The Real Cost of Building

We may have made our name with shipping containers, but it is not the only building material we have extensive experience in. At the end of the day we are an innovative architecture firm, meaning we work with any materials that challenge convention. 

In this Episode, we talk about our team's extensive expertise in various design options, the importance of valuing quality of work, and everything that you need to know about the cost of building. 

Here's a glimpse of what you'll learn in today's episode: 

• Why we don't limit ourselves to containers. 
• How to look for a high quality of work. 
• Benefits of working with an experienced team. 
• Breaking down the costs of building. 
• Breck's project highlight of the week: Whitehall Ohio Housing Development 

Show notes for Episode 52

Supplementary Episodes:

Reimagine Multifamily Housing With Susan King of HED

Breck Designed His Own Home and Now He's Building It

Stay In Your Lane: When To Hire Your Architect, Engineer, And Specialty Consultants

Ready to move forward with your project? Contact us here and we will put you in contact with the right member of our team.

Make sure to follow us on Instagram, Facebook, and LinkedIn to stay up to date on new project releases, trainings, and more. 

Transcript

Copy Transcript Copied

SPEAKER_00 0:02

Welcome to the Innovative Real Estate Podcast with your hosts Leslie Horn, Brett Crandall, and Claire Ovilla. We're here to make your life easier as a real estate developer and teach you everything we've learned about designing and building innovative homes, multifamily, and mixed use structures. On this podcast, we'll be giving you our best advice, trainings, and QA segments so you can learn from our years of experience and make your innovative vision a reality. Welcome back to the Innovative Real Estate Podcast. And isn't it so fun that we get to come on the show and have conversations that are so relevant to all of the conversations that we're having with real people on the phones week to week and get to answer your questions so that hopefully we can address what's on your mind before you even get to speaking with our team. So we've got a conversation for you today all around the real cost of buildings and also how to decide what kind of construction type is right for your project. So whether you are building single family, whether you are working on a vacation rental or multifamily development, we really want to first of all start off this podcast today with uh the confirmation that here at Three Square, we don't just do shipping container projects. We've spoken about this on our podcast before. This is how we started off. Of course, yes, they're fun, but we just really want to make that clear right off the bat. And in this episode, we're really excited to dive into some of the other construction types that we are working on, why they make sense in per in certain applications, and how you can start to take in the pros and cons of those different options and work with our team or work with someone else, even just to find what works best for you. So we are here, we've got Leslie, we've got Breck, and we've got a project highlight of the week. So let's kick it off.

SPEAKER_02 2:03

Well, I'd actually like to start the conversation before we get into the project highlight of the week this time, because I think it really speaks to this conversation that we get asked all the time. Uh, if you've heard of Three Squared Inc., if you've seen our website, if you've seen our projects, you are likely to think, you guys are the shipping container architects. So what happens if we get a phone call, Claire, that asks if we do anything other than shipping containers?

SPEAKER_00 2:32

Well, usually I say yes, and I explain a couple of the other uh construction types and the many other projects that we're working on, where it's usually some sort of hybrid approach, uh, depending on what makes the most sense and that application for the project. And then what usually happens is people still think we only do shipping containers.

