JF1264: How To Make Shipping Containers Into Homes & Profit with Stevie Bear
Stevie started by learning construction and building homes. She moved onto flipping homes, and eventually container buildings. What was supposed to be a retirement project, turned into a full blow real estate investing business. Make It Modular has taken off in the last year, Stevie and her team don’t see any signs that will change. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Stevie Bear Real Estate Background:
-President/ CEO – Make It Modular, Owner of Community Real Estate Investing
-Managing Partner at UP Capital Funding, Broker/ Owner of Four Directions Realty
-4th generation in Real Estate
-Been involved in Texas real estate since 1997, and has been a licensed Broker/REALTOR in Texas since 1998
-Say hi to her at http://makeitmodular.com/
-Based in Austin, Texas
-Best Ever Book: Road Less Traveled by Scott Peck
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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.
With us today, Stevie Bear. How are you doing, Stevie?
Stevie Bear: Great, how are you?
Joe Fairless: I am doing well, and nice to have you on the show. Stevie is the president and CEO of a company called Make It Modular. This can be interesting, it’s a shipping container that is a home, and I’m sure I’m grossly simplifying that, so Stevie can educate us more so on it… But MakeItModular.com is the website, and Stevie is in the fourth generation of real estate in the family. Based in Austin, Texas… With that being said, Stevie, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Stevie Bear: Yeah, like you said, I’m a fourth generation that’s been involved in real estate; my family and my great-grandfather came over on a boat from Norway, and they were farmers and builders; that’s what they did, and my grandfather continues that tradition. My father is in his early seventies and is still flipping houses today… So I kind of came by that honestly, although I did take a detour in the social services; that was a good thing for me actually, and I was very appreciative of it. It taught me a lot about how to work with people, and that’s been very important in the work that I do, especially with the way this recent company is taking off… So it’s been good.
I’ve spent most of the last 22+ years in real estate; I have a brokerage company, of course, Four Directions Realty. I kind of started doing real estate because I bought a house and it fell down, and I talked to my dad and he said “You know, you just have to figure out what happened”, so in the course of figuring out what happened, I went and took builders classes, got my real estate license, took inspectors’ courses, figured out what happened, rebuilt that house from the ground up, essentially, developed a taste for contracting out of that and a contracting crew, and then ended up building and rebuilding a lot of people’s houses for them. I did, of course, 15-18 years of flipping houses.
A couple of years ago I was in San Antonio doing a historical home, which was a lot of fun. When I was about three quarters away through that I decided I’m gonna go do my passion project, what was supposed to be my retirement project, and it has turned into the biggest thing I’ve ever done in my life, and that is the container building.
It was kind of prompted by a lot of things, but I saw containers being used commercially and residentially some 3+ decades ago, and just had a sense even then, though I wasn’t involved in real estate at the time – even then I knew that there was something to it. Fast-forward a few years, as I’ve gotten involved in real estate and started to study building and contracting and all, I started studying container building as well. After a dozen or so years studying container building, I felt like I was ready to kind of try my hand at what I thought could be an answer to a lot of problems, and as it turns out, yay, it is an answer to a lot of problems.
So we are a container-based building solution company. We do residential, we do commercial, we do a lot of development… We’re doing a lot of dev work now, and we literally went from being barely scraping by and paying the rent this first year, to next year we are bumping up deep into nine figures for the company as far as what we have on our plates. This is my fifth company; I’ve never seen anything like it. Nothing has captured people’s attention the way that we have designed our product.
We have people from all over the country, all over the world seeking us out and asking us to produce this product for them, and we couldn’t be more excited.
Joe Fairless: Who’s your typical customer?
