Episode 20 - Jeremy Nova, Studio Shed

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 Jeremy Nova of Studio Shed, a company that makes kit ADUs, sheds, and a bunch of other cool stuff. Based in Colorado, I believe. Welcome, Jeremy.

Studio Shed

Thanks a lot for having me.

Prefab Review

Awesome. Yeah, we're really excited to talk to you and excited to learn about your company, but first I was hoping to learn a little bit more about you. We were just talking about how you are a professional cyclist or mountain biker. You know, not everyone we talk to here was a professional athlete before they got into the prefab housing industry. So how did you get into this?

Studio Shed

It's actually, well, they're related stories. I was a professional mountain bike racer for about 15 years. My wife was as well. And the way that crossed over into the prefab world was we lived in a small ranch house in downtown Boulder. And I think between the two of us, we had like twenty mountain bikes and nowhere to put them. And I've always been a real enthusiast of modern architecture and clean design. And I got an engineering degree at the University of Colorado in Boulder. And so I just decided to design and build my own kind of cool storage shed for mountain bikes. And that was how the company started. I never well, I actually never even envisioned starting a company about doing that. But my now business partner, Mike Koenig, he loved what I did, and said, hey, can I do the same thing? He built one and turned it into a home office. And that was back in 2005. And then we kicked around the idea of doing it,

Prefab Review

Was that just two by fours and like very DIY in your backyard?

Studio Shed

Yeah, it was a total DIY. Not permitted. I mean, the design aesthetic of that original one is actually still pretty similar to what our signature series is now. But I had yeah, it was all stick built. I put the glass panes in and built my own window stops and had metal fabricated and all that stuff. And so it was, it was a true DIY project and then his was as well. And then the first stage of the company was really figuring out, OK, how do we turn this into like a prefab concept? How do we actually make it? How do we create the technical details that make it? So it's actually like a good technical product and not just a DIY shed in your backyard.

Prefab Review

And so why do this as a prefab product? I mean, there's a big record of me being a fan of prefab. Like, you know, if you had done it stick built, why not just create like a local builder in Boulder and just build these for people around there?

Studio Shed

So it's a great question. I think part of it was we always sort of envisioned it as this fun Legos for adults kind of project. And we wanted to make it so it was something that you could put together with a lower skill set than needing to know, like, say, framing, carpentry or any of those kinds of things. And so we wanted it to be kind of like this IKEA-type product. And we haven't gotten there. Right.

Prefab Review

So this would be like a kit for the everyman and not something that requires a local builder.

Studio Shed

Right, exactly. And obviously, like, you know, that was 13 or 14 years ago now. And so the product has evolved by light years. But there is, we're obviously plugged into the the prefab landscape as well, but what we found and where we are fully committed as a company now is sort of like a more hybrid prefab model where we've learned that there are things that are very, very efficient to do in a factory and they result in a much higher quality product. And there are still some things that are just more efficiently done in the field.

Prefab Review

And what specifically are you talking about? I know a lot of the homes, especially bigger single family homes, like garages, for example, which are still site built compared to like, sometimes they're panelized, but they're largely still site built even on modular homes.

Studio Shed

Yeah, yeah, yeah. I mean, even like something like putting in a garage door. Right. Or something like, you know, I mean plumbing, you know, like stitching together plumbing fixtures. In my opinion, like some of the dream of prefab are around, like not having to do any sort of the hard work of the field labor. And there's truth to that. Like, it's difficult to find quality contractors to do these things and you need to say, OK, if I can move all of that manufacturing into a controlled environment, that's going to potentially lower cost. But it doesn't work as well as it could. And so I think and we think there are efficiencies to sort of 2D prefab as well. Where you're panelized, you can use a crane, you can access more sites more easily with things like that, and so I think that that's really where we see a lot of this going, is to do what makes sense in a factory, and then do what makes sense in the field, in the field. And the field piece is harder. Like that's one of the things for our company, having built out a real network of professionals that are able to service this and do that field work, that's the harder work than, say, creating the specs to have a module that's factory built. But building those relationships and building the service side of the business has been paying large dividends, now that we have a bigger footprint with those install teams.

