, you know, a lot more sort of volume to reach the site at a better cost.

Prefab Review

That makes sense, so I'm still trying to get my head around this. Are we speaking to all your models, or specifically just the Conexus model?

Wayne Norbeck

So that's the Conexus model and so what you end up there is with a sort of full house with that model. We also have a second line called the Via and that's the tiny home that's on a chassis and on wheels, that is done as a full on modular unit.

Prefab Review

Right? Oh okay, so I may not have understood this, so this is helpful. So the Conexus models, they're not on a trailer chassis, do they go on a manufactured foundation?

Wayne Norbeck

Correct. Yeah, then there's, you know the foundation is sort of, we like to say we're foundation agnostic. When we designed the house for the disaster relief model, we looked at doing helical piles that can screw into the ground, and then if you move the house later you can unscrew them and take them out. But you can also use Sona tubes or flat matte slab or you know a crawl space or so forth Even a basement that you can rest the house on top of.

Prefab Review

I see. Okay so, god this is really helpful. So essentially what you're making, I was in the impression that essentially what the Conexus was, and by the way everyone, I'm learning with everybody. So this is actually not 2 trailers connected, this is actually just basically elevated manufactured housing, right?

Wayne Norbeck

Yep.

Prefab Review

Meaning in terms of from a volume perspective is actually like, if I look at your angled two bedroom or your three bedroom this in some ways is a lot like a, I hope this doesn't come across as insulting, a lot like a double wide in terms of just like the volume of space and in terms of how HUD would look at it but this is architectural, it's just more distinct is that is that the right way of interpreting this?

Wayne Norbeck

Yeah, yeah, and it is a different model as you're mentioning, you know where we know the HUD requirements very well about the sort of separate volume, two separate volumes and so forth, but this is a different approach. And what we like about that is that it gives a ton of flexibility. You know if you could start out with a sort of tight house but then actually over time you can literally add on to it with more components so you can start off as a couple and you know as you have children or so forth you can expand the house. But it's also when we're contacted by clients of different needs, we can really provide all kinds of different configurations that can work really well with their site. Even though there's a very standard kit of parts that's necessary to kind of keep cost in line and have the factory be precise and efficient, we're actually able to put them together in a lot of different ways and really customize it for individuals.

Prefab Review

Okay, interesting.

Liv-Connected

And we noticed that's an important concept because even though we start off talking about the base models. Everyone always asks the question; can you add this, can you increase the space in the living area? And the answer is yeah, that we can expand it out. And typically up to fifty feet beyond that structurally and aesthetically it doesn't look as great and so we could put things side by side and, you know one of the other key philosophy is that you know young people want to be able to get into a home that's not overwhelming both financially as well as sizewise. So. You can grow with the house and the house can grow with you as you need, so that is one of the key points.

Prefab Review

Got so when you were talking about assembling something in 4 hours does that include like MEP and stuff like that? Are you just talking about the shell of the home?

Wayne Norbeck

Yeah, it actually does include the MEP. So we spent a lot of time trying to figure out how to integrate the mechanical system.

Prefab Review

Oh by the way sorry to interrupt, MEP stands for mechanical electric and basically, it's just like the internal systems. Sorry, continue.

Wayne Norbeck

Yeah, yeah, so in the base house, above the bathroom, we have a space where the mechanical sort of air handling units are located and we're using a split system. So We have a condenser outside and then it's kind of a ductless system on the interior. And even in the electrical, the way that the electrical is done, what we do is a kind of leave out a panel on each wall panel, and that allows you to have a junction box and connect the electrical, and then that gets covered up with the cladding and so forth. So yeah, all the systems are included in the models that we have right now which is really great because you're literally up and running. You have that kind of you say a half-day period of putting the house together then there's a little bit of sort of trim work that has to be done but you're ready fast and that's been incredibly meaningful for all of our clients because instead of you know, looking at a kind of nine-month process or you know, so forth, they can compress that down to almost nothing, which is really great.

Prefab Review

Who does that work? When you think about this concept of site work, this is not necessarily typical, right? You have the brand or the company that does the design work and they flatpack the kit of parts to the module and then there's sort of a third-party contractor who does the last 20 to 60% of the house depending on if it's modular or a kit. So is that your model or are you all doing this kind of site work?

Wayne Norbeck

Yeah, it's the same model where there is a third-party contractor on site that's doing the assembly and also prepping the site beforehand of course. But what happens is, that percentage of time really shrinks that the contractor is necessary and that's been so key for us that there's very limited work once the house arrives for them to do. Then we also need to do a final inspection out there. We do our progress inspections all in the factory, we work with a company called NTA, National Testing Association, that inspects in the factory for the regulations across the country, so they do all the progress inspections there, bring it out to site then there's sort of the final space.

Prefab Review

This isn't like a state modular thing right, or State manufactured housing thing, where you're getting approved in the factory, right? It sounds like you still need to be approved on-site on this stuff because it's..

Wayne Norbeck

Just for a final inspection, everything is done,but we do have the kind of state of approvals that are happening within the factory before it's shipped out.

Prefab Review

Got it and then, that's interesting. Do you need a crane to put your units together or are these going without a crane?

Wayne Norbeck

A crane is great and it can make it very efficient but we're also able to use a telehandler. We can put them together with that. So there's some flexibility. You know if you're doing something like a larger house or you're doing multiple houses then a crane can be more efficient but a crane is not necessary. We did not use a crane to do our Prototypes.

Prefab Review

The biggest thing that I think that drives half of the companies in the industry nuts, that we do, but is also really helpful, is we try to accurately find out what stuff costs. Because in this industry, it's actually really hard because people understandably, like manufacturers, are like “well I can tell you what my modules cost or I can tell you what my kit costs, but I can't tell you exactly what the site cost is” and I get that. But when I'm looking at your 3 bedroom on your website right now. It says 3 bedrooms, two baths plus utility, 1205 square feet starting at $448,000. Does that $448,000 encompass site work as well or does that just encompass the kit? Does that include transport?

Wayne Norbeck

That's the house price itself. So then what we do is we determine where the site is located, if you're on the East Coast, West Coast, or so forth and then we get a shipping quote for that. And then we also help the clients sort of team up with the local contractor that we were talking about to get the site costs figured out because they can, but it can vary so widely depending on the site configuration. You know, we do give guidance, we provide estimates to our clients on what we've seen in the past and kind of ranges. But of course that all has to be sort of clearly identified.

Prefab Review

So maybe we can if it's okay, maybe we can work through one? So your factory is in Pennsylvania right? Okay so one area fairly close to Pennsylvania that we've done quite a lot of work in, is kind of upstate New York sort of Hudson Valley you know Woodstock, Saugerties that area which is I don't think too far from that, right? But it is what I would call a quite expensive but not the most expensive market. You know? I mean it's not as expensive as the San Francisco Bay Area and it's probably not quite as expensive as the Hamptons or LA but it's more expensive than most other areas. Just from a cost of labor standpoint, if we assume that just the house itself is $448, I mean we assume that we're moving it you know to Saugerties or Woodstock or whatever on a flat lot that we're lucky enough to have like utilities stubbed pretty close to the property etc. what would you be looking at kind of for the rest of the costs?

Wayne Norbeck

You know it depends on topography and so forth. But you know, typically…

Prefab Review

Yeah, but let's assume that this is flat as close to Urban Infill as in that area as you can, so a fairly unchallenging site in an expensive market.

Wayne Norbeck

Right? So you know, it can be anywhere from you know I'd say like $30,000 to $60,000 somewhere in that zone is what we typically see for a fairly standard site.

Prefab Review

And that includes transport and all that stuff?

Wayne Norbeck

Well, transport would be on top of that a little bit. So it's you know it's probably like another 10 grand or so to get it up there.

Liv-Connected

Just to give you an idea. Let's say we go from Lancaster to New York and above would be a little over $2,000 for every five hundred Square Foot flat-pack truck, and what we're using, non-wide load, which obviously decreases the cost a bit too.

Prefab Review

Right. Yeah, you mentioned that there are 8 versus 16 which a lot of companies use. Got it. So that's actually a much better ratio than we see with lots of other companies, in fact. A lot of the companies we see end up being closer to like sixty-forty Fifty-fifty. So that's pretty impressive. So that's how I guess these work. How many homes have you built to date?

Liv-Connected

We've built right now, it's probably more of internal issues, we've just been producing the homes for about eighteen months, probably close to 50, the tiny homes, and we have orders. We're delivering early part of 2024 for about maybe half a dozen or so and we've got a couple in the pipeline that we're hoping it'll come to fruition within the next month or so.

Prefab Review

Then these are the tiny homes or have you delivered into Conexus as well, or is it all the tiny homes?

Liv-Connected

Tiny homes to this point, and like I said we have contracts already signed and sealed and delivered and right now beginning quarter one of 2024 will actually be manufacturing the homes.

Prefab Review

Got it.

Liv-Connected

We just got the permits approved for one of the homes in Vermont this past week.

Prefab Review

Interesting and then you were saying, just to be clear, these end up being considered by the state just like normal site-built homes. Are they considered manufactured homes? Are they considered modular homes?

Wayne Norbeck

Yeah I mean I think they're typically considered modular homes so that’s the designation where you've seen, but you know it can depend on individual sort of jurisdictions.

Prefab Review

Yeah, the big part of the reason that we care about this, maybe you can talk a little bit about the extent that you have orders on these bigger homes. You've dealt with this, one of the things that can be a little challenging about the sort of modular side of this business for customers, is the financing, meaning that more of the costs are incurred in the factory, there's a smaller subset of banks that lend on sort of the modular draw process. Do you have specific lenders who worked with or how has that worked so far?

Liv-Connected

We do have a very strong partnership with the Rocket Mortgage and they'll do it, as long as you have the land, that's not a problem. And if you do need a construction loan, we're working with the US Bank. Those are the two that we've been working with most closely at this point, but we're open to talking to anyone at this point.

Prefab Review

Yeah, totally yeah. I actually didn't realize Rocket did new construction stuff. But yeah, US Bank we’ve seen quite frequently in this market. It would be great to hear a little bit since you're sort of a newer company, and I watched an Instagram store or some type of video about this from your son Herb, about sort of the factory relationship and how you went about creating that.

Liv-Connected

Oh yeah, Atomic Design, they also have a subsidiary of them called Atomic Homes which we work with and very close. Jordan actually, after architecture school, worked with them. He did set designs in New York City and you know they come from the Pennsylvania Dutch area where craftsmanship and carpentry was just extremely well done, the quality and the experience of these folks. It was during covid and no concerts were going on, so Jordan reached out to Daniel who's the CEO of the company and we started talking and came up with some ideas and they'd just been extremely amazing partners to the point now where we recently moved this past winter or this past year moved into an over Hundred Thousand Square Foot factory where we're producing our products and they're used to building quality products that they could put up quickly and take down quickly and get on to the next concert. So with a lot of their expertise, we've developed an extremely nice product.

Prefab Review

Good. So for the tiny homes, it'd be great to hear a little bit about the permitting process for that. What are the uses for the tiny homes that you typically see? Are people just parking them on their land somewhere rural, and not using permits? Are they getting permission? Are they using them in RV Parks? How is this working?

Wayne Norbeck

Ah, yeah I think it's more the latter where you know we're technically classified as a park model RV. So you know when we do sort of site analysis for them, we make sure from a zoning perspective that it's permitted. A lot of times people can also use them as sort of an accessory dwelling on their own land or you know we'll team up with folks who are looking at tiny home communities. Our sales agent actually owns some tiny home communities and that's been a great generator business for us as we got kicked off here. You also have to sort of tie them into the utilities and so forth you got to make sure that that's done above board.

Prefab Review

Got it. So typically these have like normal RV hookups?

Wayne Norbeck

Yeah, yeah, so you have like a waste line and waterline and electrical hookup at you know, kind of each site that you're looking at.

