Episode 9 - Jim Russell, Ideabox

The Prefab Pod

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Prefab 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 Jim Russell, principal and owner of Ideabox. Welcome, Jim.

Ideabox

Thanks. How are you?

Prefab Review

Nice. Nice to talk to you. And thanks for making the time for us in this weird world we live in right now.

Ideabox

Yeah. How are things going in San Francisco?

Prefab Review

They are, they're going, you know. I see the inside of my apartment a lot. So otherwise it's hard to tell. It's a weird place right now. Anyway, moving to a slightly less grim topic, I'm excited to learn more about your company. So first things first, I was really hoping to learn a little bit more about you. How did you get into this business?

Ideabox

You never know how things go. It's kind of a career thing in the sense that it wasn't defined at the beginning, but it's certainly something that's been fun. Now that my background is in architecture and also energy and resource efficiency, and in the 90s, I was working with a team that produced energy efficient prefab houses in the Pacific Northwest, which is where I was introduced to this industry. And then long story short, to do a variety of other energy efficiency, marketing and programs and then also some marketing campaigns for companies, large, large, large companies but always had this interest in the prefab construction process and its ability to deliver homes cost effectively, but always kind of felt like design could be utilized in this industry sector. And then with my background in energy and efficiency and also materials and healthy home and all the things where we worked over the past decade, it just seemed like an interesting combination of skill sets. So we started it and then that's the real boring version of it. But that's how it is.

Prefab Review

And so I'm just looking at your LinkedIn, It looks like you started out right around 2005.When you started it, did it look like, we'll get into your product offering in a minute or so, but did you start with something similar to what you're doing now or was it pretty different?

Ideabox

Well, it's interesting how, you know, that was just before the 2008 collapse. And now I think we stayed pretty true to the original goal, which was that we always felt like houses were starting to become I don't even know how to describe it, our idea was that you could live simpler, that you could live not in a causal way. That's the one key thing, is that it's not about living a certain lifestyle, it's just living easier. We always felt like there were a lot of these new materials at that time that could make your lifestyle less attached to the house and on the outside and more comfortable to live in a healthy sense, on the inside. And then we always felt like, you know, designing a lot when I started in architecture, it was in a resort community. And I was always fascinated with why couldn't houses be like the places we always want to go? So I really wanted to bring design into the small house sector, but to the prefab industry, really. And so that's kind of where we came from. And we're still trying to do that today. Our houses are a lot bigger now than where we started. But the concept is still the same.

Prefab Review

Cool. So let's get into that. So I have some knowledge of this. But, you know, for both me and for everyone at home. Can you explain more about the exact products and the houses you are building on a regular basis?

Ideabox

Well, we build primarily today to two different building codes. One is the manufactured home code, which despite its reputation and the market, they're really pretty cool in the sense of how it works with local municipalities and permitting and that kind of stuff. And the other one is modular, which is when you're building the local building code wherever that house wants to go. So, you know, each has their strengths and their merits. And, you know, our theory relating to codes is whatever the right fit is for the project and the customers, is one that we pursue.

Prefab Review

Yeah. Let's dive into that a bit before, I do want to get more into your specific stuff, but let's dive into that because a lot of the companies, especially the modular companies we talked to, build only to modular code. I think as you said, manufactured gets kind of a bad rap in terms of they're short of a bunch of reputational things around sort of how they appraise, how they appreciate, etc. So it would be great to understand sort of what your take on that is.

Ideabox

Well, I think, you know, I think it's just in my view, the way we approach it, it's just a code. Like any code, you know, whether it's building a shed in your backyard to the local code or whether it's building a twenty thousand square foot house, codes are codes so you can build well to a code. Or you could build something not so great to code. It depends on what your goals are. So, you know, when we approach the manufactured home concept, it was about the flexibility of what that code offers. Now, there's a lot of, you know, restrictions to how that code works better overall. It's a pretty cost effective way to deliver things, not in how the home is designed or built or the materials you use, but just in how the code works. So while there is this huge preconception of and it's still true, I think there's a lot of ignorance in all communities about what a manufactured home could be. Those things still exist and they're still real and they're still building houses that, you know, could be cooler, but we didn't look at it from that perspective at all. We just took a fresh approach and it wasn't easy to to find a building facility or two that would be willing to work with us because we were coming at it from a different place. But in the end, it's a valid solution for a lot of people.