Prefab Review

So let's go back to the actual company, Studio Shed. And I know this, and check out Studio-Shed.Com if you want to see, like, beautiful photos. But what is the focus of Studio Shed? What do you do? What are your products?

Studio Shed

Yeah, so there's really. Yeah, that's a great question. So the company started, as I said, with just small, backyard, high-design sheds and pretty much immediately moved into smaller home offices and single room studios. That still makes up the majority of units that we sell. They're, 10 by 12 is our most popular size. So it's a single room perfect for a home office or a creative studio. A little backyard sanctuary, and that's our signature series line, that goes up all the way to 12 by 20. So that's pretty big. You get just a little bit more than two hundred square feet. And then our other main product line is called the Summit Series. And then that goes from about two hundred square feet up to a thousand. And then those are available directly through us with kitchenettes, bathroom, one bedroom configuration on the larger ones. And so that's really obviously the ADU landscape and that's the portion of the business that's growing the fastest right now. And we see, you know, I'm sure you're plugged into this as well, but the ADU landscape and market is really beginning to mature and communities are embracing that.

Prefab Review

Particularly California.

Studio Shed

Yeah, California is huge. I mean, there's so much legislation there that's passed that's made ADU construction far more favorable recently. So we really specialize in that thousand square feet and down small prefab single room studios and then up to like nice accessory dwelling units.

Prefab Review

And in the smaller kind of offices, do they have electricity? Do they typically have, they're typically conditioned, right? Like they have some kind of like HVAC kind of thing?

Studio Shed

Kind of depends. So if you're talking about something that's like a 10 by 12, electricity always, yes. And that's something that we handle with our installation teams, the plumbing sometimes in the small units, that that plumbing is the one thing that bumps what we do into another level of permitting complexity. But we have, we do it all the time for the ADUs, so we know how to do it. And then as far as HVAC, some people will choose to do it in smaller studios. It's not always necessary. Like if you have enough cross ventilation and a space heater if it's cold and a fan if it's warm. But if people are doing a more substantive product or project and want that, we have some turnkey, mini split options for that. And that works really well. You just have there's actually some really clean, wall mounted small units now that, look, the design is nice on the inside. You know, it's not like we call it, the sausage on the wall. Right. I'm sure you've seen those types of mini splits. There's some new options out there that are really nice and they're pretty easy to install into our smaller units.

Prefab Review

I noticed, like your interior package is sort of an option, at least from what I've played around on your site. Do most people take advantage of that?

Studio Shed

Yeah, most people do. And so it's the one opportunity and we're comfortable sharing that it is an area where you can save money if you want to do the interior yourself. So it's a mix like we use the building shell you can purchase with no interior, but with interior it's sort of a white box, right? It's like insulation, drywall, electric, like ready to finish flooring and ceiling and you are ready to go. But if you're the kind of person that wants to do interior finishes by yourself, that's generally the easiest part of the product. So a lot of people do opt for just a shell.

Prefab Review

From a permit standpoint, is that something you will handle for people? Do you provide construction drawings or something, and then like a local builder will handle it?

Studio Shed

We do. We try to do as much as we can to take it off the customer's plate. And we have a whole permit services division within the company that facilitates it. And so we build the document plan set. You know, everything from the site plan and the foundation details. We have a relationship with an engineering firm that can stamp in all 50 states. So we do that. We do the engineering. We do need assistance from the homeowner sometimes. Right. Like they need to assist on the site plan. We'll have like an installer go out there. For example, like in California, energy codes. It depends on where the glass is, on the structure, combined with the orientation. And so there are often a couple of site visits that we need to gather information from from the homeowner. But we are the ones that would compile the document set and then deliver it to either the homeowner or there are some places where we can submit.

Prefab Review

Interesting. It's title twenty four is the California one?

Studio Shed

We can do the title 24 certification. That's like a turnkey add-on to the permit process for us.

Prefab Review

Does that mean that it's pretty easy to add solar to your products as well?

Studio Shed

It is. We're in the process right now of a couple of different turnkey solar packages that we retail. Currently, you wouldn't purchase it through us, but we would kind of help you navigate that process. And that's one of our things, is to actually integrate that to our specific product offering. But right now, it would be done by a third party. But we would facilitate the appearance of that on the plan set and engineering and things like that.