Prefab Review

Got it and that, of course, will be different for your Conexus models right?

Wayne Norbeck

Yeah, well the same thing. It's different in that those are more like sort of single-family situations that you're providing the utilities to, but yeah I mean actually it's not that much different. It's the same exact utilities that we need.

Prefab Review

Got it cool. Let's see what other questions we have. In terms of customizations, one of the questions that we've got mixed answers to is, what's the ability for your homes to handle snow loads?

Wayne Norbeck

The houses are designed, you know, exactly like a regular house. So for the conexus line, we're following all the applicable building codes that you have all over the country. So the structural loads are meeting all of those requirements on the tiny home side. It's quite innovative in that you know a lot of the tiny home industry is sort of almost like glorified shed builders that have been putting these together and when you tour tiny home communities. You will see all kinds of different levels of construction and some of which you're wondering how long it will last. What Atomic has done is they've worked with structural engineers to kind of pioneer a different framing method because the VIAS are not tied to sort of residential building code. They're open to other types of framing techniques and what they've done is developed a whole system using one-inch thick structural plywood which they can have cut on a CNC machine very precisely. And then it's assembled to make the framing of the VIAS and that's all been sort of load tested above and beyond what's required for residential as well and then what's great about it is it's a very rigid and sort of stiff framing technique. And these houses really last as opposed to what you're typically seeing in the tiny home market.

Prefab Review

Got it. That's helpful. Um, let's see, how have most customers found you to date? Is it mostly, I see you've gotten a bit of media, Is it mostly earned media or, how have you got connected to your early customers?

Liv-Connected

Combination. Website, we tried to make the websites appealing so that they understand it's a one-stop shop if you need it. We take them through, they just reach out, we reach back to them. And of course the social media where everyone is and we've gotten quite a few leads from there as well.

Prefab Review

Great, cool. This has been wonderful learning a bit about your company. Anytime we have experts on our podcast, we try to, I mentioned to you how many before we got on how many questions we get from our audience, so if it's cool, can I give you ah both a few questions? Perfect. Okay, I guess one of the questions we get a lot is, about the resale value of tiny homes. To the extent that you know, do you think you can talk about if someone buys them are we looking at a car where it's like you know 20% of the value goes off when the car goes off the lot, or is there sort of another parable like you know closer to a house.

Wayne Norbeck

Yeah, what we've been told from our sales agent is that the houses are holding their value. So it's not like a car, like people can actually build equity and be able to sell them at a very similar or better value than when they're purchasing them. So that's been really refreshing because it's become something where we feel like we're offering a solution you know for the housing crisis for people that need to be in that certain price range. That's a really good alternative.

Prefab Review

Got it. Can you talk a little bit more about the sort of health innovations you have as options for your homes?

Liv-Connected

Absolutely. One of the backgrounds for my professional career has been involved in telehealth and digital health, being involved in that since the turn of the century. And had a company that was one of the first to market at providing health care through telemedicine and one of the things I think is important for us is aging in place. We don't want to be warehoused in a nursing facility. So we feel with the current direction in which digital health is going, we could keep people in their homes. If someone happens to be admitted to the hospital for a major surgical procedure; we could get them out of the hospital quicker to home where we could do remote patient monitoring and this extends beyond the seniors. For example, if you have a child who gets sick, it's usually Sunday at ten o'clock at night, do you want to take them to an ER? No. They're not that sick, you want to sit in their urgent care? No. You can stay at home and have a telemedicine consult and there are digital health tools that we can help you navigate to pit select. And do a full examination where a virtual pediatrician can take a look in the ears and make a diagnosis of an ear infection. Or if you're in your 30s or 40s and you work all day long and you ignore your sinus infection. You can't get to a facility such as an urgent care or a doctor's office. We could do the same thing in the comfort of the privacy of our own home. So the whole idea is as you get older if you fall we could build in using lidar technology developed in Israel where people if they fall to the floor within a minute and half a text message goes out to the caregiver. Be it a family member or physician and they could investigate why that your loved one is on the floor and there are other devices so these are all incorporated as part of an add on pack just like solar or off the grid. And we think it's important because I think more and more people will agree that you could get good health care at home now. Obviously it's an emergency or urgency, you go to the hospital but we feel that a lot of those trips are unnecessary and why can't we do that at home.

Prefab Review

That makes sense. Another question we got was, how should I evaluate tiny house quality? So you spoke a little bit to Wayne about the varying quality of when you go to those tiny home communities, right? It goes from pretty Diy to pretty professional. if I'm someone who just wants a nice, well-built tiny home. What are the specific things potential customers should be looking for?

Wayne Norbeck

Well, I would recommend learning about the sort of company that the home is coming from or the contractor that put the home together as much as possible., you know it's… We take it incredibly seriously. You know how detailed and you know relating all of our work back to building science, energy performance and so forth, but there are a lot of people who cut corners, especially in tiny homes. The building code is not quite there yet, you know as we understand it. The codes are being developed now that will have more of an impact on these houses. So I think you want to do due diligence. You want to go with a reputable company that's providing them and you know ask them. Ask them how the wall assemblies are put together if they're meeting the building code. You know what kind of loads the houses can withstand and if there are examples of people that you can reach out to who have been in them for a long period of time I would definitely recommend that as well.

Prefab Review

Got it. Well thank you guys so much for taking the time to chat with me, the question that we ask everyone, sort of as a final question. It would be great to hear the answer from each of you: what are you most excited about for your company or for the industry in the near future?

Liv-Connected

Oh, for me, it's part of a legacy lifelong dream to be able to provide homes to take care of you normally it’s the other way around you take care of the home and the architectural design that Jordan Wayne and Joe have done, really is an excellent example of how we could take that and then merge it into the needs of health care and quality of life and so that's really exciting. I can see that in the future and as people begin to understand what we have to offer and how they could benefit from that. Again, the house will take care of them.

Wayne Norbeck

I would like to mention that one of the really exciting initiatives that we have right now is that, you know, we learned through this process that the rules across the country are so different and it became challenging for us as a company to deal with that because it's difficult to order materials in bulk, for example, or build a kind of stock of house or something to keep the prices down. So what we're targeting now is looking at sort of HUD-approved houses, and the regulations around those and we've been working with congressional leaders as we speak frankly to try to change those rules and open that up so that it's possible that more different types of housing not just the kind of limitations of what we have right now for HUD open that up so that we can have more of a national standard on housing and we estimate that could have you know anywhere from like a 15 to 30% impact on cost and we just really love that we could. Make an impact like that and improve affordability in this country.

Prefab Review

That's terrific, I'm really excited to see the rollout your multi-module homes and see how this all develops. We're big fans of anyone doing anything innovative here Anyway, Thanks again. It's been great talking to you.

Liv-Connected

Thank you.

Wayne Norbeck

Yeah, yeah, thank you.

Prefab Review

Again for those who want more information about liv-conneced visit liv-conneced.com and as always you can visit us at prefabreview.com, thanks again.

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Listen to the episode TranscriptPrefab Review - Hi, my name is Michael Frank and this is The Prefab Pod presented by Prefab Review where we interview leading people and companies in the prefab housing industry. Today, we're speaking with Jordan Easterling. Jordan is the founder of Building Swell and I'm sure he can explain what they do better than me but basically, they make software that helps prefab companies better run their operations. Previously, he was a VP at Factory OS which is a modular company and he worked at ManufactOn which is another software solution for the offsite manufacturing industry. We're going to try to have a wide-ranging conversation about his journey and his areas of expertise because I think it'll be really helpful. We get a lot of questions about what really happens in the factory and in the construction process. And since he's been an executive and founder in this space, he can definitely be helpful. So Jordan, Welcome.

Building Swell - Hey, thanks for having me Michael. I’m really excited to chat.

Prefab Review - Awesome! Well, thanks again. So I guess to start, you obviously worked at a bunch of different spots within the industry. Can you tell me a bit about your personal journey and how you got involved in what you did at each of your professional spots?

Building Swell - Yeah, absolutely. At the very start, you know, I was a structural engineer by education and basically stumbled into forensic engineering. And what that means is if something failed on a job site or something failed as part of a construction project, I had to figure it out. So, what was the mode of failure? And you know, how can we support folks that are digging into that? And I was doing that for quite some time. And then the lines get a little bit blurry when you start looking at not just buildings that have already been completed, but how can we start to prevent some of those problems from coming up during the design or during the pre-construction phase? During that journey I was exposed to a really interesting project that was by default a prefabricated project. And it was my first foray into that space. And oh man, it was so fascinating. That was a light bulb moment for me I thought, “well, wait a second. if we're doing it for this project that actually needs prefab because it's in this remote location but it's working really well, why aren't we doing this more broadly in the construction space?” I mean, this is applicable for any project. And so that peaked my curiosity.I did some more consultative projects around that. I was at a company called ManufactOn that was focused on providing high level status tracking for different prefabricated builds. But you know what, you mentioned most recently I was at a company called Factory Os. And FactoryOs focuses on these multifamily mid-rise, wood frameed apartment complexes. Basically apartment units but manufactured in more of a manufacturing workflow. And there I was responsible for anything the tech touched.

And I'd like to break it into 4 big areas. We looked at commercially viable R&D so, you know lidar or a lot of times like hardware applications. And then we built a bit of custom software just from the ground up. And then we also looked what can we pull off the shelf from the software side and develop training or implementation programs around that. And that was a super fascinating time at fFactoryOS but really good exposure to see what is the tool set available for a modular builder or prefabricated contractor.

I guess at Building Swell, I stepped away from Factory OS in 2021 to focus on what we do at Building Swell. Now full-time and at a high level, we focus on, I think you hit the nail right on the head, running a shop is really hard. It's so multivariable and so where Building Swell comes in is we help manage teams and some of the production schedules. Even when you have a myriad of different project schedules and help manage inventory. Basically a lot of the the difficult planning and operation style functions. We help shops tackle that.

Prefab Review - Got it. That's helpful to understand. So I guess let's jump in. So FactoryOS has gotten a lot of press in the Bay area, where where we both live. They partnered with a bunch of the big tech companies to do different multifamily and sort of high profile projects. So they partnered with both Google and Facebook or at least one of those 2 companies I know.

Building Swell - Yeah I forget what's been published. But yeah, definitely some big some big names in the tech space. And you know a lot of either corporate housing or a good a blend, FactoryOS says a really good blend of affordable supportive and market rate housing.

Prefab Review - So that's like a fairly scaled company relative to at least a lot of the prefab companies we work with. So is a lot of what you're doing bringing like the best practices that a company like that would have to maybe a smaller company or is it actually providing a different capability?

Building Swell - Yeah, you know it's a little bit of that. I would say there are a couple challenges regardless of what type of prefabrication you run. You know, some of our customers are in the electrical space. So they're not necessarily doing these volumetric modular residential units. So it can be broadly applied but really where we focus is any time that you're building something prefabricated. There's a high degree of variance or a degree of of change that happens in the product line that you're building. And so really where we focus is bringing best practices into these spaces but also making it very clear when something varies, how does that impact your production process? One of the things that we hear over and over from different companies is, “we don't really build the same thing twice.” You may have a product catalog where you're building the same studio unit but every local jurisdiction is going to have different requirements based on what you can and can't do and what some of the the subassemblies have to look like. And so we make it really easy to capture that variability and and give you the next steps or what's next.

Prefab Review - What were companies doing before before you existed? Were they using another software? Was it going to some gantt chart and was kind of done less rigorously how? How are people dealing with these sort of different variations of housing before 2021?