Prefab Review

So let's dive into this more specifically. Right. I'm definitely not as knowledgeable as you on this. So the key thing on manufactured right, is that they're approved by HUD on a national level. So I assume the permitting is a little simpler, right? Are there major nuances I'm missing, which I'm sure there are? And then also from an actual building standpoint, how does that differentiate between the homes that you build to the modular standard and to the modular code versus the manufactured code, are they actually structurally different at all? And what are some of the key differences?

Ideabox

Well, the first part of your question, it is overseen by HUD. They do have local considerations. For example, if you're in a small load, you've got to meet that. Up in the northwest here, we have a different energy standard. We build above all that anyway. So it's really never going to be an issue for us. But it is an onerous code. It's actually more onerous, really, than modular just because of the layers of oversight the HUD code and the federal government require. And as far as structural differences, the biggest primary one is that HUD code requires the steel frame that the home is transported on, remain on the house. So you're using those two I-beams as part of your structure. When you build modular they're not required to have I-beams. Those if they do, they come on a carrier or some other kind of transportation device and those things go away. So your structural loads and calculations and everything are to the perimeter. And so structurally, that's basically the biggest difference - the floor joists almost all the time. And then also the foundation preparation for the houses is different. One is that there's patterns depending on the house as to how you support the frame and the perimeter walls. And on the other side, the modular side, you're building a conventional foundation most of the time. But other than that, it's really I mean, there's some other electrical nuances and plumbing nuances and small things. But if you stood in one house that was modular and one of ours that was manufactured, you probably wouldn't notice the difference.

Prefab Review

All right. So from a cost perspective, does that mean that using sort of permanent foundations vs. right, typical manufactured homes by definition, or whether they're permanent or not or sort of often considered not permanent, that means that the cost of the foundation and site work tends to be less?

Ideabox

Well, it certainly can be. Ours' aren't. I don't know of any of our houses that have ever been moved. It's a bigger deal. But you know, there are code provisions that consider the manufactured installation to be permanent. You know, in the West Coast, in California and Oregon and throughout the west, really we'll have seismic standards you have to meet. And so those are enforced which is great. But I suppose on the very low end or the less costly end, they can remain somewhat mobile like in a manufactured park, for example, or it's not a permanent install, which we don't do many of those. So I'm not as familiar with those.

Prefab Review

And then the last question on this particular topic is, yeah, I don't know how involved you are, I think the other question we get on this issue a lot is around appreciation of that. Have you seen any difference in the appreciation in sort of buyer's willingness to pay for one or the other?

Ideabox

That's a, you know, often asked question. And I think in the case of our stuff, I can't speak to the other stuff. But, you know, there's a couple of things and it has to just do with really human nature, a really nice house on a really good site, it's gonna do fine. We've only had a few of our houses re-sold and all of them went quick and fast and above asking. So you know, we've done over 300 now, I forget where we are exactly but we're out there now. And so it's a small percentage of what we've done. But they did do fine. I think if you put a you know, not an expensive house, ours are considered kind of expensive in this sector, and a lousy site, it's not going to do well at all. So it's really I think, locale.

Prefab Review

So we sort of went off on a tangent, which is kind of a fun tangent and we get those questions a lot. But just getting back into what Ideabox actually builds, so I'm looking at your website, it looks like, you know, you build a lot of small and medium sized houses. What are the things for people listening that sort of make you distinct? Like what are the key values? What are you trying to accomplish? And how does that manifest itself?