SPEAKER_01 2:56

You know, it's so true. I mean, I know that was our niche. I mean, that that that's how we it flooded the industry as an architectural firm when we we pivoted. Everyone knows we pivoted in 2017 and we became an architectural firm. Brett came on, director of design now, and we we we hit the market very hard in cargo architecture. That's how we and boy, have we been super successful in that. And the moral of the story is cargo architecture is not always the best fit. People think so because of all the information. And if you like the cool factor, you cannot deny that. But Three Squared is an architectural firm, first and foremost. Our team actually not only knows how to do cargo architecture really well, but in order to do that, Breck has said this numerous numerous times. We have to know architecture super, super well. We've been actually in our calls and people wanting to know more about our design services. I try not even to tell them that we're going to do something out of containers because it it's many times is not the best fit. And we are the first ones to share that with you. And, you know, if your budget comes in, we get these calls a lot. Oh, I'm on a super fixed budget, you know, I want to build 3,000 square foot house for 200,000, and we just giggle. But we've we've heard all of those. But at the end of the day, what is really the true cost of a building and how does that impact you not just today, but also down the road? What is your budget? So these are the conversations we need to have up front in order to have, I believe, your best interest as a client um in mind. It's being a good steward. It's one of our core values. Our our team of architects are by far, I think, the best when it comes to what is the best process for our clients? What is the best product? What is the best, you know, design elements? And we are constantly another core value, being one step ahead in order to meet the new innovations that are constantly coming down the pipelines. It's it's truly amazing. Uh Breck, I'd like your feedback on that. And by the time we you get to a client now, it's is it hard to shift their minds? Is it not hard? Is it tell us a little bit about that?

SPEAKER_02 5:33

It depends on what they want and what they need. And those are two different things. And some clients come to us because they understand the whole scope of the conversation. They're like, we've done a ton of research into shipping containers. That's what we want. We want a house out of this. We want a story to tell our family. We want the videos of these steel boxes swinging from a crane into place. Like, you know, there are people that really desire that. There are other people that come to us and they're like, I want the most affordable housing solution that I could possibly get. At which point I go, boy, do I have a story for you. And then we start talking about alternate solutions and different types of construction, and we find the best balance. And sometimes that is cargo architecture. And in many other instances, we're working with different styles of construction. Now, you may have started with cargo architecture when you initially, you know, started Three Squared Inc. I've been around for about six years here now, but I had another eight years of a career before that where I had to learn the basics of architecture. Because you don't start with something that is like rattling the industry, right? Like I started by building traditional, really, really small houses. Like that's that's where my career got its its starting point. And it took me a long time to get into this very, very complicated profession of architecture. I mean, you go to school for seven to nine years, you take six state board exams, like you learn a lot throughout that process. And ultimately, um, you know, you end up learning what you need to in order to introduce these strange and alternate construction types. But but the story is because we all had to understand how regular architecture, traditional architecture worked before we could even start working with alternative methods of construction. Now, with our experience, we have the ability to take a conversation with a client, meet them where they're at with their needs and desires, and be able to suggest the best possible solution for that project. And so now I'd like to circle back to the project highlight of the week because that's the exact conversation that we had with these developers in Whitehall, Ohio. So this is the greater Columbus region. The city is growing rapidly. They're getting a lot of spillover from Silicon Valley that's opening up like huge locations for uh Apple, Microsoft, you name it. And so they are in desperate need of housing. So a developer came to us uh with four parcels that were each zoned to have two buildings on them. We started looking at cargo architecture right out the gate. We thought that that was going to be the solution for this one because we were gonna be building a total of eight buildings. So we wanted a design that wasn't monotonous, that fit into the community and the context. Uh, and as we started diving into it, we just realized that some of the challenges of these sites and the size of these lots and the positioning of these buildings and the scale that we needed to reach with these dictated that we pivoted from shipping containers to SIPs. So that's structural insulated panels. And we then redesigned the project in a conceptual point in the progress that met the client's needs, met the budget, met the timeline, and made the whole project make infinitely more sense. So these Whitehall developments ended up being instead of two individual buildings on a lot, we actually combined them with the demising wall down the middle. So now they're duplexes. And it's kind of a kind of an interesting project. They're really targeting like adult dorm style living because it's a lot of these transient workers who are going to be relocating here for six, 12, 18 months at a time. And so, from a real estate standpoint, you might like raise an eyebrow to it, but we're looking at four bedrooms, four and a half baths, so that each bedroom gets its own private bathroom. And then the first level is all community space with a half bath on the main floor. So you've got your big open concept kitchen and your dining and your living space all on the first floor. The upper stories are all uh bedroom spaces with really gratuitous outdoor spaces. So you get huge balconies, uh, lots of space to lounge and to find your own space in there. So that's our project highlight of the week is the White Hall developments. And we'll be posting some renderings uh on what that design ended up looking like. And again, that is a SIPS project. So we're really excited to be working with that medium yet again. Uh, just another step forward in alternative construction methods.