Building Swell - We see a variety of things. There are some companies that will try to leverage a true manufacturing software. And there are some very powerful, very wonderful softwares, but it could be very expensive. The bigger challenge is that some of this software just doesn't capture the variability that you see in construction. It's assuming when you build something, you're building the same thing over and over and over again. Let's say an automotive manufacturer. Basically you're saying look, we're not going to change this design for the next year, this is locked. We're just going to really figure out how can we continue to tweak or optimize process so that we can drive down cost and really increase the volume of production that we're putting out. Bu none of the prefabricated construction players don’t do that. There's going to be some small change. And if we're just talking about fixtures or finishes, that's one thing. You know, if you're swapping paint colors or maybe the exterior facade. That's less of a challenge but you know if you have anything else that's changing which is anywhere that you're building if you're going from one municipality at another or just a different building owner, you're going to have pretty big changes. And that has a ripple effect through your production process, through your design process, through how your supply chain operates. And so while it's good to focus on how can you eliminate some of that variance, eliminating all of it is just not practical. So anyways, that's a longwinded way of saying, yeah there are some style of tools but the lion's share of what we see, even in large shops is some permutation of a spreadsheet, whether that's a locally stored excel file or sometimes this is an airtable or smartsheet but it's still a spreadsheet and they're trying to figure out, okay, how can we track some of this production process or some of this production status.

Prefab Review - That makes sense. That sounds really cool. It sounds sounds very needed. One of the really cool things about having you on here is again, as I said to you before we started, we talk to a lot of Founders or CEOs of different companies but not necessarily people who are so focused on the actual construction and the construction processes. So one of the things that we do and anyone who goes to our website prefabreview.com can ask a question. And so we ge questions and we try to answer some of them. But we get hundreds and hundreds of questions every month. So I went in there this morning and I picked out a bunch that kind of fall into areas that more expertise on than I do. So I was hoping I can just go through and you know, if you don't know the answer, that is totally fine. But I think you'll be able to be helpful on some of these. So with that being said, you talked about this idea a second ago - most factories are not Toyota, right. It's not like they have 4 different types of RAV4s or whatever. You know, there's almost like an unpredictable number based on site, location, and jurisdiction. And all that stuff if you think about it, I don't know if you've worked with these companies, but you probably at least have some understanding of Champion or a Clayton or some company that probably is a little bit close to not specializing quite as much and you know they have big catalogs. Probably hundreds or tens of homes. But it may be less customized. How would they differ from a more custom shop in these processes?

Building Swell - Yeah, you have to keep in mind that you still have to, well before we jump into that, there are two sort of big branches, right? You have more HUD-style requirements where you're building to a different standard and national code. And so when you're building to that you have a little bit more of an ability to reduce that variability or that variation in your product line. But oftentimes it's difficult to know. And until you start building or unless you know you've been in this space for a while what some of those local requirements are and how that is going to impact your overall production. So to give you a good example, in a past life I worked with someone that was building 2 different residential, multifamily units in 2 municipalities that were side by side and very seemingly small changes. One municipality required an additional layer of drywall flame spread. Well that’s so trivial, right? Like no owner’s going to care too much, just throw the additional layer of drywall on that's not a problem.

But when you start digging in, you realize that okay, the window that you're mounting into this space now has a deeper sort of rough opening depth. So that is going to change the window that you're using which could have a high cost. It's going to change the flashing around that. And then, you know, that could have a pretty profound effect on the supply chain now. Now with windows, let's say it's an 8 week lead time. And now you know, mid process, you have to order another window. And now you're sort of bloating that lead time. So I guess, the differences are when you're a company that has that national reach and you've been around a little bit longer, it's more the experience you understand. Okay, these areas are going to be a little bit more suitable for this style and then if we've been burned by this type of change in this municipality in the past, maybe we just don't sell to that area or you know maybe we've already thought through the details around that. So I think that's one of the big differences is it's less like a structural change and more like an experiential change.

Prefab Review - Got it. Interesting. Moving on, what are the innovations in factories you're seeing these days? We've worked with a lot of different prefab factories and some of them are like, “hey, you know we have 20 scientists from Stanford and we're trying 3-d printing or something.” And some are like, “my grandfather started this prefab factory in this warehouse and we're still going.” So there's a lot of pretty old prefab factories. Is there going to be a huge amount of difference in their process or like what are the cutting-edge changes, you're seeing.

Building Swell - That's a really good question. You know, it's difficult because it's not necessarily one size fits all. If you've read the Toyota method there are some really good concepts out there around either continuous improvement or this theory of constraints. And the takeaway is that what you're building is different, because you know the the different areas that you're in is going to be the best use of your time, right, maybe it was better just to focus on areas where you have a much longer lead time or a longer cycle time. You know, just the area where it's the highest risk for your overall process.

Prefab Review - Got it, that makes sense. Another question we got, why do companies miss their targets for completion so frequently? We sort of know the answer since you're building software. But if you were in a factory, could you minimize that and is there stuff you would do beyond good planning and sounds like flagging variances early?

Building Swell - So this is a really tricky problem and a really tricky thing to answer. But one that we're happy to dig into is this is our bread and butter. This is what we really like to focus on and give you a good example. Let's just take a look at scheduling in the first place. So if you are a prefab shop and let's say that you're doing a couple multifamily projects and a couple of single family projects. Obviously, the single family projects are going to be much more pared down in terms of scope and duration. But you know, you only have a certain capacity in your shop. You only have a certain number of of things that each of these work cells can hold and projects are super dynamic. You're not just managing your material lead times and let's say a customer says, “you know what, we don't want this window. We want this other window.” Not understanding and you may not even understand what that lead time Delta is when you're in the conversation but also you know prioritization. Maybe one project gets delayed because of a permitting issue and now you have this soft spot in your schedule. It is very difficult because you have so many moving parts to keep track of and so it's a really challenging thing for any shop to handle. The more variance in in each step of your process from design to some of the the inventory management or supply chain pieces to your production is sort of multiplying. So reducing variability is good but you know at a certain point construction is just really tricky because it's so multi-variable. There are so many different moving parts. There's this really good article I'll drop to you afterward that you can share it in the notes but it talks about the difficulty of innovating in construction because of the fact that it's so multi-variable and because you can only compress a schedule so much. But your potential for blowing the schedule on the other side is sort of unbounded. You can have this progressive delay that just like a delay, feeds on another delay and it's sort of adding up.

Prefab Review - So kit build versus modular, how are the processes very different? One of the things that I think customers like about modular that I wouldn't exactly call it QA but is a little bit helpful, is when you're shipping a modular house to the site, you can see that like at least the frame of the house is there. Whereas you know, I know there's theoretically high-quality shop drawings or whatever that the kit's been fabricated to and those get sort of QA’ed and checked before they get flatpacked. But beyond that, how are practices different otherwise on the sort of factory construction side?

Building Swell - That's an interesting question. So you're shortening some of your processes with kits. One of the things that we see if we're talking residential is you know the standard in the US and in Canada is using drywall. And of the one of the most attractive things of prefabrication regardless of whether you're in residential or commercial or you know some of the subcontractor sort of trades.One of the things that bloat the process the most is cure time or something where you're literally waiting on painte to dry. So one of the interesting things about kits is you just don't have to deal with some of that cure time, right? Because the drywall work is happening on site and the finishes, you know that paintwork is happening on site. But you know conversely for the homeowner, what's really nice about the volumetric side or the prefab side is if you're doing that in your factory it's going to be more challenging for you to QA it. You see that and you have to figure out what to do with that cure. But, we've seen some clever shops bury that cure in their process in a clever way to where they're shortening the overall cycle time for those units. One sort of example case of you know, just interesting differences. I guess zooming out even more broadly, something that I think is really interesting, there was a good presentation we saw at the industrialized construction forum at Stanford, a couple years ago, talking about the tradeoffs of volumetric modular versus like panalized versus more of a kit approach. And basically what you're doing, you think of the surface area of coordination is what I'd call it. You're pulling a lot of that coordination into the shop and reducing that time on site, the closer you get to the volumetric approach and you're going to have a little bit more coordination required on site than with the panelized. So you are saving a ton of time. But what you're then doing that's sort of inversely related is you're reducing some of the flexibility or the degree of freedom that you have downstream. Right? So what we see is actually companies that have done really well are actually blending a couple of these different styles for different use cases or for different subassemblies or product lines that they run.

Prefab Review - Right. Yeah, we've seen that as well. So I guess this is actually one of the biggest questions and I'm not positive and I’ll be interested in your answer. How should consumers evaluate construction quality? That's one of the hardest questions for me to answer for people. Normally it's pretty easy for people to evaluate - do I subjectively like the aesthetic, we can like tell people building permit information and we can give them some information especially on sort of like the finishes level. These are considered higher-end finishes. These are sort of certain practices of construction that are a little bit nicer or more robust in certain ways. But it's very hard for us to say like objectively this high-end construction modular company has better construction practices than this one. I mean there's a little bit of that in what's the r factor and like home installation and stuff like that. Which is I guess one aspect of it. Prefab Review - But yeah, how do you evaluate that stuff?

Building Swell - That is such a good question. There are a lot of different aspects of that we can dive into. I would say that high level, a lot of the QA that you can do as a homeowner or sort of the end user is visual. I mean that's how a lot of the the testing is done in a shop for QC is very visually based. So there are a couple of cues there that we can talk through a little bit more. There are also very formal or formalized quality control protocols that these shops will run and we can talk through the differences between what's required at a state level or you know, at local level versus what shops go above and beyond. And then there's a standard battery of tests that are traditionally done that are a little bit more quantitative. You know, air leakage, your water penetration tests. You're talking about the thermal performance of some.

Prefab Review - If you're in the factory, I fully understand how you can get r values, I sort of understand how can get that data but right, like can consumers even, maybe it's just negligent on our part. Not negligent, I shouldn't use words like that, shortighted our part, I don't think we've ever asked a modular company about water penetration testing and different thresholds for that and I don't know we've evaluated thousands and thousands of houses, so is that something that we should be asking about or yeah, what's your perspective?

Building Swell - So here's the thing, a lot of these shops actually do it. They may not advertise it because it's not as sexy as advertising some of the design differences of their units but a lot of them are doing it and you know a lot of them are actually really open to sharing some of their QC reports. You know, they may have internal reports that they run that they may not be willing to share but they have something they share with the state or local building agencies. And sometimes they have programs in place where they will walk the customer through that. And we think that that's really powerful. The ones that have more of a structured quality control program and are open to sharing that. That’s wonderful on a couple different levels. It's wonderful before you actually have the module setup on your site but even for long-term operations, just having that additional information is like a turnover document or turnover package is wonderful because let's say that you want to swap where your electrical outlet or your roughend goes, you now know this is where it was, this is where it passed inspection. This is you know, maybe some other notes that you have while the unit is being made.

Prefab Review - Okay, interesting. So maybe we'll do an experiment, we'll email a bunch of the companies we're close to and ask them. This is just called like a standard quality control processes document. Because again, I mean we have plans right, and those show the rough-ins and the outlets and all that stuff, but what you're talking about I think, is you're talking something beyond plans you're talking about something that speaks to right, like kind of quality and standards beyond just like the state required stuff that they walk through?

Building Swell - Absolutely. To give you some examples of what may be captured in a QC document for some of these shops, let's take a wood-based single-family home builder as an example. Hypothetically, let's just say that they have 10 work cells that they work in. Well the first stages they're going to be setting up a lot of the the frame, right? The floor panels, the the wall panels, the ceiling trusses, you know ceiling panels and each of those are going to have a series of visual inspections that they go through. Like how square is this? Do some of the the rough openings for windows or let's say that you have some pass-throughs for plumbing or for electrical, do these line out the way that they're supposed to? And this is important even at the early stage This is important for the company themselves. I mean they're doing this themselves because if you get something that's out of squar, well now it's not going to sit right in the next stage where you're adding those walls and you know adding a roof to that. So oftentimes, they're running those visual inspections throughout the process. Once we get downstream and you have the electrical, they're running electrical tests to make sure that each of the circuits are performing the way that they should so that they don't get to the site. What do you do now if this light doesn't turn on. So there's a standard battery of tests through each of these stations that they're doing so that they know it's going to flow through their process. I imagine it's pretty standard for some of these shops to share with their customers. We see it all the time with commercial, you know, them sharing these QC reports with their general contractor. Or you know, the larger maybe like tech company building owner, right?