Ideabox

I think, you know, in a fundamental esoteric way, we just want houses that are a blast to be in. We are also interested in creating things that don't require a lot to live in and around, you know, kind of what I said earlier. So it's really mostly design. I think that's you know, we're really big on the use of a lot of glass to bring in lots of natural light. And, you know, with the window technologies today, we can do that without too much energy penalty. We like volume. We like things that are tall and well, you know, there are road restrictions as to how tall you can be with something. We try to maximize those volumes. We love openness, you know, before there was an open concept, we've always been big about sharing space with, you know, like living in, and dining in, and cooking as a public part of a house. And then there's the bedrooms and baths and stuff that's the private part of the house. But all of them want to live the same way we want. Lots of life, lots of lines, lots of air. We'd like all that kind of stuff. And we like access to the outdoors quite a bit because we live in a pretty cool part of the world. Most of the time and the ability to live inside and outside extends the size of a home quite easily. And because we are what we are, it's just as fun to be outside as inside most times.

Prefab Review

Which is in Oregon, correct?

Ideabox

For this network today, we're most of the West Coast. We are working on projects now in Palm Springs and projects up in...

Prefab Review

Yeah, we'll get to that. I mean, you guys are specifically located in Oregon, Correct?

Ideabox

Yeah, we are physically in Oregon.

Prefab Review

Cool. So let's talk about if I buy an Ideabox home for myself, what parts of the process are you helping me with vs. another party? You know, you're handling the design, I assume. You know, potentially the prefabrication, not the site work. Like, can you give me the specifics of sort of what areas you handle.

Ideabox

So are you talking about just kind of the process of what we do?

Prefab Review

Yeah, exactly. And which of those parts sort of do you bite off versus working with other parties.

Ideabox

Well, you're working with a lot of parties. At the end of the day, you know, every single project is a construction project, whether it's a little house or a big one. So the one thing that we've tried to do is, and most times clients haven't done this kind of thing before. So you're having to take on a lot of hats. And as we've grown, you know, into modular stuff, finding contractors and stuff is really the primary challenge of a project's completion. But the process of things really is; our client comes in from wherever they are. We like to talk to them and meet them and talk about what their goals are. This is design related, but it kind of is you know, budgets are huge and we want to make sure the clients understand what they're wanting to do and what their budget goals are and make sure that we're steering them in the right direction. Typically, we meet with them. We can meet with them in person. A lot of times we don't. But we can see all the sites on the computer today. We can see them in 3D. We can get a sense of scale. The one thing that we have to pay attention to that site-built projects don't, is we have to be able to deliver the products that we build. And so we're looking at it from both a design perspective in terms of views and opportunities and how that site wants to live. And also how do we get a box? It's so big and so tall and so long for that location. So there's that extra little bit of fun in that. And so then conceivably, the design part's always fun and it's always interesting. And we try to have as much flexibility as we can within the limitations we have working in a plant, you know, as a prefab builder. Once the design is complete, we have several builders we work with in different parts of the West Coast. And so that house gets reviewed and costed. And meanwhile, we're working with a client to secure local contracting. Because that's equal, if not more important and actually most times more challenging than building the house part. One magic day, the house gets delivered, this is cutting edge really sharp. The house gets delivered. It gets finished and they're off to the races.

Prefab Review

So what do you do? Do you own your own factory? Do you work with third party factories or how does that work?

Ideabox

At the very beginning, and it also comes from my background with the industry and energy stuff, we've always felt like there's existing capability out there already. And running both production facilities is a completely different experience than like running a design shop. So we've always wanted to take advantage of existing capabilities. And now it's not easy to find the right ones. And it's a marriage at the end of the day. You've really got to find people who believe in what you're doing and you go through that kind of process with those people before you can go work with them. So yeah, we work with existing facilities.

Prefab Review

I want to talk about it because we know a lot of them in your area. Yeah, are there a couple specific ones?

Ideabox

Yeah, but we have proprietary stuff with them. They're not the ones in your area. The other thing that I have to say is that we have a kind of an affordability goal, too. Right. So a lot of the factories that are kind of in the news a lot these days,

Prefab Review

Or in your area or in Washington are a little more expensive for a price point then my impression of you guys, right?

Ideabox

Yeah. Because that wasn't ever our goal. I mean, you know, it sounds kind of whatever. But if price was no option, you'd do tons of things. And so part of our, I don't want to say mission, because it sounds serious, but part of our goal was to have houses that people can actually buy. And the things we were seeing when we first started and even more today, their costs are incredibly expensive. So our goal is to stay in the room for most people.