SPEAKER_01 10:16

Breck, let me ask a couple of questions because in that conversation, I mean, I I recall this client um had already hired, you know, somebody from Fiverr. So just for presentation purposes, some general designs uh for and because he had his mindset on containers. Um tell me during your design kickoff meetings and and maybe maybe it was another meeting or two, what was the driving factor in changing it to another uh I mean, you've got your three like triangle things, the the cost, budget, timeline, and I forget what the other one is, uh, design. And so what was what was the primary factor? And how did that come up in the conversation during design?

SPEAKER_02 10:59

So of those three, and that I love that. So it's it's your budget timeline and the design or scope, if you will. And uh we prioritized two of those, and that was the budget and the timeline. So the design was kind of open, it was whatever we needed to do to make this work. But when we got those original like sketch designs, they were yet again using shipping containers as garages. Does not work. You can't open your car door, you can't park inside of a shipping container. I'm sorry. Uh yeah. But in order to fit in the garage with this design that they were working on, and in order to meet the scale of economy and their timeline for this project, we made a pivot there because um, because these are these are mass manufactured panels that can just be turned out at a at like a similar size. So you have like multiple of the same panel, and you just get loads of these and you put them together on site. Rather than like custom modifying these things in order to like bring a container onto the site, it made more sense to do a panelized system that could go up uh relatively quickly and meet the timeline of the budget. So the cost was probably the biggest driver of that conversation, seconded by the timeline of that particular project.

SPEAKER_01 12:11

Fantastic. Fantastic. So another core value being good stewards.

SPEAKER_02 12:18

Absolutely. So I know I know we we want to talk a lot about cost in this in this project uh presentation today. And so if we're thinking about you know you started off, Leslie, when you're talking about I decided on this construction type because of the cost. Well, sometimes you don't know what those implications are, and a lot of our clients have like, you know, job sites that are they're really challenging to get to for any product. So like a panelized product is going to be much easier to get to, you know, like a mountainside in Colorado or into uh hilly woods in you know northern Michigan. Um, so we've dealt with some of those challenges of cost, but everyone is so preoccupied with the question of what is my construction budget?

SPEAKER_01 13:05

They need to be telling us what their construction budget is. I mean, honestly, this is um this is it's it's that whole chicken and egg thing. How much is it gonna cost? And you know, as an architect, we have to design within a budget. We're not creating the budget. We can kind of tell you what we think it's gonna be. Oh, yeah, you want a 2,000 square foot house? Where do you live? All right, let's just do our little due diligence. There's a lot of information out there, but you know, cost of construction is high. And it's not up to us. We're not paying for it. We're you're paying for it, the client is paying for it, the developer is paying for it. What's your budget? What do you need to do? Huge implications in in the construction type. And given factors, you know, what is the design? Where is your land? What kind of land is it, you know, and just so many factors that go into that.