Prefab Review - Yeah, that makes sense. That's interesting. Yeah, we'll request some and see how open they are to providing them. I guess the next question is this is a little bit of a California-centric question. But we've done projects all over the country. So I think it's centric to everywhere. A lot of times for modular construction, particularly. The building approvals are on the state level for the home and then essentially the local levels but I'm really speaking to a residential use case here, the local building department. Is that a reasonably good process? Because the thing we haven't had any issues with but that has occurred to me is, okay, if something happens between this time it moves from the factory to site that’s not visually apparent, is anyone going to check this? The last thing I want generally in California is more regulation for permanent houses but just curious about your perspective on if that's sufficient.

Building Swell - I think you're going to see some variance in the process depending on who you work with. And I think this goes back to our prior conversation around quality control, right? We've seen some wonderful shops. Some that that use Building Swell to do this but we'll basically capture what do things look like from a visual perspective. Maybe some of the finish work. You know before it gets to sight and so you have this sort of chain of custody, right? You have this information around what it looked like when it left the shop, what it looked like when it left the truck, what it looked like when it was installed from those companies themselves or from some of their third-party set partners or or whoever else is involved. That's done just because it's sort of required for the company generally and so that type of information, even if the state or the local may not have eyes on that, you know generally, the company does and and yeah going above and beyond on the company side I think that is more sufficient than adding additional layers on the local or state inspection level.

Prefab Review - Yeah, I mean ideally, I guess the other good thing is most of these states there's some alignment around who’s responsible if stuff breaks. Ok, a slightly silly question. Why isn't 3D printing, why isn't that really a thing? I mean like, I know we've spent a little bit of time with Mighty who I think, is in Oakland.

Building Swell - Yeah, yeah.

Prefab Review - And there's a few groups we've talked to I think in like Austin or in Mexico or Latin America where there's some level of this happening, but I don't know what the exact numbers are. We're probably talking about like a few hundred or less than 1,000 homes total at this point. Why isn't this a commercial process of any scale?

Building Swell - That's a pretty layered question.

Prefab Review - I don't know if you've dealt with that. But we get questions all the time like, “can I just 3D print my house?” And we're almost always seeing there’s no scaled, mature technology as far as we can tell. But we don't usually say like this is why.

Building Swell - You know, pretty good question and we just haven't seen many vendors in this. I think you can break the answer into 2 big reasons why we don't see more of that. And keep in mind that there are some companies that are that are really pushing the envelope here and we could see some interesting progress over the coming years. But right now, it's really it's really based on how cost competitive is it. We can jump into that in a second but also there's some technical limitations around what you can and can't 3D print. Starting with it being cost competitive, when you think about 3D printing on site, let's say.One of the values of prefabrication in the first place is you're taking a lot of the complex sort of management and complex construction processes and moving that into a more efficient, streamlined manufacturing process away from the job site in a controlled environment. And so obviously, you still have to pay for shipping costs to get it there. And so you're betting on having a more streamlined process that will outpace cost.

Prefab Review - Yep. Plus I mean honestly, a lot of prefab for us is a labor arbitrage, right? If you build your house and the labor’s gonna be cheaper than in Los Angeles or whatever.

Building Swell - But think about it with like a 3d printing system, right? Whether it's a gantry or sort of you know this five six axis robotic arm sort of based system or deployment system, you know, basically you're moving all of that to the job site and then still doing the work there. So someone can't work in that space. But you know, the other interesting thing is a lot of what's being printed is concrete and concrete is so prevalent. It's easy to find some of those components locally or some of the materials locally. And we've gotten really good as a global sort of construction industry at producing concrete to be really high performance. You know, low cost and so you're competing against sort of like the best in class material if you could call it that on a cost basis.

Prefab Review - Right. That's interesting. So if you could 3D print like framing or whatever in a more efficient way something, that's more laborious, more expensive etc, that might be more efficient? Okay, that makes sense. I mean, it's a very cool concept and it makes sense in terms of turning your labor into capital. But yeah, honestly we're not that intellectual at our company about this stuff. We just basically say who's done really cool stuff with reliability and then we recommend that to customers and stuff. Unfortunately, we haven't seen it very prevalent. So hopefully it gets there.

Building Swell - Now, well one thing to add there that we have seen that's really interesting is using 3D printing as part of your internal process, now that's where it gets really interesting. Let's say that 3D printing really good at complex geometries and you know shapes that would be difficult to do in a traditional process. So if you can leverage that and do that in your facility, and then incorporate that into your volumetric or panalized prefab process, that's where things can get really interesting, especially when you're using novel materials. You know, something that may be more of like a polymer-based approach. The last thing that I'll say about it that's just about you know 3D printing material and specifically 3D printing concrete is you know, you brought this up earlier, we're both in California and you know, heavy seismic requirements here. One of the beautiful things about modern concrete is rebar. You know, having steel to sort of compensate for how poorly concrete performs in tensile and in tension, right? But you can't really push rebar through a front head. That's a really challenging thing to do and you know, there are fibers that you can push but anyways, nothing works as well as just good, old-fashioned rebar. But advancements in you know, different material types or even different processes for how to compensate for the the poor tensile strength of concrete. But for now, it's just sort of like a watch and seeing how people people continue to innovate.

Prefab Review - Cool. Thanks so much. That's a good answer as well. So last question Jordan, we really appreciate all your time here. We ask this to everyone. What are you most excited about for your company or for the industry in the near future?

Building Swell - So we are really excited about empowering more companies to be able to come onto the market and help drive more housing. One thing that we've been focused on pretty heavily over the past year is making it easy for customers to see what types of changes you may make, whether it's you know, moving people around or reprioritizing different projects or even different subassemblies within your project - making it super clear. Super transparent. This is how that is going to impact your overall throughput and we're just really excited to see how we can demystify some of the complexity so that more people can come online and build more housing to start attacking the housing crisis.

Prefab Review - Awesome! That's terrific and we're excited about that as well. Well Jordan, thanks again. It was awesome talking to you. For more information about Jordan and Building Swell visit buildingswell.com and as always you can visit us and learn more about the industry at prefabreview.com Thanks again.

Building Swell - Thanks Michael.

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Listen to the episode TranscriptPrefab Review:

All right. Hello everyone. Welcome to Prefab Review Podcast, slash video screen, slash whatever mediums this is on. I'm Michael Frank from Prefab Review and today we are lucky to be talking with Toby Long of Clever Homes. Toby, I think this is his third or fourth time doing video and audio stuff on our platform, but he's been one of the most helpful people in the industry to us. (Prefab Pod 2 w/ Toby Long & Prefab Pod 15 w/ Toby Long) He's an architect based out of the Bay Area. And I guess Toby, you can speak more to what you do, but I'd say doing a combination of high-end single-family homes as well as multifamily and commercial stuff. And the motivation behind having Toby on today beyond just his general wealth of knowledge on prefab stuff is to talk about evaluating land and lots. So we in general get lots of questions of people sending us Redfin links, sending links to Zillow and saying, "Hey, should I buy this?

Can I just buy this piece of land that's $7,000 and throw a prefab box on it, and have I just figured it out a cheaper way to build housing? Typically speaking, that's not true, but there are cases where that arbitrage is real or where it makes a ton of sense to build. So what we're going to do during this video is we're going to talk through four or five examples that are pretty indicative of the kinds of land that we discuss with people every day and basically go back and forth and chat live. So we've each looked at these a tiny bit, but not that much. But right off the bat, one. Toby, how are you?

Clever Homes:

I'm doing good, Michael. Thank you. Thanks for having me today.

Prefab Review:

Okay. So before we do this, the other motivation behind this is for our newsletter and our site, we're actually revising our typical land diligence checklist because we think it has some areas that could be improved. So Toby, I was going to show you what we have at first and feel free to rip it apart and then we can use that as context of other stuff you'd look for and then we'll dive into land. All right, so everyone should be able to see my screen right now. So basically, the number one things just running through these points are site access, and this is really particularly with modular homes in mind. Can you get a crane and a truck back there? Because a lot of the projects we work on, we're talking about modules that are, what? 40, 50 feet long. Sometimes maybe 20 feet long.

So you basically need to be able to get them back there, and then you need to be able to get a crane back there. Then, the power lines thing, I don't know your thoughts on this. I consider this not typically a deal breaker, but something that can make life more complicated. And then, there's just a bunch of stuff. Most of these aren't things that are necessarily deal breakers outside of, can you access it with a truck and a crane, but it can make things a lot more expensive. So is there a reasonable building pad? Is there a driveway, if that's required? Sometimes you get these lots that really aren't buildable because of setback issues or other weird stuff.

Then, the survey and geotech. Again, especially the geotech stuff, a lot of times that's more of a determinant of cost in terms of more expensive, complicated foundations. Are there floor area ratio max coverage issues? Again, that's largely permitting stuff. Can we actually build what we want to build on the site? The design review process, HOA stuff we have all the time in certain more Tony areas, making sure that what you want to build is consistent with that.

One of those things since we've been doing this whole company and modular stuff over the last five years or so that I've been really pleasantly surprised with has been how helpful local planning departments frequently are when you just call them in terms of educating on a lot of these issues. So we typically recommend that everyone calls the local planning department at least before, even if it is sometimes after the lands under contract, but at least before completing a transaction. And then, there's a bunch of other stuff. If it's a high risk area, again, you can typically figure out insurance and stuff like that, but it can make things a lot more complicated, a lot more expensive.

And then, I think the other areas that typically get really expensive though you can typically deal with them that I think we'll talk more about in the remote land situation, are how close are utilities in a working road. Just because, if you're going to be paving a one-mile driveway or extending power from somewhere, it seems like that can get complicated. So just off the bat, I know you haven't looked at this list, are there other checklist items that you look for right away when evaluating lots?

Clever Homes:

Yeah, I think this is great, Michael. I think that you're doing a real service for people and trying to get ahead of a lot of these questions that I think most folks don't necessarily think about right away. Obviously this is a really hard part of projects for so many reasons. It's easy to get really excited about land, I think people see opportunity in certain land's values certainly where that starts to look really inexpensive. As you reflected, that's often an indication of complexity. I do think that this is such an important aspect of building any kind of project for sure. You've got to connect with the land, there's a visceral element here that's hard to quantify. We have to want to be in certain areas, and of course it's additionally challenged by the fact that certainly here in California there's just not a lot of land.

There's a lot of land, but land for sale that's buildable is getting harder and harder to find. The good news I think, is that construction technology and techniques are continuing to advance and improve so we can build on topography or in areas that were previously really challenging, I think, for building projects. And I would apply some of this to offsite construction and modular building in particular. I do like that you start this process with the assumption of modular construction as we're all in promotion of factory partnership and prefabricated building methods in all of their various forms. My pitch to clients is often to start with modular. It is maybe the most profound change to the way that we build, but it's also the most rigorous. And if you can start to navigate through a modular scheme on a particular building site, I think all of the other techniques within the industry are of course applicable, assuming that Modular construction starts to become too challenging or difficult.

So I think that your summary here is a really good one. The things that I look at are two buckets, one is just, what is immediately observable? When people call us, I think about what can I do online? How do you leverage Google Maps, consistently reflect on what did we do before this? What happened before Google Maps?

Prefab Review:

Google Earth is amazing.

Clever Homes:

Can we look at the property? Can we see things from a different online perspective that can get us a quick reaction. And there's that bucket and you capture a bunch of these. And then, I think there's the more detailed observations that come from really looking more closely at disclosure packages, talking to jurisdictions, trying to in other ways, dig a little deeper, literally and figuratively into what might the property require to be successfully developed. The one thing that might be interesting to point out here that has definitely been an evolution over the last five, 10 years or so is that most communities have a geographic information system online available to people.