Prefab Review

So it's low. Let's dive into that. So one of the questions we get a lot, which we do our best to answer, which, you know, I find modular companies often have a hard time answering for understandable reasons. It's sort of this price point/cost question. And I understand that that's partly because every site is different. There's levels of customization. But let's talk about one of your projects or sort of an example project in an expensive city. Right. Let's call it Seattle or something. Right. From like a cost standpoint, what might we be looking at and it'd be really helpful if you could sort of help break that down in terms of the different parts of the project. Right. Like sort of design, soft costs, cost of the modules. Right. And then, you know, kind of typical, maybe site costs for a relatively easy lot.

Ideabox

That's a very, very loaded question. As far as the way we cost things is that what you're seeing online is reflective of typical projects of that particular model. We don't really change the costs from place to place because that's relevant to us in terms of just the house part. With the exception of any local code, things like, you know, the easiest ones, snow loads. But, you know, those kinds of things will have an impact. In California, obviously, there's the wildfire stuff like sprinklers and those things. But we don't change our costs, relating to where the house goes. We've said we're re-evaluating some of our houses or doing our current process. It's been since 2005. We've always kind of had a margin that we've set which allows us to be freer with what we do in design. So what we make isn't relying on the house. It's just what it is.

Prefab Review

So let's go along, I'm looking at your website right now, so I'm looking at the Ideabox Fuze 3, which for those at home who are not looking at it, it is a very nice looking Fifteen hundred-ish square foot, three bedroom house, right? Like the price online, it says the original starting at $207,000. The custom is starting at $235,000. So first of all, as you said, that is significantly less than some of these other sort of high-end factories where, you know, we see like $190 to$210 per square foot per module. Right. You guys, I guess, doing some quick math in the back of my head you know, a little more like $150 per square foot on that. That makes sense. All right. But yeah. So are your local costs then going to be pretty similar to that?

Ideabox

That's the kicker. And that's the most difficult part because depending on where you are, the cost can vary wildly. Right. You know, in Portland and Seattle and I'm sure in the Bay Area, obviously in the Bay Area, competition for contractors is really, really high and location like anything, is location. And so those costs are much, much higher than, say, a rural site. And on the other side of Yosemite or somewhere like that in California, or eastern Oregon or wherever. So those just those are just crazy.

Prefab Review

What are you seeing these days? So I can tell you what we see if that's helpful? Right. We typically see like with a few exceptions, right. If you're doing something in Oakland, you know, somewhere in the Bay Area that's expensive, $200 a square foot for the local side of this would not be unusual at all.

Ideabox

Yeah, that's that's what we're seeing. I mean, the site prep is site prep always. So it's not going to be different from our house or a site built or from a high end prefab company. That's just what they are. They're not going to change it, too.

Prefab Review

OK, so let's talk about this sort of relationship with the local builder. So he's the local builder. How are you guys doing the transporting for all of that stuff or is that the local builder or how does that happen?

Ideabox

Well, we arrange all of the transport and delivery and then to the extent where some sites require certain kinds of equipment to get homes there. So we want to coordinate all that. And then depending on code like manufactured as an example requires in most states, a licensed installer to do the install. So there's a contractor that's preparing the site like they would for anything. And then if it's a manufactured install, we do need to find the source of a local installer. On modular, the general contractor can take it all the way through if they want to. We still like installers because they've done it a million times. And, you know, it's just a higher degree of security, I guess.

Prefab Review

But then how many customers are you actually serving on a yearly basis?

Ideabox

I would say, you know, with all the weird stuff going on these days, we're about at 30 to 40 houses a typical year. At any given time we probably have 40 to 60 projects in some phase. And that seems to be fairly typical year after year.

Prefab Review

How do customers find you?

Ideabox

I think the Internet mostly. You know, we're in a town called Salem, which most people only know it being south of Portland. So, yeah, we're not a drive-by kind of facility. We just have a little spot here in Salem and people come in usually from the Internet. We used to do a lot of home shows back when there were not a lot of them, just a couple really in the northwest. But those have kind of changed. So it's really Internet driven. We were on HGTV a few years ago, and that continues to send people. And, you know, certainly the magazines are kind of fun, too. So I would say Internet mostly.

