Episode 7 - Paul Nyulassie, DIGZPrefab

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Prefab Review (PR)

Hi, my name is Michael Frank, and this is the Prefab Pod presented by PrefabReview, where we interview leading people and companies in the prefab and modular housing industry to learn more about them and make it easier for you to make decisions about your prefab or modular project. Today, we're interviewing Paul Nyulassie, the president at DIGZPrefab and NYUdesigns. Welcome, Paul.

DIGZPrefab

Thank you. Thank you for having me, Michael.

PR

Great. So we're very excited to have you today. I'm very much looking forward to learning more about your firm. But first, I was hoping to learn a bit more about you. How did you get into this business to start?

DIGZPrefab

Well, I've been doing it for twenty five years. I practice architecture. I also work as a construction cost estimator and I work as a project manager with very large general contractors in San Francisco. To answer your question, I decided to build a stick frame house in Mill Valley in 2006. And being in the industry, I soon realized that in the residential industry, I was having a hard time controlling my costs. And through the process, all the money that I had into the project, I had very little equity. And after I built and sold the house, I realized that given the location in San Francisco, Mill Valley, Marin, that there had to be a better way to control costs. And after that experience, I went ahead and did all of my projects modular construction. So I no longer do stick frames. I've built several homes in Mill Valley, all modularized. In Tahoe and also in the Oakland area. And I've just found that when you go into a contract with a factory, you have a fixed contract and that's a good way to control your construction costs. And in the greater metropolitan areas of L.A. and San Francisco.

PR

That makes a lot of sense. So I've been to your website and I've seen you have both ADU designs on your website, but also it looks like you have a bunch of custom homes. Can you sort of explain the variety of the types of homes and projects you take on?

DIGZPrefab

Yeah, absolutely. So, yes, a year and a half ago, I went ahead and launched my ADU designs. And we have built a total of five of them so far in the Bay Area. And we're having a lot of fun with it. I launched my factory two years ago after working with many, many factories throughout California. And I realized that this was something that I felt on a design-build basis. It would make more sense for me to branch out, take my construction background as a project manager and marry my architecture and construction and cost estimating as one package. And that's what we're offering right now. I have a team that is also a general contractor that does our custom homes. We're currently doing a 4,000 square foot, 8 module project that's going to be going into San Rafael. It's all custom. Many of my projects in the Bay Area and also down in L.A., the planning and design review process is the same process as any other custom stick frame project. That process can take anywhere from 6 months up to two and a half years. That's just the nature of the beast in California. In these areas, we have to go through the neighborhood HOA or design review process. But the homes that I'm doing are all 100% custom and I have never been able to do the cookie cutter designs on hillsides. And also, I focus on my clients wishes of what they want. One of my projects in Marin has twenty one foot ceilings with floor to ceiling glass overlooking the Bay and San Francisco. I don't have any limits with modular construction and designs and I do have a lot of fun with it.

PR

That's great. So that's pretty cool. So I actually haven't seen, sort of, this complete full stack offering, that much. We've helped people with a few hundred projects this year. So you're saying that you actually will be the architect, you'll be the prefabricated manufacturer, and then it sounds like you'll also also do the foundation in general contracting work, is that what you're saying?

DIGZPrefab

We are doing that. So the recent project that we just delivered in Santa Cruz, we're trying to limit the risk of homeowners where sometimes you have between the architectural office and the general contractor, you have a disconnect. We're trying to minimize that disconnect. So my production manager at DIGZPrefab located in Newman, it's about 90 miles out of Oakland. We also are coming out on site as the general contractor to do what we call the stitch and we are stitching the modules together. We're doing the crossover connections, the MEP, which is mechanical, electrical, plumbing and fire sprinkler connections, as well as the seismic and foundation connections. So we delivered eight modules in Santa Cruz. It's a two thousand square foot house with a five hundred square foot ADU up over a garage. And we built that project, which was twenty five hundred square feet. We built that in five months and we set it on its foundation in two days.

PR

And then it took like eight weeks of finishing after that or something?