Prefab Review

And then from a foundation perspective, do you use a standard foundation for all your homes or do they vary from home to home, or do you even need them for the smaller homes?

Studio Shed

It's a good question. And the short answer is it depends. You know, the small, small, single room studios, something like a 10 by 12, it's often more than sufficient just to do small peers and like a deck type wood frame foundation on that, especially if it's unpermitted, if it's permitted, we often still do that style of foundation. There's just usually additional pier depth required.

Prefab Review

Is that just because it looks better because I would assume a slab costs less? Is that just because you like the look of that better, or is it actually more cost efficient?

Studio Shed

It's often more cost effective. It's kind of close, you know, we find the cost is pretty comparable to either a slab or, that's a popular option. That's probably the most popular option as you get up into the larger sizes. And then we have done a handful of stem wall foundations too on larger structures. And that's usually necessitated by site conditions. Right. Like there are places where if you have like some slope or something like that, like a slab is often not as desirable. So that's something that we would work with, like our local installer and the customer to determine the right foundation type. And then we would have that engineered as part of the permit plan set.

Prefab Review

Cool. And then I think the hardest thing and it is the thing we get asked most and the hardest thing for you to explain. But I think the easiest way to do it is to break this out into components. If we were like, let's just take like an eight hundred square foot ADU from you and think about the costs on a flat lot and let's call it like Denver, because it's an expensive market. And again, your site actually, really one of the issues we have with the industry, which we try to stem, is just incredible price ambiguity and opaqueness. And you guys are very good about kind at explaining out, at least on your kit, the costs. But how might that break down in terms of thinking through, like the kit costs, the interior costs, and then what one would likely expect on the sort of other components in terms of like the local site costs?

Studio Shed

Yeah, no, I mean, that's a great question and it is a challenge. And I think it's going to remain a challenge for the industry because everything still is so site specific. Right. And that's why, I think that's why you have that opaque quality to pricing on a lot of these things. And a lot of established prefab home builders and or what we're doing, it's very easy for us to create clear, transparent pricing around what our building is. And the reality is every market is so different around when you get into site work and foundation and trenching and utilities and compliance with local codes and even square footage, estimates are, it's often difficult. Right. If you have a flat site, it's mostly soil. You might be looking at like five thousand dollars or something like that. And it's like if it's a site that's got some slope to it, it's full of rocks and it's got this and you're looking at fifty thousand for site work and you know, the considerations of like plumbing too, do you have the right drop to tie in plumbing for an ADU to your home's utilities and the siting of all that stuff. And so it generally is, because we've actually wanted to roll out some type of site work estimator or calculator so that people can wrap their heads around the budget number in a more clear, sort of a more clear and straightforward way. But it's very difficult because those pieces can often vary by an order of magnitude from site to site.

Prefab Review

Do you think you can go through an example for like let's say Boulder, Denver, or some market you all know well? Let's just say 800 square feet and let's assume it's a flat site.

Studio Shed

Look, as the person that's not on the front lines of the sales team here, I hopefully don't misspeak around any of these things, I want to say that, like. I want to say that, I'm trying to think of, I have so many square foot numbers kicking around in my head, like 30 to 40 square feet for concrete or what. Right. Like all these different things, I think. I think of, I guess, the number. I guess I really don't want to misspeak, I can speak to the cost of the product, but I almost don't want to throw out site work estimates because I'm not an expert on it, you know what I mean?

Prefab Review

Yeah, well, give us as much info. I mean, we have actually estimates for your company that I think we've cleared with your team. So, you know, mostly it's just kind of understanding. Yeah, just speak to whatever you can. And, you know, we understand that this is complicated.

Studio Shed

Yeah. I think, you know, I mean, like so let's see site work and trenching. I mean, I think the ballpark. Well, do you have numbers? You said that you were because I actually am pulling some.

Prefab Review

I have overall for you all. And again, tell me if I'm wrong, you probably end up in being overall in the two hundred to three hundred dollars per square foot range.

Studio Shed

Yeah, no, and that's correct, I'm trying to think about how that breaks out right now. Right.

Prefab Review

I would guess it probably breaks out about 50 50 between, maybe 60 40 between kit and site work. But do you think it's more?