Prefab Review

Yeah. So let's talk about the actual design of the actual homes. One of the things that I've heard from some other companies, this may not be true for you, is that the sort of homes that are shown on their site or the plans on their site are basically advertising and no one ever actually builds them. You know, they're more for inspiration. Is that something true for you or are people sort of building, like what's the breakdown of kind of very custom designed homes to something incredibly similar to what we see on your site?

Ideabox

There are some that are more popular than others, but the one thing about our side is that everything you're seeing is very real. All the models have stemmed from something - some projects that we've done. That's why they're up there as a model. In fact, we had this conversation yesterday because there's a lot of things that we haven't shown that we've done for people. And they're not something that we feel is a model for us. A model is something that people have seen and bought over time to the point of others that they serve as inspiration. But now what you're seeing is kind of what we do. We don't do design to market or advertise. We just show what we're working on.

Prefab Review

So I noticed some time in the last year, I think you launched this farmhouse style home, which is cool because it gets a lot of people to our website and then we, you know, help a few hundred people every month sort of think through projects. And, you know, like well under 50 percent of these people actually end up doing the projects, at least right now. And this sort of modern farmhouse style is definitely one of the two or three, you know, sort of more in-vogue style. We get a lot of mid-century modern. A lot of modern glass and a lot of people who want a sort of modern farmhouse. So two questions about this house. One is. What inspired you to do it? So let's actually start at that. What inspired you to do it?

Ideabox

Well, there's kind of a funny thing about that. It was a design that we did in Colorado for someone who we needed to meet an HOA requirement. Which was the 6:12 roof pitch. You know, just because

Prefab Review

We're doing something very similar with someone in, you know, in Tahoe who has to do a 4:12 pitch

Ideabox

Sometimes design drives it. And then with all the as you mentioned, the popularity of the farmhouse and there are some of us that are a little group here that thought it should go online. So we put the drawings online. The funny thing about that is that we've done a lot of that house, but not with that 6:12 roof pitch. They've all done our typical roof pitch, which is the shed, the shed roof. So it's done wonders for us and it's brought a lot of people to us. But the houses that we don't, have all been to more of a modern look. So it's interesting. Now, I think it's kind of funny. And we're not big on trends. We don't like to do things that are trendy. We just like to do it. We do. And that one I felt like we were caving to the trend, not to take anything away from it, it's just that I think there's other more fun ways to apply it so that you're not looking like you're part of the trend.

Prefab Review

So since you guys are released annually, putting new plans on your site, so we're doing this in March of 2020, Do you have any sort of inspirations or ideas about stuff that will go on for this year?

Ideabox

We're trying a couple of things. One is, you know, I know we're already pretty cost effective, but we're trying to come up with something that we can repeat and control costs a little bit more in California. The first couple of those are in process right now. And if they are built the way we've designed them, that might be something you'll see new. We're always looking for better ways to make building more cost effective or affordable, so particularly in California that'd be awesome.

Prefab Review

OK, so I wanted to, it's been great to learn a bit about Ideabox but I want to transition quickly to our fire round. So basically, these are kind of questions that we'd like you to ideally answer in a minute or less, but we don't enforce that limit too hard. But it'll be great to tap new expertise. OK. So we talked about local builders a little bit and how crucial they are. If I want to build something in an area where you may not have a really deep local relationship, what should I be looking for?

Ideabox

Interesting question. I think a comfort level with a builder. You know, their local reputation matters and their availability to the client matters. But once they're sourced either by the client or by us, because we will we will also help if they're not ready, we really want to get to know them ourselves personally, to make sure, because you are handing off, you know, it's like a relay race, you are handing something off and you want to make sure it finishes the way it's intended. But just like anybody building anything, if the local guy's good, that's what you want.

Prefab Review

But does it matter if they have a lot of experience sort of doing modular or not, or is that not as crucial?