This is the GIS systems, and usually if you Google your local town or county, there's some way to identify parcels within their GIS mapping program. And that's usually tied back into, at the highest level, planning law and codes, development standards, things that you can read into the zoning of the site. I think there's valuable information there. And some GIS systems are as sophisticated as to map back to water and sewer and power and other kinds of infrastructure. So it's a really helpful tool that I use, I certainly promote other people become familiar to a degree with these kinds of systems. They don't answer all your questions, but I think it's a good way of just starting to understand what kind of information a local jurisdiction has about your property. And usually, in combination with mapping software or Google or Apple or whatever maps, I think you can start to have a high level overview that you can start to look at pretty quickly.

And my list is very similar. I think these issues of slope and topography are really critical, access and power lines are for sure. I'm with you Michael, I think power lines aren't unto themselves a showstopper. We've had some success in working around power lines. Not surprising to hear. They tend to be end of the road, not in the middle of the grid power lines situations. But they definitely can be rigorous, it puts yet another hurdle for offsite construction to climb over as people are trying to make a case for these techniques. So I think power lines are really important to understand. Things that I also look at just at a high level are surrounding homes, not that that's a hard thing to identify or conclusive, but obviously a property surrounded by existing homes is a little bit easier to contemplate, building a new one than being in a rural location as I know one of the lots you're going to show will indicate.

I also think that there's observations that can be made around fire infrastructure that you can also get ahead of, just identifying hydrants, looking at even manholes in the street and stuff that you can see in that mapping software. And then, the more detailed stuff that I think is on your list often comes from either further investigations, like talking to the planning department, as you mentioned, is invaluable. I also find planning agencies to be extremely friendly, very consumer oriented in a way. And so, getting in front of planning departments, sitting down at the counter, heaven forbid, having a face-to-face meeting can be super valuable. Most planning agencies are able to return phone calls pretty quickly in our experience, so I think you can get good information there.

And we do find that a lot of properties that I come across do have reasonable disclosure packages. Maybe it's from an attempted project and there's existing reports and data. Sometimes it's just from due diligence that owners have had on properties. So I always encourage clients to go chase those disclosure packages down really quickly so we can start to understand the details that might be inside of that. But I think your list is great here and I think it's a great way to start and to begin to literally check some boxes that I think open up the opportunity for these kinds of conversations.

Prefab Review:

So just as I said, we're going to revise this in an email we'll hopefully send out to everyone in the next couple weeks. But the two or three areas that I'd say we're going to certainly add to this, and we might even figure out some other ones during this discussion. And I don't consider them the first order diligence things, but things that we've just found through experience are really important for people to be comfortable with is, one, just the economics cost benefit of... And me and Toby we were talking about this a little bit before in terms of the existing macro conditions of, okay, when you pencil this out, is modular and prefab really the right way to go? Then secondly, this is a general construction thing but also a prefab modular thing. Are you comfortable with the timing?

Meaning, if you're in doing a process that might take 18 or 24, God forbid, it may be even a little longer than that, does that basically work with you? And again, it's not as much of a, is this land doable as much as is this happily doable for you? And then the third thing, which we have here but not as explicit that we've actually found out to be pretty helpful is actually trying to call an insurance agent early in the process and getting quotes from them. And again, we can talk about ways of doing that typically to the extent that you're able to build relations with any neighbors or the existing people who have the land and just find out who insures them, especially in California and some other areas that are a little more close to the coast or wild fiery, et cetera. That's been an unfortunate surprise at times.

All right. So with that being said, as you guys can probably see, there's four or five lots representing different types of projects that are hopefully indicative that me and Toby are going to dive into. And one of the things that is interesting is we were actually planning to do this conversation maybe two or three months ago, and then, I don't know, skiing for Toby and having kids for me got in the way. So what you'll see is some of the lots that we actually highlighted that I thought were easier have not sold, whereas some of the ones that actually seemed more complex have sold. So that's just an interesting thing in the process. So anyway, we're going to dive into it first. And again, a lot of these are going to be in California because it's where Toby and me are both located, so we know the areas reasonably well. But this is the same process you'd go through anywhere, it's just the costs might be two or three times as high here.

All right, so Montara. Hopefully you can see this now. This is 825 Montara. Hopefully I don't do this too quickly. This is basically, to your point, this is a pretty flat lot located near the coast, 825 Edison. And you can see it's actually, doesn't look too crazy. It has a bunch of houses literally next door to it. We can look at the specific stats on it in one second. But yeah, it's 6,000 square feet. But you can see, I think it's been on market for about 926 days, which is two or three years, which is a very long period of time. And let's see if there's been any price reductions or anything.

Yeah, you can see there actually have been recent price reductions. So generally, once in a while you'll see these dead listings that are on the same price for years and years and that's like, someone listed this and they didn't really care about this. This person is actively cutting the price, so it appears they actually do want to sell it. So what are the things that you you look at here that you'd want to dive into when looking at this slide?

Clever Homes:

Well, I think you hit the first one, which is why is this not sold? Actually it's not on your checklist, but it's actually a really good thing to look at. Is this a property that hit the market five days ago? Is this three years now? And with price productions, to some extent, there's a behavioral note here. If a property hits the market and it's been five days, the way that you behave and the way that you need to act with regard to that lot might be very different than something that's been sitting there for three years.

Property's going to move pretty quickly in a lot of areas, certainly there where you and I are working, property's valuable and people are looking to build new homes. I think partly people are frustrated with existing houses and the cost to renovate and modernize are so high that a lot of folks that call us I know are interested in trying to just make it for themselves, which makes complete sense. So I think that's number one, this would be a disclosure question for me. Hey, let's see what the sellers know. Is there a failed project here or not? So there are some subtleties about this area, Michael, that I may actually have had something to do with-

Prefab Review:

Can I ask a question on that before we jump into that? So we see land generally being on the market longer, if for anything for, just because doing diligence takes a long time. In my experience, if something's on the market for 31 days in San Francisco or Marin or whatever, you usually assume it's mispriced or something, because it shouldn't be on the market for that long. Obviously, 900 days or whatever this property's been on is a long time. Is there a certain time threshold where you start to raise red flags? Is it 90 days, 180 days, et cetera for you?

Clever Homes:

Yeah, I don't know. It's arbitrary, but I would put around a hundred for some reason. That sounds right for me.

Prefab Review:

That sounds right, a couple months, yeah.

Clever Homes:

A couple months is not tied to market cycles. This thing's seen a couple market, this is seen at least a market cycle. The properties around-

Prefab Review:

2021, everyone was buying everything.

Clever Homes:

Well, right. And Montara's probably seen some up, and then maybe a little bit over the last year or so, so there may something going on there. As we know, and as it really spelled out in your checklist, and maybe this is something valuable for people to understand. It's obvious, but I think you have to talk about it too, which is land is proportioned. The value of land is proportional to the value of the property that you're developing at the end. So property value is going to drive land value. So if you can build a million dollar home, land is valued appropriately. If you could build a $5 million home on the lot, land is valued appropriately, and that obviously scales quite a bit. I tend to mostly argue that I think land is 20, 25, maybe 30% tops of the final value of finished real estate. So I think therein lies a certain projection that you could make. This property is listed for, what? Close to 300 something thousand dollars. It would not be out of the question that a final value of a property or home on this.

Clever Homes:

Yep, not be out of the question that a final value of a property or home on this site would be in 1.2, 1.3, 1.5 kind of range. And so that can create a little bit of this. And it may have been that originally, three years ago when the land was valued at $600,000, somebody thought you could build a 2.5, 3 million house here. And actually, that's proven to be wrong. And so the land value has had to fall in order to meet the value of real estate in this part of San Mateo County. So I think that's a great observation. I think that 100 days sort of feels like a gate to me. Beyond that, it might be that there's more technical issues.

I do think there's another part of this, Michael, which is that a lot of land that sells quickly probably being purchased by developers, by spec builders, people that are building for profit are looking actively for land constantly. And I think it's that next group that's a little bit harder to build on, that a lot of clients find, or a lot of homeowners find. It has been out there for a while because it maybe doesn't have the same opportunity for margin that a developer would be looking for. It has some complexities in some category or another. So my guess is, there's a little bit of that going on this site that probably could be revealed through disclosure. We're just trying to understand some of the nuance of this particular area because there are some unique characteristics of this part of San Mateo County.

Prefab Review:

So, is your perspective on this, so is your best guess, basically, so if I was coming up with a thesis on why hasn't this sold and what are the things to look for, I have sort of two theses, and again, you probably will be able to debunk one of them. One is there's something like horrific from a regulatory standpoint here or permitting standpoint. So, just so we're clear on location, everyone, this is very close to the coast. I would this be Coastal Commission stuff, this close to the coast?

Clever Homes:

It could be, it's going to be handled by the Planning Department. So I don't know if the Coastal Commission gets involved there with the process

Prefab Review:

I don't think so.

Clever Homes:

Planning, I don't think so either. But even if it was, it wouldn't-

Prefab Review:

If you got close that, and I've heard fun things, and by, "Fun things," I mean painful things about dealing with that kind of planning. And then, the other thing that I think is pretty likely, and I think you were getting this is, Montara is quite nice, but it's not one of the highest end parts of the Bay Area, but it is a little more remote than certain areas. So you may be dealing with it potentially in narrow work, but still costly construction, group of subcontractors, et cetera. So it might just not pencil, honestly. You might say, "Oh, in this area it's going to cost like $500 plus to build a house." And I don't know, maybe the after build values, once you get in all the soft costs, are essentially the same cost or less than the actual land plus house. So those are some theses on this.

Clever Homes:

Yeah, I mean I think Michael, so I would just kind of like you have in your checklist, which is super valuable and we can use it too, but just going through the basic stuff, like the slope of the property doesn't seem wildly challenging. Access is good. There are no visible power lines that seem to be particularly problematic. There are some trees on the site. Trees-

Prefab Review:

I was going to ask-

Clever Homes:

areas-

Prefab Review:

Would you be concerned about heritage trees and stuff like that?

Clever Homes:

Yeah, they look like they're eucalyptus, so even though they may require a permit, they're probably not protected, although there might be some cypress here. So there might be some other things that get sort of folded into that. I don't think that's a deal breaker, but-

Prefab Review:

Just so everyone's clear, if you have, essentially, old trees that are of certain species, I guess is the right term-

Clever Homes:

Well, the way I would look at it is, yeah, most municipalities have protections around trees that are large enough to be considered community asset. They're part of the environment. And so, usually what happens is that trees over a certain size, in most communities, require a permit for removal, and then that usually gates around trees that require permits that are non-heritage trees, like in this instance, the eucalyptus would not be a heritage tree, so you could just receive a permit. Trees of certain species in this area, coastal redwoods, oaks, cypress, other kinds of trees that maybe categorized as heritage trees require a different permit process, and often require discretionary approvals that go with design review, or they require mitigation, so when you take it out, you have to plant new ones. These kinds of things. My instinct on this property is that, while there are valuable trees around it, I don't think someone would cut all of them down, and surely any that are impacted by construction activity get removed anyway, or that are hazardous. So part of the-

Prefab Review:

Right. And certainly people did that on the adjacent lots because you don't see the same trees.

Clever Homes:

I think the team checklists as you go through stuff is kind of like, "Do you need an arborist?" In this instance, there would be an arborist on the site that would produce a tree report that goes with the permit application. But I think, going back to the basics, you can probably check all the boxes on access, infrastructure, delivery, setting up cranes, taking mods. My suspicion, having worked in the area is that the soils aren't deeply problematic. There are houses around the site, which I think goes back to buildability. There may be some technical stuff that has to be resolved through the foundation design. We see that pretty frequently, certainly in seismic areas with a lot of sand and water, you can get different characteristics that kind of emerge as engineering functions. And so, I think you can get through all that.