Studio Shed

Probably less than 40 would be my guess. I think, you know, I think

Prefab Review

Our estimates are normalized too. We normalize all our cost calculations to the Bay Area, so that might be why it's you know, it's a little bit more expensive on the site work side.

Studio Shed

So that sounds about right, I mean, so for an eight hundred square foot ADU, so that is about two hundred and fifty thousand dollars, like as an all in price, that if someone came to us and said, I have that as a budget and I want to do an eight hundred square foot ADU, we would say that's probably realistic. And so I think that's a good starting point. The building, with interior finishes and a turnkey, white glove installation with all of your rough-in and finished plumbing and fixtures and appliances and bathroom and hook up and all of that, I think you're probably going to be in like the one hundred and seventy five thousand dollar neighborhood. And then the balance of that would be site work and foundation. Seventy five thousand. So that's I mean, at a very high level that does sound like probably about right.

Prefab Review

OK, anyway, yeah. We understand that if someone really wants to find this out, contact your sales team. Sure.

Studio Shed

I mean, I think that even just sort of the I mean, whether it's not It's not that I don't want to throw something out there, because I don't want to showcase it, it's more like I don't want to misinform people about anything. But even just that exercise shows why it's difficult to pin such a specific cost on these things. I think a lot of times when you kind of do have to speak in those generalities of ranges, right. This is going to be the building is going to be one hundred and fifty to one hundred and ninety. And then your site work is probably going to be 40 to 70 or something like that.

Prefab Review

Let's transition this into talking about how you build out your local builder network, because one of the things we actually see sometimes is sometimes not necessarily you all, but right. Sometimes we find out that the easiest place for our clients to gain savings is just be like, well, that quote looks OK on the local builder side. Let us introduce you to two other people. And we see people especially in California, we see big differences on foundation costs on steep slopes and stuff like that. So tell me about how you built out your builder network, because that sounds like a pretty laborious thing in and of itself.

Studio Shed

Yeah, we find that same thing too, you know, and we get estimates from people, the customer will say, I was way along in the process and then I got this foundation quote and oh my gosh. Right. And so we're familiar with that dynamic. We have an absolutely stellar network of installation partners at this point. And it has been one of the more difficult pieces to grow for the company. I think we've got about 50 builders in the network now. They're typically small GC firms and we have a thorough process to kind of vet that they're all licensed, insured, and trained in the assembly of the studio shed product. Some of our larger teams, the majority of their work, is doing studio installations at this point. And for other people on the team, they'll do other work as well. Often, one of the benefits of being a part of the network is we basically do all the marketing for these guys. We bring them good jobs and they typically see quite a bit of additional work from the customers. So we will bring them a job to say, hey, we've got this ADU installation for you. And then they also end up doing retaining walls and all these other things. So we homes in on a good win-win model with those installers. And it's been, that's really been an organic process. You know, outreach, recruiting. We do active recruiting in markets that we know we want to move into. We have gotten referrals from customers before. You know, customers have said, I have a great contractor and we've on boarded some of those people into the network. We don't hesitate to have customers work with their own contractor. So that's something that we will work with. It's often desirable. So you can purchase our product as either a DIY or you can use our installation service. Like I said, pretty much most major metros and then a reasonable radius around that. And then our DIY sales are split between what we would consider like a true DIY where the homeowner actually does it, and then DIY where a customer works with their own trusted contractor. And we like that. And we'll work them, give them the same kind of training tools, videos and all of the documentation that we use with our own teams. And so that's often a good model. And we're not hesitant to say that is an area where you can save money, especially if you do have someone who's good. That's the key, right? We like customers to have someone already that they've got some confidence in, not like, hey, I just found this guy and that project goes sideways.

Prefab Review

Do the contractors need to have experience with panelized construction or does it not really matter?

Studio Shed

It doesn't really matter because what we're doing is not like it's not technically way outside the box as far as like SIPs. The panelization is still traditional stick frame construction. We use the zip system, the zip sheathing. It's just such a good vapor barrier and it installs really cleanly. And the factory tolerances that we're able to achieve on a framing level are just so good that the building goes up so fast and so cleanly that it's pretty easy for anyone with just general framing experience to put it together and have success and even homeowners with kind of minimal experience. We say it's not, it's not putting together an IKEA coffee table, but it's within the reach of a handy homeowner.