DIGZPrefab

That's correct. That's correct. So wood flooring and buttoning up of some siding. This was an exciting project for me because this is one of the first projects where we were able to take the lead. And I was able to do things my way rather than relying on other factories where I had to curtail my designs to meet their needs. And I was able to do what we were able to do, all the siding on the exterior of this house as well as all the overhangs and the roofing sheet rock. And it was a pretty turnkey project for the clients.

PR

That's great. That sounds awesome. I actually think one of the most sort of value added things that the factories or architects can bring-in is a really sort of synched-in local builder because we've seen in areas where things are not distinctive and that's a little more challenging.

DIGZPrefab

It is challenging. And I've been through those sagas and it's not fun. And when you're delivering twenty-five to twenty-seven thousand pound modules coming up the hill side, you know, there's a lot of moving parts and you have to work with a company that is going to need to be cohesive and we need to work together with that. Cool.

PR

So what areas are you serving? The sort of counter of doing a lot of stuff yourself is just you're probably not serving Boston, right?

DIGZPrefab

I'm advertising on the East Coast, in New York and Boston areas. However, I am a boutique and we work one on one with my clients. And all of my projects are designed in revit with a 3D modeling bin. And so, you know, I'll take my laptop with my clients. We will design the projects around a kitchen table together. And we're a team, and I really focus on design-build rather than design-bid. But to answer your question, I am servicing pretty much the West Coast. Many of my projects are in the Bay Area. Many of my projects are in Marin. We just finished through the design review process for twelve single family homes in North Hollywood. And I am picking up some more work down in L.A. L.A. right now is just passing an ordinance which is extremely exciting, is that they are now going through the process of allowing tiny homes on wheels as legal and rentable ADUs. San Luis Obispo, Fresno, Santa Clara is just passing the law and San Diego. And so that's exciting news. If we can try to bypass some of the some of the process and hurdles that we have to go through with the planning and building department for and deliver an ADU that's 400 square feet. It's going to reduce the cost. And we're able to just basically leave it on the wheels and tow it right back into someone's backyard.

PR

That's pretty cool. Yeah, I actually like it. I do want to talk more about ADUs because we've been really pretty excited by the other new laws in terms of 60-day permitting and four foot set backs and stuff like that. But I didn't know about the the wheels thing, I guess, right, I guess at very least probably saves you a bunch on foundation costs and stuff like that.

DIGZPrefab

It really does. And we're advertising an ADU. I can deliver up to a 400 square foot ADU. It will look and smell just like any other constructed residence 2x6 studs, 16 inches on center. We use 2x12 floor joists, 16 inches on center. It's a very sturdy house. We have to comply with all the building codes local and through the state. But the beauty of that is correct. We can deliver it with a VIN number. A basically comes out with a DMV tag and with L.A. and San Diego being on the front end of this. I think it's going to be a very exciting thing that we can start offering to clients where we don't have to go through all the foundation and things that are gonna hold us up with the city and planning departments.

PR

That makes total sense. Yeah, that's that's very cool. I'll definitely learn more about them. I'm guessing that that's going to end up being a like no short term rentals kind of law, so mostly based on creating long term housing, but it will be interesting to learn more about all the nuances.

DIGZPrefab

I think it's the Wild, Wild West right now with ADUs. And I think we're all learning and the codes are constantly changing. But as you may know, California has now passed the law that any single family house is allowed ADU up to 1000 square feet, up to 1,200 square feet for a detached unit. But then also you're allowed a J-ADU, a junior ADU you within the footprint of a single family house, which is five hundred square feet. The code is also allowing now multi-family projects, multifamily apartment buildings up to ADUs detached for rentable units. So I think it's a very exciting times for affordable housing.

PR

So let's break down costs. I think that's one of the things that no one likes quoting because every project's different. But let's start, let's talk about one of your projects, you can call it the Mill Valley Project and Oakland Project for basically thinking about like, you know, in an expensive area of California. It sounds like it's mostly where you operate. Let's just say a standard ADU, Let's start with the standard single family home, say two or three thousand square feet. I don’t know If you talk about total price or price per square foot. But I mean, obviously, you have a part of each of those components. Can you help me break down like, you know, what the module cost tends to be for a project with you? What the architectural design cost tends to be. And then what's sort of the other costs? I have certain numbers in my head for the market. I want to begin to understand if I said, hey, go work with NYUDesigns, a general range of what these things might be. Yeah.