SPEAKER_02 14:02

But that's only one way that we can help with your cost. The topic of today is what is the true cost? And the true cost starts the day you get your keys to that building. And I think that's what people really forget in this entire process because everybody's too preoccupied with the cost of construct. Cost of construction, what's my cost per square foot? What's the cost of this tile? What's the cost of the siding material? Like, okay, great, that's all fine and dandy. But what you're forgetting is you gotta pay bills on this house when the things done. So let's take a look at some of these cost implications. Yeah. Let's say you really needed to meet a budget. You took a building that was planned one way and you started making changes during construction. You're like, I gotta change this because this is gonna be cheaper. Let's say you started a container project and you decided that halfway through the project, my builder says he could do it cheaper if we just go with sticks and we do like regular materials and we just like we'll just we'll we'll you know, we'll just get it done so we could sell it. Okay, well, when that project's done, you sped up the process, you cut a bunch of corners, you didn't finish the building properly, and now you're gonna pay heating and cooling bills that are way higher than what you were previously dealing with because of those corners that you cut. An energy envelope being tight and air sealed is probably one of the most important cost considerations for the lifetime of a building. We're talking about lifetime costs of a structure. Because if you just put in the cheapest windows you possibly can because that extra $10,000 during construction scared you, I guarantee you you're gonna pay more than $10,000 in bills over the next five years. So you really got to start thinking about like, am I gonna put in the effort now to make this building what it should be? Because buildings aren't built like they used to. We know this. Like, you're lucky if a house lasts 100 years. I mean, very lucky. We don't build things that will last because it's all about what is my cost of construction? Let's drive that down, let's drive it down, cut corners, cut corners, cut corners, and speed up a timeline so that I can sell this as fast as possible. I could rent it as fast as possible. But guess what? You're just shooting yourself in the foot. Because if you use garbage materials and you use cheap labor and you rush the project, mistakes will be made. Let's take a case study example of a building that we know very intimately, and that is the prototype of shipping container buildings that Three Square developed back in 2015, our model center. We've talked about this building a lot. I'm living in this building currently, it's in the background. And so I know this building very, very well inside and out. Now, we got what is called a blower door test a couple of years ago. And a blower door test depressurizes your house and it allows you to actually see where you have air leakage within the home. And we went through the whole building with a thermal imaging camera and it glows blue in areas where there's air leakage, and it glows red where you're nice and warm. And so when we did thermal imaging on this building during that test, come to find out that we were leaking like a sieve all over the place at the surround of every door and window throughout the building. Leslie and I talked about it, thought about it for a second, realized the contractors that finished this building never finished sealing the doors and windows properly, never put in the trim, and never caulked them the way that they should have been done. So we were just paying money out the window to have those things done. Quick fix, bills go down. Turns out it was just a corner cut at the very end of construction that we didn't even realize that was costing us money. Now, Leslie, I'd like you to talk a little bit about another lesson that we recently learned. And I just want to reiterate this wasn't a quality concern. This was a rush job and a contractual concern.

SPEAKER_01 18:15

Yeah, it was because at the end of the project, you know, towards the end, and I mean, I I you're scrambling because when somebody hands you an invoice for something that you weren't prepared for, not on your pro forma. Well, where does this $18,000 for my utility hookups go? Where where is that on my pro forma? Well, no, it's it's not there, it's separate from that. Okay, so now I've got to pull $18,000 out of my, you know, where and it's and so it these other little things, you start robbing other places of the building. So when it came to, you know, like spending some quality time on how to flash our our windows and and the assembly that's needed to create, um, I guess uh if you look at the back of our building, you've got four containers that are exposed, and the bottom two we covered with um fiber cement board, we painted it, but then there's that little detail right above it that connects the two that we had no idea was a detail that really nobody had detailed out. And over the past seven years, eight years, we had a little trickle of water when it would rain, the water would come in from the, you know, so all these little gaps, these tiny gaps, because we weren't paying attention, we were in a rush, we thought it was all done. Oh, let's just do the cheapest way to get this connected. I don't, I I really I remember saying a couple of times, I don't care if we find the most cost-effective solution. I I said those words. Oh, now the true cost is, you know, we're having to go back in, not only replace an entire window, but also now all of the insulation surrounding it, you know, and all of those other things that come with ripping out a wall, ripping out and replacing the exterior. I mean, so it's it's a big fix. The true cost, I mean, I didn't even think about what it was gonna cost me later. I remember saying, oh, we'll just we'll just deal with it later. Well, shooy. Um, we're dealing with it now later. And it's a it's a hefty price tag. It's all good because I mean, tuition, we all talk about that. And being a new developer at the time, oh my goodness. So I don't beat myself up for it, but boy, oh boy, had I had this experience beforehand, I really would have thought differently about how we secured the flashing in between the containers, how we, you know, make sure that everybody did all the caulking and weatherproofing in order to facilitate a complete build. I mean, those just it would have been so, I mean, it it would day and night, day and night. It would have been a great decision to have.