Stevie Bear: That’s a good question… I wish I could say I had a typical customer. We kind of land in the millennials space, or so it seems, but we quite literally have several thousand people in our database right now, after just a year and a half, and we are building for people from their mid-twenties up until their early eighties. So a typical customer – they are looking for something different; they recognize that the product that we build, while we can make it anyway you want it to look quite literally, inside and out, your imagination and your pocketbook is really the only limitation; we can make it any way you want it to look… It’s still gonna be buried in that look, all the inherent, wonderful qualities that container building can bring to the product. So the people that are looking for it, the people that recognize that inherent ability, the affordability, the durability, the sustainability, the ability to stand up to anything that nature or man can throw at it and still be standing at the end of the day.
Particularly this past year, when you look at all the natural and even some of the man-made disasters, people have been crawling out of the woodwork and coming to us and saying “I need a house that’s gonna stand up to the next hurricane, I need a house that’s not gonna burn up in the next wildfire. I need a house that’s not gonna flood”, and we can do that. We have the ability to provide them that, and save homes, save businesses and save lives in the process, and basically, we’re just thrilled to be able to do that.
The people that are seeking us out are the people that recognize that and want that and need it, and the other people are just seeking it out because they just like it; it’s a cool product.
Joe Fairless: It is completely something that’s not typical, that’s for sure, and Best Ever listeners, I recommend you maybe pause right now and go to MakeItModular.com, just so you kind of have visual reference for what we’re talking about. At least I would have a hard time visualizing what we’re talking about, but once you see it, then hit play again and come back to our conversation.
Stevie, you said it’s protective from a hurricane, but if water rises to six feet and your container has six feet of water then all your stuff’s ruined, just like it would be a house, right?
Stevie Bear: Well, you would think so, but that’s not really how this product works. It’s a water-tight and air-tight environment, and the way we build with it, we keep it as much that was as possible, and we also take into consideration the environment that we’re building in. For example, our products that we’re building down at the coast – we’re raising those up on steel piers, 14-16 feet, depending on the area.
Then the container itself is built in such a way – the way we do the door and windows structures – that it is pretty darn water and airtight; it is airtight, and it’s pretty darn watertight. It’s so airtight as a matter of fact, if you are to light a candle and turn off your air system, which acts as an air and heating and wicks moisture out as well, and we use an HVR/EVR – it’s sort of like a minisplit system that also handles the moisture.
If you were to turn off that system and light a candle and go to sleep, you might wake up gasping for air, because that candle will probably suck all the air out of the room; it’s that airtight of a system.
Joe Fairless: Wow… That’s a little scary. How do you address claustrophobia, and people who have that fear in the scenario that you’ve just described? Or is that not a thing…?
Stevie Bear: Well, we make sure that the air systems that we use to [unintelligible [00:09:33].13] fresh air in there – it’s almost like the air that you get in there feels like you’re in the middle of a forest; it’s really a wonderful air system that we use. The air handlers that we use on this product are superior air systems and they’re really a wonderful product, and you do kind of have that fresh air feeling without the humidity, without any of the particulates and allergens that create issues for people.
And for the height on these, we use what we call high cubes, and; they’re 9,5 feet high. The first reaction when people come to see them, even the small ones that we have built out here in our headquarters in Austin on our lot, they get inside them and inevitably the first comment out of their mouth is “Oh my god, they’re so much bigger than I thought. Wow, they’re so much taller than I imagined.” They’re ingeniously designed, where space and room is really not an issue. People that are used to living in 1,500-1,600 square feet are quite happy living in 800 to 1,000 now, because of the design and the way we use the space. So downsizing is not out of the question for people, because the use of the space and the design of the product allows for that; it’s really a sweet thing.
As far as the water, the entering of water, that’s the same thing that keeps it airtight, it keeps it pretty watertight, so whether you’re raised on stilts or not, if you have three feet of water outside your door, some of that water might [unintelligible [00:10:53].19] in along the seam of the door frame, but you’re not gonna have three feet of water standing in your house… So you’re not gonna have as much water in your house as you have standing outside it, which is a real benefit to all of our friends down in Houston. By March we will be on the ground in all four major cities on the coast here in Texas, with residential and commercial products… So anybody in the Texas area will have a chance to view that, and we are making inroads into a couple other states as well [unintelligible [00:11:22].21]
Joe Fairless: Is there a zoning or code restriction that would prevent someone from having a container home?