DIGZPrefab

No, absolutely. And I really try to pride myself on providing loan to value cost estimates. So I provide those 100% free. I want to make sure that it's not only feasible for the client, but also my company. And so to answer your question. We always have soft costs. And I have the question many, many times where clients are looking to a general contractor to either stick frame or modularized. And the one component that I see that clients are not thinking about are the soft costs. The permits, a permit for a single-family house in Mill Valley can cost anywhere from 30 to 50 thousand dollars. A water meter in Marin can cost up to seven thousand dollars, but a water meter up in the Oakland Hills can cost up to fifty nine thousand dollars. So those are things that we all have to take into consideration, as well as the civil grading drawings. But in a nutshell, with all those soft costs, PG&E, East Bay Mud or our Marin Municipal Water or down in L.A. as well as the permit costs, building permit fees, architectural, structural engineering, mechanic, electrical, plumbing, fire sprinkler drawings. You're looking roughly at about one hundred dollars a square foot for those soft costs. For the site costs, many of my projects we're looking at, and this is based on a three thousand square foot house. We can't use that for a 400 square foot ADU. That's a little different. Yeah. For a foundation you're looking at anywhere from one hundred to one hundred and fifty dollars a square foot with the strict measures with drainage and the civil grading drawings that we have to do. We can't just you know, we can't dump water right into the streets any longer. We have to mitigate that and the water has to be treated with bio-swales that we see all over parking lots throughout California. Residential homes have to do that also. But you're looking at about one hundred - one hundred fifty dollars for all of your site costs, including your utility trenching, your PG&E, all the infrastructure that all the things that you're not going to see after the house is complete. For the modules itself we're going to be ranging anywhere from $177 a square foot to $200 a square foot. And that's for a three thousand square foot house that will have everything. All your sheetrock, flooring, cabinets, all the inspections will be done. It's a very turnkey package, you know, and also when these modules come together, even for myself that I live in. My project. I'm very passionate about my designs. But even when the modules come together and I'm walking through these houses, I forget where the modules begin and where they ended. And so you're looking at a very custom high end house. Most of my clients in Mill Valley, Santa Cruz, parts of Oakland and Tahoe. They gain, very, very good equity going in this process. So, for example, two of my projects in Marin, I have disclosed land to my clients. I'll use an example of a project which was approximately a little over two thousand square feet. They paid $375,000 for the land, all in with the construction and all the soft cots. As I was speaking with the land and the construction, they were into that project $1.6 million, but it appraised for $2.2 million. And so we use lenders, we use Umpqua Bank in California.

PR

They're fantastic.

DIGZPrefab

And they will fund up to 75% loan to value. All of my projects in Mill Valley, use Umpqua. And I've had two other projects. Same scenario, all in land and construction. One project on a hillside with views of Sausalito and the city all in. They were into the project, $1.7 million, but it appraised for $2.7 million. So I won't do stick frame construction any longer. With this process, I feel that it's foolproof and my clients are getting very good equity. And the project in Santa Cruz is a very good example of land construction. They're roughly into that project, one million and they will be putting it on the market between $1.6 to $1.7. So there's a good opportunity for someone to make some money or just have equity.

PR

Yeah. Unfortunately or fortunately, this tends to be right. It's basically the costs don't vary that much between like. A high-end area of Mill Valley and maybe a less expensive area outside Santa Cruz.So it seems like a lot of this tends to be around location. Because if you know, if new construction, like as you said in Marin, can, you know, you can sell for $1,000 or $700 per square foot. It sounds like your projects are probably in the well, like $400 - $500 a square foot. A typical example like this. So there's some delta..