SPEAKER_02 21:14

So let's let's recap a little bit on on the true cost of a building. Because you yes, we can work with you on the onset of a project to determine what the best construction methodology is for your project, for your timeline, for your budget, for the quality and scope that you're aiming for. And that's one way to you know to set the standards of cost. But once you get into the project, let's say you're building yourself a house, all those corners you cut now are gonna cost you later. If you're if you're trying to, you know, have a good tight building envelope and you want to be sustainable and you don't want to be paying crazy heating and cooling bills every month. Month for the rest of the time you live in this space, then you should really think about that when you're talking about the cost of your building up front. If you don't want to go back and replace doors and windows or fix water damage or holes in the roof or drywall and paint that's peeling, maybe you should consider a little bit of quality and better materials and choose contractors that aren't the cheapest and fastest because you're gonna end up paying that much and more through the lifetime of your building. Now, let's say you're one of those uh those developers who's just trying to get the project done so you could sell it. I mean, we see way too much of that. Uh and I think that's kind of what's poisoned the water of the industry, is because there's too many people that are just trying to flip these things. I mean, look at look at regular flips these days, the old contractor special where they just paint over everything, including the outlets and the light switches, and they're just slapping on the Home Depot special, you know, gray and white tile in every kitchen and bathroom. It's just terrible. It's just awful stuff. And you're just handing that price to the buyer. So if you're buying houses or if you're looking to rent apartments, you should look closely at the quality of work, the quality of the windows and doors that have been put in. Like, how is your building built? Now let's zoom out and look at a developer on a large scale. Let's say you're developing an apartment complex. These issues compound a hundredfold. Because if you're trying to save money on your development so you could get renters in there faster, so you go with the cheapest possible siding solution. Well, you've just again cost yourself truly in the lifetime of your building, because in five years, you're gonna have to tear that entire side of the building off and replace it. And if you want to do that every five years again for the rest of your building's life, be my guest. But you're costing yourself not only in the cost of materials and labor to redo this multiple times, but you're also costing yourself on a bigger picture. Like you have you have now set the stage for an industry where we're just gonna continue to do this as fast as possible, and you're never gonna recoup your costs because you're you're always paying more for the duration of the life of this building, and you're reducing the lifetime of this building. Buildings that are built with garbage materials and take water damage like this aren't gonna last 100 years. They certainly won't last 200 years.

SPEAKER_01 24:56

Well, Breck, and they won't. And also, I mean, this is you're as a developer, you're building your brand. I mean, there goes your reputation. How many developers do we see in Detroit that we see them building a product that you can hear your neighbors, you can hear your neighbors two doors over? Um, in you know, it's it's it goes up super cheap, it's not quality, they don't get the rents, then there's a lot of vacancy. I it's it's really sincerely, I think it's it's a practice that we as developers and or builders really need to take a look. And we're always gonna have that scale of it. It it's like I mean, Susan King, when she was on our podcast, uh the last I don't know if it was our 50th or 51st one, but she yeah, thank you. She, I mean, she really talked about like, and it was a good lesson for me to hear windows, the quality of windows. If you just spend a few more dollars, not significant, but the cheapest ones, you will have to replace when they're not effective in five to seven, eight years. And so if you can just spend a couple more dollars, it's not significant, it's not like going out and getting all the wooden ones. It's there's really good new technology, but we have lost our way in we just keep doing things that we've lost our way in change. Change is hard. We don't we don't want to do things differently, we don't want to be thought leaders, we don't want to do the homework that it takes in order to make our buildings greater. And that's the thing I'm so excited about our team. I'm so proud of our team because that's exactly what we do. It's are we you you guys do it most? I mean, we're always constantly looking at how we can improve this whole process.