Stevie Bear: That’s a question we get asked a lot, and that goes back to we can make it look any way you want. When we run into an HOA or a situation, a scenario in a neighborhood, a subdivision where that becomes an issue, what we do is we go in there and we show them the architecturally-designed product that we have and we ask them what it is that they need us to do to fit into that neighborhood. Generally speaking, what they want us to do is match up to what is currently going on in that neighborhood, and that’s not a hard thing for us to do. We can site these things just about any way they need to be sited, and we can site them in such a way that it does not penetrate the skin of the container itself, which is fabulous, because it’s less ways for water to find their way inside the container.
We have a siting system that doesn’t need to have stucco, doesn’t need to have rock trim, doesn’t need to be brick, doesn’t need to be hardie… We can do any of that. So we can literally make it match up to whatever you want us to match it up to, and still maintain all those positive benefits that the container building brings to the table.
Joe Fairless: And what about insulation?
Stevie Bear: Yeah, insulation is really a great thing. We exceed all of those conditions… Of course, we build by the international code of both business and residential, obviously, in our [unintelligible [00:12:51].09] codes, and then we also build to whatever code in the areas that we’re building in. Thus far, we have exceeded all the insulation and green expectations for all the areas that we’ve built in, and one of the reasons we started here in Austin aside from it being one of my homebases is it’s one of the top five or ten hardest places in the country to get permitting, so we knew if we could get permitted here, we could pretty much take it anywhere we wanted to… And we have been permitted here multiple times.
The insulation we use is a [unintelligible [00:13:21].28] water-based closed cell spray foam insulation, and [unintelligible [00:13:26].17] You can’t really determine its value by R-value alone, but in R-value alone we tend to exceed R-value by 2-5 points just based on the current requirements in Austin, by the IRC codes.
Joe Fairless: How much does it cost?
Stevie Bear: You know, we have struggled with that a little bit in our startup early on, because we wanna produce that affordable factor for everyone, so what we worked on really hard this past year was being able to get a formula that allows us to build at sticks and bricks cost in whatever area we go into. So we will go into an area, find out what current sticks and bricks cost is building for, and we will build you our design for that same cost or less.
That includes all the benefits of the container itself, as well as our special roofing system that we have, that is a solar-friendly roofing system that also acts as a rain catchment system, which can truly give you a big leg up on going off grid or just cutting your bills down, if that’s what you desire to do.
Joe Fairless: So you go in and you basically let the market determine what the price is for the container in that particular area, right?
Stevie Bear: Well, yeah, sort of… In Austin, our average sticks and bricks cost is about $150/sq. foot, whereas up in Dallas it’s $95 to $105. Down at the coast right now it’s about $165. In Houston we’re looking at $115-$120. So even here within our Texas market, obviously, we have a wide range. Some of that has to do with supplies in the areas, a lot of it has to do with labor in the areas, so that’s why we try to ascertain when we go into the area what is it that we’re dealing with locally, so that we can give you a fair price. I don’t wanna give you a price in Dallas for Austin, and get up there and say “Hey, it’s gonna be $150 a square foot”, because if sticks and bricks up there is $105, you’re not gonna wanna work with my product.
The container being our main building block and providing the base – your walls and floors and ceiling – gives us a great advantage price-wise… But we don’t have a lot of control over the local labor cost or cost for transporting materials that may not be available locally. But if we know what the local sticks and bricks building cost is, we know that we can achieve that using our product, and give you a superior quality product for the same price as you’re accustomed to in that area for a sticks and bricks build.
Joe Fairless: Okay. The approach that you’re taking now with the company is to both do residential and commercial right now with your business… Which one are you doing more revenue for?
Stevie Bear: I’d say we’ve got about 10%-15% in custom residential right now, another 10%-15% in custom commercial, and then we have (I would say) — the other 60% is probably split about evenly in commercial development and residential development.