DIGZPrefab

Absolutely, Yes. And, you know. And then but then you also have to compare this site built construction that can range anywhere from five hundred to a thousand dollars a square foot. When I built in Mill Valley, I couldn't control the change orders. And I'm in the industry. And this process, the factories and in my factory, we offer a fixed contract not only for the fact not only for the modules, but for the site stitch. We want to make sure that we are protecting the clients as much as possible. And we try to make sure that we're dotting our I's and crossing our T's, because if this was an easy process to build in California, everybody would be doing it. And it's not an easy process. There's a lot of moving parts to this.

PR

Cool. So let's talk about your ADU projects, so I guess everyone says this sort of thing. I talked to people in the industry that kind of like I don't know if I'd call them advertising, but like the advertised plans on site are some sort of, there to spark the imagination. It sounds like that's similar with you guys in sort of how you thought about the market, where the kinds of places you're building these, what are the use cases to understand more about your practice?

DIGZPrefab

Of the last five to six ADUs that I’ve just built. It's interesting because I think this ADU will be changing our family values, the fabric of our cities, and I think it's a fantastic thing. And I had a project in Danville where the family, the parents, their son had recently married and they had their kids. You know, obviously were having difficulty finding a house to purchase. And so they they built they built a 1,000 square foot three bedroom ADU in their back yard for their for their kids. And I'm seeing that a lot throughout the projects that I'm working with. I've also had clients in Mill Valley that are, you know, they have a very large mortgage payment and they're thinking, look, you know, this is expensive for us. Why don't we rent out our main house and live in the backyard? You and I have two projects like that. And so it's not only for just affordable housing for renters, but it's also changing how we look at things and how it's for our kids. And so I again, I think it's a very exciting process right now. We delivered a t275 square foot ADU in Oakland in the flats of Oakland near Berkeley. We built that over the summer. We built that in 12 weeks. And the family built that for their in-laws and parents to come and visit so that they can be visiting with their grandchildren. So that's what I'm seeing that's happening right now. It's starting to have extended families living, living with us, but also having the privacy that we all desire.

PR

Yeah. We're seeing the same thing. OK, so. So it's been great to learn a bit about your firm and your practice. But I want to transition to our fire round. These are a bunch of short questions really to help make me and the audience sort of smarter on general issues we think about with building a Prefab or modular homes or at least evaluating the idea of it. So I'll ask you a couple of questions. And do your best to keep your answer to 1 minute or less, but you don't have to actually. So the first question, which sounds like you're very qualified to answer given all the work you do in hilly areas, if I am thinking about building on a hill or thinking about site selection versus like a flat lot. What are the key things to understand in terms of cost difference? In terms of feasibility what are the things you look at when you're evaluating? Is this site appropriate enough?

DIGZPrefab

Well, number one, is it buildable? And that's something that we have to do our due diligence. I let all of my clients know if you find a parcel of land and we go to the planning department and it's zoned for a single family and it meets the setbacks, we need to do a little bit of a feasibility study on on the interim to make sure that it is something that not only can the clients afford, but if it's something that, you know, it's something that we can build on. Not all not all land in California is buildable. There's a reason why it's vacant. And so we have to find out what that is, whether there's an easement running through it. And so it's always better to build on a flat lot. We see a lot of hillside lots around California that appear to be affordable, but what do you have to do to those lots to make them buildable? And if you have to dump in another five hundred thousand dollars into a seventy five thousand dollar hillside lot, you have to see if that's actually worth it. The flat lots are easier to work with if you can find it and fill. But the cost variations I've had, I just recently did a hillside upslope. The foundation on that was three hundred thousand dollars and we're still building to the same building code just like any other custom stick frame house. So when my clients find a lot, we will do a loan to value estimate and make sure that it's something that will fit their budget. And that's that's that's that's what I try to do.

PR

Do you find that you need Geotech to make that assessment or is that more for all the department related issues and foundational issues, verses like understanding feasibility?