SPEAKER_00 26:51

Anyway, I'm gonna get off that box so I love what you said about the developer's brand because that was exactly what happened when I was in Toronto and we were in high-rise, and there was a building that was going up right next door. And as soon as they put that big banner outside the construction site that said the developer name on it, everyone was like, Nope, nope, don't live there, do not live in that building. And there was all these stories about what had happened about these other high-rises downtown, and it was it was like a no-fly zone. And wow, like it was just like everybody was on the same page about it. So it's so interesting how that how that word spreads. And also something that we haven't really talked that much about because the topic of today's conversation really is around the real cost of construction. But I mean, when we think of the real cost of buildings in general and taking into account architectural fees and doing things right the first time, and kind of circling things back too, to the way that we've opened up our project scope to include non-container projects and SIPS projects and traditional projects. Then what I want to remind people is how helpful it can be to work with a team that yes, can do stick build projects, but also has extensive experience in alternative construction types so that you have a reliable and informed and experienced team to weigh those options and figure out together what is the best material type for your project.

SPEAKER_02 28:45

Right, I'll add to that because we don't know everything. I haven't built every type of building under the sun, but we know how to do things that are different and we know how to tie them into things that are standard. And we've talked about this before. Like, alternative construction methods aren't replacing how you make a building, we're replacing how we build like one aspect of a building, be it the floor, be it the walls, be it the roof. Like, that's where alternative methods come into place because you still need a toilet, like you still need your electrical panel, like all the flooring materials, like all these things are they're the same in all buildings. We're not we're not reinventing the wheel, we're just reinventing one aspect. So, what I'm saying is that even if our team hasn't done something radical before, we're the team that's gonna do the research and find those partners in order to make that construction type work. And if through that research we discover that it's not applicable for what you're attempting to do, we'll be the first ones to talk about it and then solve for a solution. How many projects right now are we working on that we got a call because a client said help we're stuck? And we actually came in and took over that project and started finding solutions for some really crazy challenges because we're that team that'll take on the crazy projects, we'll take on the challenges and we'll find that solution for you. But what we won't do is allow you to rush your project and build something that's gonna fall down in five years and make you look bad, but also make us look bad. Now, there's a there's a building in Royal Oak, like right downtown in Michigan, it's just north of Detroit. Same thing, Claire. Developers put this thing up super fast. Within three years, the balconies of the apartments were collapsing, visually collapsing. They were tilting down, like not a few degrees, like a few feet. They were collapsing. The building was condemned. They had to get everybody out of the building because it was structurally collapsing. That looks bad on the developer, that looks bad on the engineers, that looks bad on the architects. You have now like sullied your name. Like, no one wants to talk to you, no one wants to work with you because that's your brand. That's your that's your vision. And now people are scared to work with you in the future. And at what point in the process did the finger pointing start? Who who rushed what? Who was just trying to get something up so that they could be done with a project? It's just a lesson learned. And the takeaway here today is it's not just your cost of construction, it's what is the cost of your building's lifespan? Because a building will only last as long as you take care of it.

SPEAKER_00 31:48

All right, mic drop. Oh, that was awesome, guys. Thank you for that convo. And if you're listening to this, I think we can wrap it up here. Yeah. Yeah, I think so. If you're listening to this, we would love to hear from you if you've got questions, if you've been in this place where you feel stuck because you don't know which path to go, which direction to go with your project. We've got our contact form linked below. Please just send us a message, give us a couple details about where your uh site is, what you're looking to build, and we're happy to share some more information with you and connect you with the right member of our team to have a conversation and uh see if it's a good fit to move forward. So thank you for listening to another episode. We will be back with another episode in two weeks. And we will also link below a couple of relevant episodes in case you want to check out some um some complimentary podcasts that we've done recently. So thank you everybody. We will see you next time. Bye. We hope you enjoyed this episode. And if you found it so valuable, you want to connect with us one on one, click the link in the description to tell us all about your project so we can help you get started.