Ideabox

Well, no, I don't think so. And part of it's because you asked a long time ago about delivery and those kinds of things. And, you know, part of my answer is we would like to work with installers and people. So for most of the country, we've got those people out on the West Coast, I should say. So we're gonna coordinate heavily with those people, with the local GC, so that the foundation is the way it's supposed to be so that expectation is when the house arrives, everything is what it needs to be. So the contractor knows what happens after the home arrives. And so everybody's kind of in the loop as to how the process works.

Prefab Review

So next question, if I want to buy and I want to custom design a house and I want to work with someone like Ideabox, what's most helpful for me to sort of bring to the table or bring in preparation for that process?

Ideabox

I don't think it's any different than any architectural project or any kind of creative thought. Anything you have that inspires you to come to this place is what we want to see and experience ourselves. So everybody approaches it from different ways. Some people come in and we just kind of sketch it all out here or electronically over the web. Some people come in with, you know, like look books or whatever they call those things where they're showing the things that have inspired them in different ways. And then the site itself almost always presents all sorts of opportunities that we can take advantage of. So it's a combination of all that stuff.

Prefab Review

Got it. You talked about evaluating, getting a box to a site more or less. What are the, I mean, I know some of them like road access, power lines, what are the key things you're looking for to make sure that's feasible?

Ideabox

Well, that's a big one, depending on what house or what model. The length of something can matter. So like a really curvy road can be a challenge. The houses typically ship at 16 foot wide and 16 feet tall and by some length. And some of the larger ones obviously are longer than the smaller ones. So that's one of the first things we do, is see what the site access is and see if there's any issues up front, because if we can't get there, you know, the rest of it's kind of pointless. So we'd like to look at that stuff rather early.

Prefab Review

OK. And then the final fire round question. This sort of speaks to your roots. If I'm thinking about environmental friendliness and I like the idea of building an environmentally friendly house, what should I be looking for? What are the things I should be evaluating and thinking through?

Ideabox

That's another huge industry all by itself. One of the nice things about prefab is that you're not doing a whole lot to the site. You don't have to do as much on site. You can keep the building environment kind of tight because, you know, every opportunity you have in a project is to minimize waste or minimize disruption. That's key. As far as the house goes today, it's pretty easy compared to when we started. Because there are so many materials that are available now that weren't available then. You know, in turn, like I remember, we were doing bamboo. And bamboo is like this amazing thing. And all our houses were no VOC paints and the interiors another one. But those are hard to get back then, you know? Fourteen years ago, fifteen years ago. So those are all, you know, today we're using energy less, which is key. And with L.E.D. for lighting and the new refrigerators are pretty efficient. And we like zonal heating versus forced air. Because one, you're not blowing dust mites and stuff everywhere from the forced air furnace and then two the energy efficiency is better with zonal. For heating and cooling, we like ductless heat pumps because they're incredibly efficient and they work very, very well. You know, there's opportunities throughout the process from the exteriors today with well, in California you know, with the fire stuff, fiber cement siding is practically probably mandatory there. But they also use fly ash in their manufacturing. So it's a very useful material. You don't paint it as often. We use a lot of things that it's, paints embedded in the material. So even further just it's just every phase, there's opportunities and we try to take it.

Prefab Review

Cool. And then this has been really helpful. I really appreciate the sort of time and sort of helpful information here. So the final question, we ask this to everyone. What are you most excited about for either your company or the industry sort of in the near future?

Ideabox

I think the thing we're focusing on now, and of course, that's a really interesting question, I think being nimble right now is my catch phrase of the last month or two. We're always excited about design. Always, always, always. And the people that we get to talk to continue to keep that excitement going. You know we're fortunate to have really good clients and really exciting sights. The process of design is always, always fun and always exciting. So, but being able to come up with solutions that are interesting and kind of exciting and doable, that's where my thoughts these days of being nimble are, that we can have things that people can have and have them relatively affordably and have them reasonably quickly, just kind of at least for me, one of the driving forces. So that's a long answer to your very quick question.

Prefab Review

Well, thanks a lot. This has been a pleasure learning more about you guys and hopefully we stay in touch. For more information about Ideabox, I guess the best way for you to learn about it is probably at ideabox.us. And as always, you can always visit us for information about all sorts of companies in the industry at prefabreview.com. Thanks again, Jim. Really appreciate it.

Ideabox

Thank you.

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