Joe Fairless: Educate me on the difference between custom residential and residential development.
Stevie Bear: Sure. When we first hit the ground, we kind of thought, well, being a startup and bootstrapping ourselves through private investment money that we kind of launched off of my investment company CREI, which did a lot of the rehabs and flips and things like that previously… So we brought a lot of those investors on board and kind of bootstrapped ourselves that way. But it was a building company and I really had no idea what it took to build a building company; it was a learning process for me, and it still is. But we brought those people along, and having somewhat limited resources – about a million bucks is what we started with – we thought, “Well, we’ll build a spec house or two, and then we’ll try to take in some custom clients that we’ll build other houses for, and we’ll do what they call additional dwelling units (ADUs)”, which are those little he-and-she sheds, mom-and-pop shacks, kids home from college shacks that you can drop in the backyards.
In the Austin area and in a good deal of Texas we can drop up to 1,100 square feet in somebody’s backyard, so you have a primary home and then a home behind it. So we thought that would be our bread and butter really, so we started going after that market. It’s a good market, but in a custom build, 3-5 months probably, you’ve got 2-3 months in development with your architect/design team (maybe up to 4 months) and then you have the 3-5 months in permitting, so you’re 8-10 months just in the planning phase.
Now, a 1,500 square foot home – I can knock that out for you in 4 months, which is a third to half the time of sticks and bricks building, which is another cost savings for our clients, of course, and a time and cost savings for us. But when you add up the time of the architect and design team and the time for permitting, you’re well into a year to develop that project and get it built. We can look at that and say that we were gonna starve to death doing it that way, so we said “How can we survive as a company while we’re trying to get enough of these on the ground and enough money in the bank to live?” and the easy answer was development, because while sticks and bricks building — while custom building for people is great, the price tag on that is considerably higher, because you’re doing a single build on a single lot, but you’re having to bring all the same infrastructure in, all the same time in, the same time with an architect… It’s very time and cost-intensive to do one, whereas if you do five or ten or a hundred at a time, you can drive the price down.
So as we started bringing clients into our headquarters here, we definitely had people that wanted [unintelligible [00:19:31].28] in their backyard, we definitely had custom builders, but we also had people coming in that they were on a budget, and we wanted to be able to meet that budget. The affordable part was really important to us, and we realized the only way to really meet a budget for people was to drive the price down to where that affordable part really worked for people that were apartment dwellers and needed something that could get them out of that apartment, but not quite a custom home. We needed that development space, that neighborhood space. We didn’t think that it was attainable, but we connected up with a good financial advisor and a team of deep money people that made it happen for us, and we developed a great lending package that allows us to have to pocket very little out of our own pockets (5%-10%), work with developers who have land that they’ve already done some inroads on, and we can come in and subjugate their land, take our 10% down, and with that money build 100 houses at a time instead of one or two. By doing that, instead of building a custom home at, say, $265 to $325/sq. foot, we can now get that price down in that neighborhood to the $140-$150/sq. foot that the big box builders are building for, and again, deliver you that container home, make it look any way you want, get your solar and your rain catchment system on it, have it be affordable, durable, sustainable, and deliver that product to you in a neighborhood where people that are average Joe’s on the lower income/middle income scale can afford to be there, because we’ve driven it into the neighborhood.
So custom is one-offs on your own lot, which is great, and dev work is those neighborhoods that we’re building where anybody can afford to be there.
Joe Fairless: If you had started this company 20 years ago, what mistakes would you have made that you haven’t made since you have the experience that you have – you’ve got 15-18 years of flipping homes and you’ve got a real estate practice or a brokerage… So what mistakes would you have made that you didn’t make in this launch?
Stevie Bear: Well, I don’t know if I could have done it… The path that I took to get here – I didn’t realize this is where it was leading me; once I had a notion of that’s where I was gonna go, I really kind of focused on gathering the skills as needed… The knowledge of construction, knowledge of how to work with steel, the people that work with steel and what they now… Steel reacts differently than wood, so having that knowledge is so very valuable, and just creating the right team, having the project managers, having a good vice-president of construction, having people that know how to run numbers to do a neighborhood in.