Prefab Review

And then in terms of the speed that you were just talking about. So let's say I said I want like, I go through your online tool or whatever, and say I want this one. This looks great. What are the next steps and how long is this process going to take if I'm a motivated homeowner?

Studio Shed

For the installation piece or the whole process of purchasing and manufacturing?

Prefab Review

From the time I want to purchase one to completion.

Studio Shed

The big question there is if it's permitted or not. And so for an unpermitted, if you order one right now, it would be about probably six weeks, six weeks out for our production schedule and then it would ship and then to build it, something like a single room studio, home office, our crews will usually have that dried in in one day. And then the second day would be all of the additional exterior finishes, sliding doors, you know, any of those final little touches. And then they usually begin the interior and then wiring electrical and then interior finishes are typically another one to two days all-in. And so it's less than a week for a turnkey studio. For our installation teams, a larger ADU would probably be more like two to three weeks at a minimum. It kind of depends on the inspection schedule. That's usually what makes those projects stretch any longer than like three weeks is usually that. And then if your project is permitted, the way it works is we would work with you to develop that permit plan set and get any information that we needed, things like site plan, site building, location on the site, confirm setbacks, foundation engineering details, and then we would deliver that document package to the permit office or the homeowner would take it in. And then that's sort of the black hole. That process usually takes about three to four weeks to get those documents submitted. And then some building departments turn it in like a day or two and then some it takes four months. In Berkeley or some of these longer ones, like in the Bay Area, can be quite a ways out. And so once we get the permit, we won't start building the unit until we have a permit in hand. And so then you're looking at about six weeks for the fabrication and then delivery after that.

Prefab Review

That makes sense. This is the question I've been wanting to ask all time, what are the coolest kind of use cases? And I've seen a few on your website, but what are they, the coolest studio sheds that you've seen your customers.

Studio Shed

We have had some really cool ones like that, you know, like a lot of the art creative studios are really cool. Seeing the art that people have created or there are musicians that have set up like a really cool music space, photography studios. Some of those are really inspiring. Home offices are our most popular. And obviously over the last year that's accelerated. That's not exactly the most amazing, inspiring use case. We've got a couple of learning pods, like there's a couple of buildings that are almost like a little home school set up and that's super cool. We had a guy that was like a YouTube celebrity and teaches banjo lessons out of his studio shed. So, yeah, I mean, some really, really cool stuff. It's kind of like you name it. You know, I think that's one of the things that people have found over the last year, certainly is that their home is no longer a sanctuary. So a lot of people need a place whether it's to work or to create or to just get away but still on their property. heard a lot of really positive responses from customers, especially over the last year, "I'm just having a place of my own just helped that life balance and stuff like that."

Prefab Review

Can you talk about what scale you're at, in terms of customers, et cetera?

Studio Shed

We don't share like specific revenue or unit numbers, but I mean, we're shipping twenty plus buildings a week right now. So, you know, right now that's what we're at.

Prefab Review

I think one of our clients or someone mentioned this to us, you're now in Costco as well, is that right?

Studio Shed

There is a selection that's available through Costco, it is a great program. If you're familiar with Costco's model, they want to retail something awesome, at a great price. And so we pick some of our most popular studio configurations that are kind of perfect for a home office. And I'd say it's kind of ideal for like that un-permitted size that you can get in your backyard an 8 by 10 and 10 by 12, a few different models. And it's free shipping. It's like we roll up a bunch of that stuff and create some efficiency around getting a little bit more scale in repeating the same product over and over again with them. So it's a really good option if you're looking at just those simple home offices, things like that.

Prefab Review

Yeah, I mean, I see there's some reviews on the site. It is very cool. We know how much our entire site is based on the idea that people want more education and hand-holding. In terms of like doing this process or the fact that you're I mean, I assume it's not a high touch process for you if you're selling through Costco.