My gut is, like yours, on this particular site is that there are maybe two things that I would start to really understand. First one is just the value. I think the recent cost reduction was April of this past year. So they're about a month from when we're doing this. Maybe that's going to be part of the key because at $600,000, it doesn't make sense. At 300,000 in change, it starts to look a lot more interesting for the value of the home that would be created here, or for the potential buyer in the current market that might be looking to build this particular kind of home.

But the thing that concerns me a little bit more about this lot that I would want to look at more closely could pertain to infrastructure and utilities. Historically, the coastal towns and San Mateo County have had challenges with water distribution and there have been water moratoriums that have protected development for years, including out in this part of Montara. And so it may be that there's a water issue, or there's an upgrade that's required if you have to improve infrastructure to build the house. I think a lot of people don't necessarily understand that local municipalities don't have big coffers where they can invest into infrastructure upgrades in communities. So a lot of that work falls to developers doing proposed projects. And homeowners building homes for themselves in the eyes of local communities are developers. And so a water main upgrade, a sewer main upgrade, a fire service upgrade, obviously can get very expensive, as we all might anticipate, and could easily start to affect the economics of construction on a site.

Now in my book, I don't know that that's a reason to not explore property. It could be that if there's, let's just be arbitrary, say there's $100,000 sewer line upgrade that would be required in order to plug in the new house to the existing infrastructure. Well, in one way or another that might need to reflect in land value. And that may be happening as this property is falling in value or they're reducing costs. And it could certainly present an opportunity for a prospective buyer to approach a seller with an offer. And so, rather than offering what might be stated online as the proposed value of the property, we would come in and offer something less, the basis being that we have to do an infrastructure upgrade, or we have added foundation costs, or there's a road extension or some of the other things that can get people tripped up might reflect on the reduction of the value of land.

So I'd probably look at infrastructure on this one. I think a lot of the boxes, otherwise, get checked pretty cleanly. I think this is a good lot. I think this is a buildable lot, barring outside of what we don't know here, but I think this is a good example of a property that could work well for modular construction techniques

Prefab Review:

Mm-hmm, yeah. And the neighbors would probably appreciate it. Cool, that's awesome. Thanks for running through that. All right, let's keeping this moving. We're now going to, and we get this request multiple times a week is, I forgot, do you live in Oakland or Berkeley? I always forget.

Clever Homes:

Oh yeah. My headquarters is in the Oakland Hills, so that's-

Prefab Review:

Okay. Oakland Hills. So this is Toby-

Clever Homes:

It's down the street-

Prefab Review:

Like ghost cycling, or walking by this lot. But we get this specifically, we get constant requests of, "Hey, there's this fairly affordable, $400,000 piece of land in the Oakland Hills or the Berkeley Hills or whatever can I build on it?" And sometimes, and then so I'm sure you get the same request a lot, and usually they're on, it's sort of hard to tell on these photos how steep this slope actually is, but I'm pretty certain that there's probably at least a two story drop from the building. So there's at least a 20 or 30 foot drop, probably on the building pad alone. But yeah. So how would you think about evaluating this piece of land?

Clever Homes:

Yeah, I think this is a great one. Interesting, Michael, maybe part two of this should be like we should find some lots that are exactly like you say, like, "I found a $10,000 lot, it's surrounded by million dollar homes." It's a real indication there that probably something is super challenging about that lot. Cause otherwise its value would be that 20, 25, 30% of the million dollars. So how come this lot is so different than other lots around me? So I think this lot's value is already an indication of buildability, or at least the sellers believe the property is eminently buildable.

So I think this lot, like you said, has the obvious observable stuff that primarily pertains to slope. I think the carry on to that, even though it's a little technical, is that there may be some relationships to the technical condition, and the soils conditions that could drive reasonably complicated or found costly foundation systems. A lot of times in the Bay Area hills, we use foundations that are called, and grade beam foundations essentially drilling big tubes of concrete into the sort of bedrock around, in order to get away from these fill, and sometimes softer soil conditions that exist on these slopes that are often historical in nature. A lot of times when they built these old roads, they just dump the soil onto one side of the road, and you get this sort of engineered fill condition, which is not adequate for the construction of new homes.

So in this one, I think this is a little bit of the slope condition. I think there's a little bit of understanding the geotechnical part. There's definitely some elements of understanding the jurisdictional controls because there are some unique conditions that are associated with building in the Oakland Hills and the Berkeley Hills zoning controls, on the one hand are rigid because of various envelope requirements for heights, setbacks, et cetera. On the other hand, as slopes get steeper, there's a relief from some of those requirements, particularly about how far off the road you need to go, because if it's deep, you don't want to be close to the road.

I think the issue on this particular property probably goes back to construction methodologies. So this one probably starts to look like an initial exploration that could be related to access and staging. Getting to this particular site up in the hills is not that easy. There's a lot of tight, windy roads that lead us up to the site. There are multiple ways to get to this property, so this would be something where we might start a haul route investigation. And in the work that you and I do, we know there's different ways to do that, from crane people, to transport folks to pilot car companies that actually do route haul observations, to just general contractors that are associated with the staging and delivery of the building.

But that would be step one for me, is just looking at the various turns getting up to the site. Generally, I advocate for folks that, two lane, windy roads are usually pretty easy to navigate. There's specialized trailers and such that allow for the delivery of modules. Of course, they can be sized accordingly as well, but I think that the road is also very narrow on this property, so looking at how we would set up the crane, how you might take delivery, which is a question of trucks coming in and trucks getting out, you got to be able to get out of the site. So what does that look like? How would that influence our sense of construction methodology? I think that's probably where this site needs an initial investigation. Of course, that could open up the opportunity that modular construction as a prefab method may not be the right version of the project for this site. Therefore panel systems, other kinds of technologies, I know that are friendly to you guys, and that are part of your site are also applicable in these types of instances as well.

So I'd probably start there. And then, probably the additional information related to the geotechnical condition would be the next piece. We can see over here on the left that the seller, or at least the real estate agent, has already identified the utility connections, and given the fact that there are homes on either side, I would not expect a big infrastructure question on this property. And I think the property is potentially valued as such. It would not be out of the question that a new home on this property that likely has Bay views and such would be, yeah, the 1.5 to 2 million range pretty easily.

Prefab Review:

Yeah. Okay. So that's all awesome. Diligent. So when we were talking about evaluating the site, I can tell you what we do a lot of times; a lot of times there's a handful of crane companies, so Hadden is one good one, right? So literally call them, call a few of the crane companies and basically just check in on, "Will you deliver a bunch of mods to this site?" Yeah, what would be your, I don't know, diligence waterfalls or anything? What would be the sort of step-by-step that you would go... And again, I know you do this all the time, so can you just eyeball it and know, or would you end up going to a specific vendor and asking them, "Can you do this?"

Clever Homes:

Yeah, I think it's sort of depends on where people are in their process. If you've identified a solution, or you like a fabricator's product that is a specific size and shape, I think that presents one avenue of exploration. "Can I get so-and-so house up to this site," because it's a product of sorts, that might be more rigid in its design. It might be a clear answer of yes or no. I do find that a lot of companies that fabricate do have some resources to explore these kinds of questions. And so if you called up so and so prefab house, that they would be able to help provide a little bit more resource if you are-

Prefab Review:

I kind of assume that they end up just doing exactly what I just described, which is that they call their crane company.

Clever Homes:

Yeah, they call crane company. I mean, if you're sort of working more on the architect side, kind of where I live, we do some of this work too. There's local people, we might drive to the site. Again, I do a lot of Google Maps, and just sort of drive the route myself from that point where you get off the highway and try to eyeball it there. And then, there's a few companies that we work with, that actually do for a small fee, they'll do a report on the entire route, and so we can hire them. Sometimes they're the crane guys. Sometimes I find that the pilot car companies are actually, a lot of the folks that offer these types of services. They tend to be a little bit more regional, so they might also be easy to access. And usually pilot car companies do this for all kinds of transportation, buildings, and equipment and infrastructure and big pipes and whatever. And so, usually they've got some resources to figure out if you could haul a giant excavator up to a particular property, a pilot car company might be able to help with a little bit of that reconnaissance.

And then I ultimately find, Michael, usually somebody on the set crew side, or from the factory is going to bring a representative at some point before the project gets too far along, to not necessarily confirm if you can do it, obviously, our hope collectively is that we can confirm that prior to a project really starting out, but more to the specifics of the kind of equipment that might be used to deliver. As we know, and maybe another moment here to educate folks down the road would be to just do a quick intro on what kinds of trailers there are, how different techniques work for getting around tight turns. There's a kind of cool stuff in the marketplace.

So I want people to not necessarily be discouraged by tight access, obviously, it could be a limitation, but there's a lot of cool innovation in the Modular space on the delivery side and some cool stuff that we've seen people do that can make sometimes the tighter parts of access actually a lot more navigable. So for this one, I'd probably start there, look at the route, set the crane up. Once you get those boxes checked, I think getting back to the other parts of your checklist that get to development standards and other zoning controls would be a good next step.

Prefab Review:

Got it. That's all really helpful. All right, let's keep moving. All right, so now we're doing something that's big raw land. Okay, so what is this? Okay, so this is a place that actually just sold, and this is in Forestville, so that's just north of me. Forestville is essentially Sonoma County, parts of it are sort of ruralish Sonoma County, I think near the Russian River. And just so you can see, this is, looks like there's some kind of small mobile home on this. So I would kind of ignore that for the... See if we can get to some better photos of this. But yeah, you can see, there's definitely a road of some kind on this, and there's some cool trees, and there's a lot of land and yeah, it's-

Prefab Review:

... trees and there's a lot of land, and yeah, it's pretty remote. But yeah, but it's 25 acres, which is cool. Yeah, this is very standard of, "Hey, I just learned about this other modular thing. I really like the way it looks. Can I drop it here?" Maybe you can talk a little bit about the considerations for doing diligence on a piece of land like this.

Clever Homes:

Yeah. Obviously, the first part, a little bit, is what we just went through, it's just looking at the access issues. When you've got rural property, what is the condition of the road? Is there a road at all? Is that something that we could bring a crane down? Could we bring trailers with modules down? Again, lots of different techniques come to play. Single-story homes don't even need to use cranes in some instances, so there's a question there. Obviously, there's different ways of bringing mods down dirt paths. We've used excavators in the past to pull modules, so I think navigating across an improved property is actually not that challenging.

I think the place to start with rural property is really about infrastructure. The two things that are most obvious to me, although in a lot of properties these are already developed, are well and septic systems. The intersection with environmental health departments, which are the agencies that regulate septic systems and wells, are really challenging agencies to work with. Not unto themselves, but the laws and codes are rigorous and effectively immovable. There's setback requirements from where we put wells. Obviously, there's a lot of setback issues as it pertains to septic systems. Both of these relatively simple systems can be deceptively costly. Wells can get very deep. There can sometimes be impurities and other toxins in well water that have to be filtered out that can generate complex filter systems. Septic systems require percolation tests, different soil has different characteristics. These kinds of things are really where I would start.

If there's existing property development or development on the property, that's a great sign. If there are well systems in place, a lot of properties are sold with wells. That's great news. You can understand about the flow rates, how that affects your water system, fire sprinklers and such. Septic systems can be perked and not built, so that can at least give an indication of, for example, in Sonoma, how many bedrooms you could have in your house. This is where I'd probably start there. How much do we know about the infrastructure on well and septic. The next thing that for me-

Prefab Review:

Oh, sorry. So that's ...

Clever Homes:

... Go ahead.

Prefab Review:

This one, for example, one of the interesting things you see, and perhaps one of the reasons it recently sold, is you can see there it says, "New floor bedroom septic system installed."

Clever Homes:

Exactly.