Figuring out how to do one project, one single house is one thing, figuring out how to do hundreds of them – that’s on a whole other level, and even with a college background and real estate background and the family background I had, 20 years ago I didn’t have nearly the knowledge. I didn’t have what it would take and I would have been too darn scared to do it. I always people, don’t ever let what if get in the way of what is, but I didn’t have nearly enough skills or knowledge to do it 20 years ago, and I hope that my common sense would have said “Yeah, you can’t do that… Don’t do that. Go get the knowledge to do it.”
Building one house is one thing, building hundreds of houses, and change the way people live, work, play and create, so that we can all have a better future at the bottom of it all, that’s what we’re trying to do, and that takes a whole other level of skill. And while I’ve thought of this as a retirement job, it’s becoming a whole different thing now, and I’m really proud of what it’s becoming, of the team we’ve created to bring it to life and to actually make it happen… But it takes that 20 years of experience to get here.
Joe Fairless: Based on your experience, what is your best real estate investing advice ever?
Stevie Bear: Don’t ever take no for an answer, and dream big. There’s a lot of things that need to be done out there, we all have a part in it, and we all should be doing that part… So don’t ever take no as an answer, dream big, and don’t let money ever be why you don’t do it. You have everything you need to do it with, just find the people, connect up and get it done.
Joe Fairless: Are you ready for the Best Ever Lightning Round?
Stevie Bear: Absolutely.
Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.
Joe Fairless: Best ever book you’ve read?
Stevie Bear: Best ever book I read… Oh gosh, that’s a hard one. I like The Road Less Traveled…
Joe Fairless: Oh, I do, too. Scott Peck.
Stevie Bear: Yeah.
Joe Fairless: I love that whole series. The Road Less Traveled, The Road Less Traveled and Beyond, Further Along the Road — he really got carried away on The Road Less Traveled series…
Stevie Bear: Yeah, yeah…
Joe Fairless: Great book series.
Stevie Bear: Absolutely.
Joe Fairless: Best ever deal you’ve done?
Stevie Bear: Best ever deal I’ve done… There’s a big deal that we’re doing right now with a large international multimedia conglomerate that is gonna be announced in January, and I’m pretty proud of it. It’s going to be a game-changer for this company. So far, that might be the best one I’ve pulled off.
Joe Fairless: Best ever way you like to give back?
Stevie Bear: I’ve always been a giver, from the time I was a child… Collecting for hurricane victims and doing good deeds. One of the things we’re doing with Make It Modular is giving homes and businesses, creating spaces in the communities that we’re working in and giving them to the communities, and I’m really proud of that solution. So far, that’s the biggest thing – giving actual buildings to the communities that we’re working in. That’s a pretty big deal and I’m pretty proud of that.
Joe Fairless: Yeah, it is a big deal. How can the Best Ever listeners learn more about what you’ve got going on and your company and get in touch with you?
Stevie Bear: Visit us at the website, where you’re gonna find all the things we have coming up this next year. Our marketing firm is redoing the website, but visit us at the website, give us a call or come visit us here in Austin and see what we’re doing. We love to entertain people and we love to talk to people about what it is we’re doing.
Joe Fairless: Large shipping container homes and the business model about how to make that happen and make it into, as you said, nine-figure revenue – is that what you said?
Stevie Bear: Yeah…
Joe Fairless: What is that? That’s close to a hundred million dollars?
Stevie Bear: A couple hundred million dollars next year, that’s what we have on the table.
Joe Fairless: Wow, that’s impressive. Thank you for being on the show with us, thanks for talking through your approach; it’s incredibly impressive, and I’m excited to see where you take the company in the future. I hope you have a best ever day and we’ll talk to you soon.
Stevie Bear: Thanks for having us.