DIGZPrefab

Absolutely. When I have my clients looking at a three hundred thousand dollar a lot or a five hundred thousand dollar law and the seller has not provided a soils report or a geotech report or a survey, I let my clients know right at the beginning, look, if the seller isn't going to do this and this is something that you really want, I would suggest tying up the land in escrow. Putting your earnest deposit down, tie it up for three weeks so we can do our feasibility study. But paying three thousand dollars for a survey and paying three thousand dollars for a soils report or reconnaissance report that's a drop in the bucket as far as what you could be doing if this land that you're paying three or five hundred thousand dollars for and you close escrow to find that it's something that you cannot afford. So I always let my clients know, write the check for the soils report and write it write the check for the survey to make sure that this is something that you want to move forward with.

PR

Cool. OK. We have two more questions. Nope. Next question is. It sounds like you've done some work with HOAs. That's been one of the most interesting learning processes for us here over the last six months or so. Right. We're doing one project on an HOA where I think the design standards are written in the 90s and they require windows that aren't being manufactured anymore. And my impression is that's not a, that's not a rare occurrence. It's stuff like this happens in sort of areas all the time. Do you have a set of best practices for dealing with these kinds of issues?

DIGZPrefab

Well, I've dealt with HOA in Mill Valley and it was an HOA back in the 60s. And so to answer your question, yes, we have to bring the HOA to modern times, obviously, but that HOA is in place. And so we have to design within their guidelines like C-Ranch, we have to design within those guidelines and make sure that the house is going to fit compatibly within the surrounding location. So I can design anything I can design, I do modern designs, but I've also done craftsmen. And I've also had to do a Victorian design in downtown Point Richmond, which was five, three-story live-work lofts where the city said this is a historical zone so we can design anything within the area to make sure that it fits.

PR

That makes sense. And then finally, let's go through. We talked about this a little before. I'm thinking about, let's say, building with you guys or someone else like you guys where, you know, it's really a custom home built for the lot and built for my specifications. Let's run through what am I looking at for timing of each component? Let's say I'm a motivated person who doesn't want to spend 18 months on this design. Yeah. Let's break it. Can we break it down some sort of feasibility to design, to permitting to as we sort of said, construction and finishing.

DIGZPrefab

Absolutely. And this you know, this depends on the jurisdiction and what city we are working with. The quickest project I had was in Point Richmond, which took me six months from the pre-construction phase to design review phase to developing the construction documents to having a permit in hand. Actually, Santa Cruz took me three months. Santa Cruz was a pleasure to work with. And so we had a permit in hand within three months and we were ready to build the project. Now, if I'm dealing in L.A. North Hollywood, Mill Valley, San Francisco, you know, those projects can take anywhere from two and a half to three years for just your planning approval. And so that doesn't have anything to do with modular construction or stick frame. That's just the planning process. One thing I want to add, which always excites me is that once we have the planning approval, wherever that is, through design review, we bypass the building department. We take the construction documents to the state of California. And I run all of my construction documents through the state. I can get a building permit after the local jurisdiction approval in roughly two weeks. And we can start construction on the house immediately in the factory. Now, while we're in construction with the house and the factory, I'll take the construction documents back to the building department for the foundation review only. And there's a reduction in fees on that. So it helps that along the way. And we'll have to wait for the foundation. It could be two to three months for the building department to review the foundation. But we will be working with the house, building it while we're getting the foundation approved.

PR

Cool. That's good to know. Well, thank you. This has been a really great learning both about you and getting your expertise and all these other kind of aspects of building and design. Final question. We ask this to everyone. Every time we do one of these, what are you most excited about going forward for either your company or sort for the industry for the near future?

DIGZPrefab

Well, I'm very excited about the ADU laws. And I'm very excited about the tiny homes. I think this is a great, great avenue for all of us to put an ADU in our backyard. It provides rental income. It provides a place if we would like to rent out our main house, live in that and travel. I think it's given these times, I think this is something that is going to start changing our family values. And I think it's a really good thing that excites me.

PR

I totally agree. Thanks again, Paul, for being on the show. For more information about DIGZ2Go and new designs check out DIGZ2Go.Com. And as always, if you're interested in learning more about Prefab and a variety of companies in general, you can visit us at PrefabReview.com. Thanks again.

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