Prefab Review:

You can actually also see that ... again, we can't see every turn on these roads, and they're a little bit narrow, but it's probably, 12 feet wide and not too crazy. There's probably some kind of infrastructure, at least minimally-

Clever Homes:

Oh, yeah.

Clever Homes:

Well, the next piece that I was going to go to was just the fire department. Fire departments are actually pretty friendly agencies to work with a lot of shared interests about defending property from fire. But I think being able to have a fire marshal speak to you about your property that's in a rural location can be super-valuable. A lot of people don't know that your fire infrastructure road access and such actually needs to be in place and inspected before you can take delivery of modules or start framing with a panel system on site. You can see some of the older photographs on this listing show the dirt road. Here you can see the gravel, which was improved. So the fire department required the access road to meet their standard, and then likely they also were required to provide a turnaround.

Prefab Review:

I was going to say that. We've had some costly turnarounds that we've had to add to properties because-

Clever Homes:

Oh yeah, they're huge. You're turning around a firetruck in a three point turn.

Prefab Review:

... It's a pretty big radius. Exactly. Yeah.

Clever Homes:

Yeah. So they have different shapes and such, but they are required, and I think you can see on this image

Prefab Review:

This one would be fine. Yeah.

Clever Homes:

Yeah, probably that's why you had this little spur that comes up past the house. That's probably all a turnaround shape and all of that was improved in order to set this mobile home on the property. Most of that infrastructure work, wells, septic, fire roads, et cetera, happens regardless of the size, shape, or complexity of your home. These are all basic conditions that need to be in place prior to any construction activities. This is where I start on the rural side, and then you can work your way backwards towards these questions of access and setting and such, or the more detailed investigations of soils.

A lot of times the condition for some technical documentation is also different in rural locations. Some places we aren't required to do detailed topographic surveys or geotechnical work. We can often work off of more simple documents. That's project by project, but there's definitely a different condition working on rural properties than I think properties in an urban or suburban area. This looks like a great lot. Somebody's going to have a wonderful opportunity to either build something new here or to enjoy this little retreat. But yeah, I think you can see some of those unimproved conditions that looks like they were probably dealt with when they set the mobile home and were able to make this property compliant.

Prefab Review:

Yeah. This is definitely one of the ones where I think Toby alluded to it on the fire marshal person. This is also, just to be clear, this may be an area that's quite high fire risk. I actually haven't dove deep on it. Just in terms of insurance, again, let's just assume that on whatever the rule was, four or five X the price is the after-build value. So, we're talking about two and a half million dollars. Yeah, you could easily see insurance for something like this I think in the $10,000 plus annually. At least in California, there are state associated insurance programs, so it's rare that lots are completely uninsurable, but frequently they're very expensive.

Clever Homes:

Well, the California Fair Plan will take on any property, it's part of our new state requirements for insurance. It's inherently insurable whether or not it's a good policy or questions I think people are asking. I think you make a really good point though about just observations of being in these kinds of environments. These are high fire risk zones. There's good technology and code requirements for the building itself. There's best practices and requirements for managing defensible space and the trees and vegetation, but clearly something that has an influence on the project from its conception to its ownership in one form or another.

Prefab Review:

Mm-hmm. The other thing on projects like this that are, as we mentioned, are just the soft costs. Things other than money going directly to contractors on something like this could be pretty high in terms of impact fees and stuff like that.

Clever Homes:

Yeah, Sonoma County's an expensive place to build, all but for your next slides, which I think are the burned lots, which do have some other opportunities that other properties don't and can actually be pretty good value in a lot of Sonoma County and parts of Napa.

Prefab Review:

Sorry, quickly speaking, Toby, I know we're going to do the top of the hour. Do you have time to keep going through these last two slides or? All right, we're going to keep rolling. Well, thank you for your generosity through your time.

Clever Homes:

Sure.

Prefab Review:

All right. Yeah. Again, these are fire rebuild lots in Sonoma County, but generally speaking, we've dealt with a lot of things related to natural disasters, fortunately or unfortunately, over the last few years. Unfortunate obviously because people lose their homes. I think we're fortunate to be able to help. One of the things that's really nice about prefab and modular technology is it gives you an opportunity to extend the number of people who can build a house. There's this cycle that happens in these areas of, "Okay, there's a huge disaster," and then, "Oh wow," if you need to build hundreds or thousands of homes in a place where they might build 50 a year before, there's a total mismatch of demand and supply of contractors. So the cost of build goes up. It ends up creating a lot of chaos.

I think one of the reasons that you've seen modular be a really appealing solution in a lot of these areas is because it's like, okay, a lot of times you have good infrastructure in place, but you can actually have a lot of the work that would be hard to get contractors do, do them elsewhere.

Okay, now that you heard my TED Talk on that, we'll go to this lot in Santa Rosa County, which is ... I'm sorry, Santa Rosa, which is a city also in Sonoma County. You can see there was a fire, but you can see a lot of the foundation, and the building pad is still there. Yeah. What would you consider here? It looks like the power lines are still there as well.

Clever Homes:

Yeah, I think you got your standard stuff, so we can do the access and we can do the crane set-up and we can do maybe a little power line. Although a lot of projects we've done in this area haven't been

Prefab Review:

I would assume this is probably the prior house, just

Clever Homes:

Right. Yeah. I'm with you, I think our heart is out, obviously, for everybody who's lost homes, hopefully have been at least safe in their evacuation. But, it's definitely a heartbreak. But it is an opportunity for any new buyer in Sonoma County in particular. I think there's a lot of opportunity to accelerate a process and limit some of those fees that you just talked about. For some of the burn lots, the first things we look at are largely infrastructure. A lot of these properties in this area are on well and septic systems. There is a process for receiving a report of sorts that demonstrates that the wellhead was not damaged by fire or there were no toxins which leached into the well, which was a problem for a while up in these areas. That the septic system was in a similar condition. The lids are fine, or the septic system wasn't irreparably damaged during the fire. Fire does actually get into the ground a little bit when it burns this hot. As long as those systems are in place, that's usually really good news because they're permitted to be reutilized for the new construction.

One of the things that I talk to clients about for these kinds of build projects is that, building in the modern moment requires everything new and modern. We unfortunately have not had any success in recycling or repurposing old construction on a property. In this instance, we would probably be somewhat skeptical that the foundation could be reused. There may be firm engineering principles, reasons that you could, but the process to demonstrate that it can meet current laws and codes has been pretty rigorous and costly, as compared to demolishing it or removing it, which was done in a lot of properties after FEMA cleaned up. They removed a lot of concrete. Concrete spalls when it's hot. It gets kind of dry, it kind of crumbles. So a lot of the top parts of this concrete are probably not acceptable under current codes.

Of course, the geometry for prefab buildings in particular, it's very precise, so we would probably advocate for removing the concrete or at least finding ways of getting in and through it so that we could keep parts of it, which is not out of the question. I've told clients in the past, they look at old foundations on burn lots a little bit like their rock outcroppings. So what would you do with rocks? Well, you remove them, you build around them, you try to tie to it if you can. But more or less, a lot of this stuff gets removed.

I think it's also important to understand that new building projects in this area require new surveys. When the cleanup happens after fire, often 12 to 24 inches of soil is removed from the site. When you burn a house to the ground, all the stuff that was toxic in your house is now in the soil. So a lot of that soil's removed for obvious reasons. That creates effectively new topography. It's not often refilled, it just creates a new ground plane that we work against that can have some impacts to driveways and roads and access.

I think it's also important to understand that building a modern foundation requires a geotechnical analysis in most of these locations. So we do new surveys, we do new geotech reports, they're required for reconstruction projects. That's not one of the things that we get a pass on. As you go forward, it's nice to know that Sonoma, and to a degree Napa, have resiliency agencies that have been set up to allow reconstruction, as you say, to happen a little bit faster than the general law of supply and demand affords. Permitting in these areas is particularly fast. We've seen permits for some of our projects in days, not weeks or months, but it's been pretty fast. It's also without fees. So, the communities are, of course, very eager to see new homes on all of these properties, and so they're really trying to facilitate that.

Maybe the last note that I think has been relevant to projects that we've worked on that is important for people to understand is that, generally we have seen that the fire departments are not requiring upgrades to roads or driveways or turnarounds, things that we just talked about, for properties that are being rebuilt, unless some function of the existing condition prevented the fire department from reasonably defending the site. Now in the Tubbs Fire and some of the other, Glass Fire and the property fires up there were really ferocious. I don't think the fire department was impeded anywhere. They almost couldn't keep up with the fires. So we have not seen fire related upgrades required for the site themselves.

Now, new buildings in California require fire sprinklers. So you do need to account for water storage and such for a lot of these rural sites. But often the good news is that you don't have to build the driveway to a new standard. You don't have to build a turnaround to a new standard. These are fairly impactful design and engineering conditions for any property, let alone one which was already previously developed. So that's a little bit of good news that goes with the accelerated permit and reduced fee aspect of fire reconstruction. For these reasons, I really think there's good value in a lot of these burned properties, if people can psychologically get back onto the site and understand the risk of fire, it's real, it will remain. I do think there's a lot of opportunity to find well valued sites with existing infrastructure that are in these locations, as compared to building new.

Now, if you build a new house on an adjoining lot that has not been previously developed, even though it's in a fire zone, that lot still requires all of the rigorous campaigns for engineering, permitting, impact fees, et cetera. They don't have any additional pass, if you will, for new buildings on undeveloped lots. But yeah, I think this is a great lot. Looks like a wonderful opportunity. Great views off this property, and I think the real estate values in a lot of these locations are continuing to climb pretty quickly.

Prefab Review:

One of the things you'll notice about this, and again we won't belabor this because we talked about this on the Monterra property, is this property went contingent in 2020, which basically means they agreed to an offer, and then it probably fell out for whatever reason. Probably because there was some kind of inspection process where the buyer backed out. That could be all sorts of reasons. It could be because the buyer wasn't that serious, who knows, that was 2020, all sorts of weird stuff were going on. Most likely my guess on a property like this is, when they got down to it, they found that all the infrastructure costs involved with doing this lot were probably more expensive than they had imagined.

Yeah, again, you can see there's consistent drops in price here. Again, we could run comps later, and this gets to the economic questions around this. But, this is a really big piece of land with really amazing views that's really private. If you built, just totally, this is back of the envelope math here. Let's just say you built a really pretty high-end home here that was modular. Let's just say you might be able to do it in the $600 per square foot range. If you did a 3,000 square foot house, I think the math, unless there were major infrastructure costs, would check out for a property like this because this is, again, a pretty epic view in a pretty reasonably cool place. Again, there are a lot of reasons, so I'm really getting into speculation here, but my guess about why this hasn't sold despite all the price drops is, a lot of the of the site-related costs might be pretty considerable.

Clever Homes:

Yeah. I think that you state the obvious. But I think it's super-important for people to understand is that looking at that price history can teach you something. If nothing, it raises some flags on, "Well, why did this contingent offer fall apart?" If it was contingent upon buying another property or selling another property or something in the infrastructure and the deal fell apart, that makes sense. But then somebody worked for about two years with this lot before it was re-listed. Maybe that was a campaign to develop a new proposal for the site.

I just had a campaign to develop a new proposal for the site. That's where the disclosure packages can really come to be valuable and next steps for people as they find lots they're interested in. Then clearly over the last six, seven months, there's been a pretty steady reduction to try

to get this thing sold.

Prefab Review:

To move it, yeah.

Clever Homes:

But maybe again, these things that we're speaking to, maybe the well system was damaged or that the septic wasn't... I don't know if that's been in the listings at all or not. Or if the access condition was such that the fire department has required an upgrade to the driveway and now it looks like a much more expensive project than it was previously. It may be that sometimes people just have different ideas. This was an old whatever, 2,000-2,500 square foot home that burned down. Somebody wants to build a new 5,000 square foot home and now you've got this mismatch between what was and what is. The county does have a different process when you start to build in a different location or a much larger home.