Studio Shed

It's surprising I mean, it still is, actually. I mean, so Costco is less high touch. But I mean, but you're right. And that's one of the things that we also have a full customer experience team. They are all terrific. They are professionals. They know the buildings inside and out. They can speak with, you know, a lot of confidence to all of these questions around like permitting and installation and foundations and things like that. One of the things that we think in the prefab industry and landscape in general is that it's still a construction project. And I think we sometimes, like, shied away from kind of making it, like we want to make the easy button. Right. Like, this is easy. And you do still need to set the right expectation that this is a significant project, even something like a small home office requires you know, you have to dig an electrical trench and you have to hook something up to your main electrical box. And just like none of it is overly complicated. But just to set the right expectation that there is work involved and we will help you. That's the thing that's great about where we are now is we have the resources to really handhold a homeowner through what's a large purchase decision and just help them with all the steps in the process to have success. So I think that's a real key of our success has been to support customers every step along the way.

Prefab Review

So we're actually running a little longer than we usually do, which is awesome. So we're now moving into our fire round where we typically do one minute or less per question. Typically we do these kinds of things more generally. But because I have a bunch of stuff I want to ask you still about your business or that we've been asked by our readers, we might just go for that. So do you own your own factory and tell me about how setting that up worked?

Studio Shed

We do. And we are in the process of about doubling the size of it. So we don't, we don't own the building that we're in, but we own our own factory. We own the manufacturing process. It's in Lewisville, Colorado. And, you know, like I said, we're trying to double the size of it right now into 2021.

Prefab Review

That's awesome. Have you seen people do Studio Sheds, we see a lot of people trying to be opportunistic again all over, especially in California, about ADUs for investment purposes. Do you see that happening often with Studio Sheds?

Studio Shed

We do. And we are bullish on that as something that's going to happen because, for example, the finance cost of building an ADU is often offset on day one by rental income. So it's an excellent ROI for a homeowner and it's the kind of option that allows more people to get on the housing ladder in high cost real estate areas. So we think that's going to be an increasing part of the conversation at our business.

Prefab Review

Are you involved in any kind of multifamily projects yet? We see this sometimes in tiny homes, like people order twenty of these and make these little resorts or workforce housing out of this. Do you have experience doing that?

Studio Shed

We don't have experience doing that, but we've had some conversations. And I think that it's probably only a matter of time before we do. We did a large school up in Lake Tahoe that leveraged our panelized product so we've done some larger scale things, but not like a multifamily development yet.

Prefab Review

And do you have any Studio Sheds that have been off grid?

Studio Shed

Yeah, we do have some that have been off-grid. Yeah, it's pretty easy to do that, you know, between solar and especially for something like an office, certainly it's easier and plumbing is a little bit more of a challenge, but there are a lot of options for that. And it is something that works well with the product.

Prefab Review

Cool. And then the last question is, is there like a size threshold for certain cities that are just way easier from a permitting standpoint to get this stuff done?

Studio Shed

Yes. So 120 square feet is the easiest. So for single room studios that size and smaller often is a pretty smooth process. A lot of communities, the other cutoffs that are common is around 200 - 400. There are often different rules. And then for ADUs we're finding that 700 square feet, give or take, obviously different communities. It might be 720 or something like that. But those are the typical ranges, something around 120, something around 200 - 400 and 700. Those are, it seems like, those are some of the regulatory thresholds that are pretty common.

Prefab Review

And then the final question, we ask this to everybody. What are you most excited about in the near future for your company or for the industry?

Studio Shed

I'm excited about a couple of things. The ADU landscape is very exciting. You know, I think seeing the liberalization of zoning on that, I think it's a great way to add density in a thoughtful way to single family neighborhoods. I think it's easier on neighborhoods than kind of large multifamily infill development. And so I think that the expansion of that is going to be a real benefit to the housing pressure in the country in high cost areas. And then on the Studio Shed front, we've got some really, really cool new ADU and small home concepts that we're working on that I think will probably come to fruition over the course of the next six to 12 months. And to move even more into that prefab small home landscape is going to be exciting because I love the design aspect of it.

Prefab Review

Awesome. Well, thanks again, Jeremy. It's been great learning about your company. Your scale is super impressive, so it's going to be fun seeing how you develop over the next couple of years. For more information, everyone, about Jeremy and Studio Shed, studio-shed.com. And as always, you can visit us at PrefabReview.Com. Thanks again.

Studio Shed

Thanks for having me.

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