These opportunities to move through the accelerated process do change depending upon what the project proposal was. I think I'm with you. This looks like an interesting lot. It certainly has the right characteristics. The land is valuable, the opportunities for the view seem like they're pretty sweet. It might just be trying to figure out, well why is this thing not moving quickly? Maybe it's just also a saturated market. There are a lot of lots for sale up here, some that might be a little easier to develop. May also be that this is way up the road and maybe people are looking for something a little bit closer to town.

Prefab Review:

Just if you look at the directions, it's basically two and a half miles from the road, which again, could be

Clever Homes:

Not huge but grabbing groceries. Yeah, exactly. So this is where I think just to go through your list, I think some of these things like access is clearly something to look at because we can't really see all of the conditions of the roadway. I think setting up cranes and such, probably not a massive problem, but something to look at there. I think it really goes back to infrastructure and then potentially some disclosure on whether or not there's details that have been developed previously that might help qualify the value of the property.

Prefab Review:

Okay. That's awesome. Okay, so the last one on here. This is I think a project Toby's actively involved in. I'd say, I don't know, constructive or general criticisms we get sometimes on this site to Toby, we really try to service people across the country and we work with people across the country, but California is where I live and we've done probably as many projects in California and New York as anywhere. So we get this, "Hey, you speak too much to California issues where the houses are crazy expensive and that's not specific to me." So just big warning, this is going to be that to the enth degree. This is a project called AB9. Toby can probably better explain it to me, but just the quick summary is AB9 allows you to essentially split any single family residential property with a few caveats into two single family residential properties, which can then also have ADUs on them I believe.

So essentially, you might even be able to have junior ADUs on them. So you could basically split a decent size single family lot that might have one house on it into four to six residents. This specific unit that we're going to talk through, as you can see, it's a very expensive lot. It's in a sorry excuse, whatever the site is, it's stately. It was originally a $5 million lot. It's in Atherton, California, which is probably one of the five or six most affluent areas of the country. But it's an example that we had some insight on so we can dive into. So Toby, given that you know this project pretty well, do you think it's better to start here or start on the graphics or do you just want to talk a little bit about AB9 and the project?

Clever Homes:

Yeah, so I think it's generally referred to as SB9.

Prefab Review:

Oh, SB9, I'm sorry.

Clever Homes:

I think it's SB9. Yeah, so SB9 was passed in 2021. I'm not a full expert on SB9 but there are people that are, and we can help direct clients to folks that ultimately can get into the details of how SB9 actually works. But effectively, this was a law passed in 2021. I believe it became active on January 1st in 2022. It's part of California's overall campaign to increase housing inventory and to I suppose at a deep level question, single family zoning. Atherton is an interesting town because there's a lot of big lots. Clearly this has created a sense of politics because people enjoy their big properties, but there is a lot of land and housing demand in all areas, certainly in this part of Silicon Valley is very high. So SB9 really intends to offer owners of single family property two basic functions and they can come together.

One basic function is to allow two dwellings on all single family properties. So every property that's single family zoned that meets a certain criteria, it's not every property, you have to be more or less a standard type of property. Can't have unique conditions, but all properties can have two primary dwellings. They do need to meet development standards for things like setbacks and such. But if you have the space, you could build a duplex or you could build two primary dwellings on every lot. The other thing that SB9 affords is the opportunity to subdivide a single family home or a single family lot into two properties. Again, there's standards and requirements that go with this. There are also technical issues that go with that subdivision, but the minimum lot sizes are very small. So it is almost permissible on all single family, more conventional single family zoned lots.

I think the zoning part is really important. If your property is zoned for multifamily dwellings or if your property is zoned for commercial uses, these laws don't apply. These are for single family zoning throughout the state. So the lot split can also be combined with the multiple dwellings. So in principle, every single family lot is permitted to be subdivided and each lot can have two dwellings. So it offers you four dwellings on one property. There are a host of measures that are required. They require affidavits, you have to live in one of the homes, you have

Prefab Review:

Yeah, you'd have to be owner-occupied, right?

Clever Homes:

Yeah, for a certain number of years. There's some elements of that, how it gets rented out if you rent, that's part of it. But there are lots of opportunities as well. You can sell some of these properties. You can sell newly created lots. Because they are newly created lots in this particular instance, this is something that has to be sorted through. This has an existing home, it's pushed towards the rear of the property. The SB9 proposal tries to put a lot line in between. But one of the things that this homeowner's going to have to do is ultimately reorganize all of the infrastructure that serves this existing home to allow for a legal parcel to be created. In other words, legal parcels don't have neighbors sewer lines running through them or electrical lines or water lines or trees or other things that impact your property, all have to be addressed.

So this property in particular is served with utilities that come right through this view through the driveway. Assuming that that lot line runs horizontally across the screen, we've got to effectively move all those utilities to a different location so that the lot itself is not encumbered by easements or other kinds of things that would be required in order to bring utilities across one person's property to serve the other. So this property is going through a variety of technical issues that pertains to utilities. There's also some historical elements to this property that have to be reconciled as part of that lot split as well. But there's a great opportunity on all properties in California to enact these kinds of proposals, to increase density, to provide revenue, to offer multiple properties to sell or lots to sell that hopefully just improves the condition for housing.

I think unfortunately, the adoption of SB9 has not really spurred a movement yet. The number of applications is surprisingly low in the state of California over the last two years. There's only been a handful of these things that have been done, but I think architects, developers, planners, people are trying to really push this out further into the public so that people are aware of these opportunities for the chance that somebody is capable of or interested in trying to improve the density in the neighborhood or for these kinds of lots. Now interestingly, and I think this touches on something that you said, when you enact SB9, you also lose your buy right ADU opportunities. So you can have two dwellings. One could be an ADU, but you can't have two dwellings and an ADU. That would get then get back to development standards for the number of dwellings that could be on a given property or setbacks and height restrictions and coverage requirements and those kinds of things can be sometimes challenging.

So you kind of get one or the other in California. The ADU movement I think is pushing across the country. We're seeing this now state by state, a lot of opportunities to build accessory dwellings and hopefully similar SB9 kinds of movements will be taking place. I think Portland just outlawed single family zoning, or at least that's

Prefab Review:

Portland and Minnesota in Minneapolis.

Clever Homes:

Minnesota too, yeah. So that's kind of cool. I think we're starting to see finally a push towards higher densities in our communities. I know there's going to be some heartburn to this, particularly in a town like Atherton where people really enjoy these large parcels, but they're also opportunities to just add more housing to our communities.

Prefab Review:

So maybe if it's okay, you want to just describe, I think these are some of the parcel maps about how you're actually dividing this.

Clever Homes:

Yeah, essentially. So you can sort of see the house up there on the top part of that site where your cursor is. There's a lot that's being created called parcel B, which is below it. There's a sort of buildable envelope, you can see that little square there. But you can see this is a draft copy. There's some things that have come back that we need to address now. But if you just move your mouse a little bit over to the right, you'll see some vertical lines on the scene that are these utilities that are coming across parcel A, right? So in order to serve utilities across a parcel, you either need an easement so that I've got access to your lot for my utilities, or you have to clean up this parcel and relocate those utilities. That work needs to take place effectively before a final map can be issued. So the way a lot of these lot splits happen in SB9 is very similar to creating any lot. It has to go through a tracked map process, it is ministerial.

That's really what SB9 opened up was that it removed the discretionary actions from these proposals and pushed this to a ministerial process that can be approved at staff level. So that said, it still requires a clean parcel. So as an example, those utility lines have to be relocated. Once the preliminary map is approved, then you can relocate the utilities and do all the work. Then once that's done, the final map can be issued, which creates the legal parcel that gets recorded. So this one has some issues with utilities. It's got a couple big trees that have to be sorted through and then just reorganizing the driveway. Right now the driveway for this property comes in, you can see off of Glenwood right at the bottom of the lot has this big turnaround and parking area. Obviously that gets abandoned when you build a new property.

So this is actually a flag lot condition and the access is going to be way over on that left-hand side of the lot where you can actually see a bunch of those new utilities and that 20 foot driveway, which is going to come back and serve parcel A. Now interestingly, because the driveway access is now going to exceed 150 feet, which is a fire department requirement for trucks and being able to turn them around, the new driveway is also going to require a turnaround that has to be accounted for within the geometry of the site so that it effectively can be a legal access to the newly created parcels. Both for the parcel B, but also the sort of retroactive repair work or renovation work that's required for parcel A in order to make it compliant. So sort of an interesting opportunity.

One of the other things that I think is just interesting to know about SB9 is that it does require a proportional relationship that can't exceed 60/40. So any lot that you create has to be a minimum of 40% of the original lot. So they are looking for parcels to be created, which are more or less co-equal rather than just carving out a little corner of your property and calling that little postage stamp a new lot.

Prefab Review:

I forgot, is there a design review? We have not done many SB9 projects with Prefab Review. We've looked at quite a few. Is there a design review for the second unit here or not?

Clever Homes:

Well, that's going to be town by town. So Atherton does not have a specific design review process. It requires a commission approval. It's all just coordinated by the planning department at staff level.

Prefab Review:

One of the things, again, as I said, I generally really like planning departments. California has a lot of new housing legislation and sometimes the bias towards, again, not speaking about Atherton specifically, some of these suburban housing planning groups is to be a little conservative on stuff. They're not always 100% informed on every nuance of these new laws, at least I found. So what I find is sometimes, unfortunately, you'll go to planning, you'll ask for guidance on stuff, and the really nice thing about most of the new laws is they're very transparent. You'll get feedback that is actually not exactly the lot, it's some kind of jumbled interpretation by somebody. So what we end up doing, I'm not sure if you do this as well, is I believe it's called HCD, which is the state housing regulators.

They're actually quite responsive to individuals and quite aggressive about trying to make it clear to local planning departments, this is what the law is. So again, in my personal experience, you get some weird email chains of people aggressively CCing local people, but can actually be very clarifying and helpful. So particularly for these, again, 80 is the area that we've seen this most frequently. It can be really helpful. So on anything new and legislative I would, especially if it's at a state level, definitely check with the state if you're getting answers that are weird as part of the diligence process.

Clever Homes:

There are some quirky things about the ADU laws and how they get executed. Some of them in order to happen, have to happen post occupancy of projects so there's some explaining -

Prefab Review:

The state technically still enforces the permitting even though... Yeah, it's supposed to be pretty ministerial.

Clever Homes:

Yeah, I have found that a lot of communities now have handouts or they've done workshops where they've worked through what their response is going to be to some of these requirements. But I think it's true that you do get different questions that emerge case by case where there's interpretation. Can we take this part of my house and turn it into an ADU even though it has a non-conformity? I don't know if that's a question, so then how the planning departments respond to some of these things is definitely not always clear. So I think you're right. HCD is a great resource, certainly here in California, that's housing and community development that regulates a lot of these laws and codes within the state.

They've got some specific information about how that law is being accounted for within municipalities. As we said at the beginning of this session, getting down and talking to a planning department representative or a planner is just invaluable in any lot investigation. I think that's imperative for anyone. As I tell my clients, I don't think that anybody needs to become an expert, but you should feel well-informed. I think that being able to get down and just hear firsthand how some of these laws impact the potential development of a property that someone owns or is looking at owning can be a really great part of the due diligence process for sure.

Prefab Review:

Yeah. Well, I think this is the last lot. So Toby, thank you for being so generous with your time.

Yeah, thank you.

Prefab Review:

This has been awesome and thanks everyone for watching. If you made it to the end of this and you are interested in learning more about Toby, he's at Clever Homes, which I believe is CleverHomes.net. He's very responsive if you send emails. Again, we're at PrefabReview.com. So thanks again and we'll see you soon.

Clever Homes:

Thanks, Michael.

Prefab Review:

Yep.

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