This is the final episode in a three-part series that looks at various forms of shared living. The first featured a fun discussion about the Golden Girls. The second examined alternative forms of housing beyond the typical: apartment, condo, townhouse, and house. Frequent listeners know that Solo’s host Peter McGraw believes that the American Dream of owning a home is overrated.
Nonetheless, he invites Michael Koenig, the President and Co-founder of Studio Shed, and guest co-host Darlene Savoy to examine an innovative product that solos can use as a way to achieve homeownership (or could be used for a business or investment opportunity). Creating products, such as Studio Shed, that can be used for shared living is especially important when considering the challenges facing multigenerational living (which often includes solos, e.g., a grandparent).
Note: Studio Shed is not a sponsor of the podcast.
Listen to Episode #99 here:
An Alternative Dream Home
Welcome back. This is the final episode in a series that looks at various forms of shared living. The first featured a fun discussion about the Golden Girls. The second examined alternative forms of housing beyond the typical apartment condo, townhouse and house. If you’re a frequent reader, you know that I think that the so-called American dream of owning a home is overrated, much like a marriage.
In the third episode, we look at an innovative product that solos can use as a way to afford homeownership, or it could be used for a business or investment opportunity. Our guest is Michael Koenig. Michael is the President and Cofounder of Studio Shed. He has started and grown innovative companies for over 13 years with Studio Shed and now over 25 years of entrepreneurship.
Studio Shed started by offering beautifully designed alternatives to barn-style sheds that could be used as a home office or a studio, but it has grown into much more than that, as you’ll learn. Our guest co-host is Darlene Savoy. Darlene hails from the East Coast of Canada, and has returned to live there after a twenty-year hiatus.
As with me, she’s a self-described late bloomer, but unlike me, she aspires to create solo-friendly co-housing development. You may be familiar with her as a guest co-host on the launched episode Reinvention with Arlene Dickinson and as a guest on the previous episode on Shared Living. This episode has a different flavor than a typical one.
If you want to better understand the so-called housing crisis, think differently about homeownership and care about the challenges facing multigenerational living, you might enjoy nerding out with us. Studio Shed is not a sponsor of the show, but I love the product, the company and Michael. I feel comfortable extolling its virtues unabashedly here. I hope you enjoyed the episode. Let’s get started.
Thank you for having me. It’s a pleasure.
Welcome back, Darlene. This is your third time back. Speaking of thirds, this is the third installment of our look at alternative housing for solos that is alternatives to the typical apartment condo or houses. Our first episode started talking about the cultural phenomenon known as the Golden Girls and how their living situation has been inspirational for many solos, especially as they consider their golden years.
Darlene, we’ll start with a little recap of the second installment with you and Ben Lough, where we talked about shared living. One of the things about that shared living episode, there were some options that we talked through that are going to be relevant to the conversation that we’re going to have with Michael. Can you hit the highlights of some of these other shared living offerings and options?
To make it simpler and more complicated, we’ll start with co, whether that makes it easier or more complicated. We started off with roommates. We went into what’s called co-living, which is a deviation of where it’s usually managed. There are lots of those coming up on the market these days and all around the world.
There’s something called co-ops, which has a couple of different variations. One’s almost government-sponsored and the other is another type of co-living arrangement. We had co-housing, which is the most committed version where you all have separate dwellings. You have to plan it a lot and develop it yourself and then you all live on the same property.
I have a feeling that the last one is going to be most relevant to Michael’s business. Everyone should know this. Michael was a dear friend. One of the beautiful things about being friends with him is that I was on the ground floor when he launched this business. We were living together for about 6 to 8 weeks one summer when he was hatching and getting this idea going.
We were roommates. I was occupying a bedroom in his house because I was in between residence at the time. I had been kicked out of my apartment by the landlord because she wanted to move in, not because of my throwing parties. I went to Europe for a month, put all my stuff in storage, and didn’t have a place to come to when I came back, so I lived with Michael for 6 to 8 weeks. It was a magical summer. I launched a whole bunch of ideas and it was wonderful. I moved into an apartment and then I bought a house. It was a big thinking summer. How did the studio start, where did the idea come from and how is it evolving?
The Cofounder, Jeremy, is a very good friend of mine. I’ve known Jeremy since 1999. We met each other in the cycling world. They had a small ranch-style home in Boulder, not far from where Pete ended up buying a house. Their garage was small. It was a 3-bedroom, 1,200 square foot ranch-style house. Their garage was overflowing with bikes. Jeremy needed a storage shed in his backyard and he didn’t like what was on the market. The only things and even now are these barn-style sheds. He designed and built the first Studio Shed if you could call it that at that time back in 2004.
I helped him finish it up and I was like, “This thing is so cool.” It’s a great-looking backyard shed. In a small yard, you want something that’s aesthetically pleasing. I put one in my backyard. Over the next few years, I happened to take notice of all the comments that we both would get at backyard barbecues, “Where’d you get that? That’s so cool.” We’ll say, “You can’t have it because we built them ourselves.” I was wrapping up a business.
I did some research. Jeremy and I were sitting around one day and joined a beer after a big bike ride. I said, “I’ve been doing some research. If we can manufacture these and make them in a way so that we can ship them anywhere, it’s a panelized system like Legos for adults. We might have something here.” We started off with a crappy little website. That was in 2008. We had three sizes attempt, 120, 140 and 160 square feet.
We designed and built these with the intent that people would end up finishing them out. That’s how we came up with the name, “You can use it as a shed or as a studio.” We immediately built them to residential-grade construction. The only difference would be like, “If you want to convert it into a studio, then you would replace the glass and do a couple of other things, so we would ship that kit.” It got legs very quickly. We got some press and we started right off the bat. It was like, “I’m going to make this a finished space.”
Within six months, we launched the lifestyle interior kit, which is a whole kit of parts and pieces, the finished flooring, the electrical wiring and everything to create a studio. We also started getting requests for larger units, “Can you do a garage? I want to build a small backyard home. I want to put a bedroom in there or maybe a kitchen.” That was the evolution of what is called our Summit Series. We have three product lines. We have the Signature Series, which is small backyard studios. They go up to about 200 square feet. It’s great for a home office recording studio.
The second product line is a Gable Roof. That thing goes up to 600 square feet. The Summit Series is where we are seeing a lot of growth. You probably heard of accessory dwelling units, backyard cottages or granny suites. They’re called different things in different parts of the country. The most popular and getting a more popular name is an ADU. Those can go up to 1,000 square feet, kitchens, you can do up to two bedrooms in those and we ship everything.
We trademarked Studio Home a couple of years ago, and we were going to launch in 2020, but we got pretty busy with the pandemic. We’re launching Studio Home in Q1 or early Q2 of 2022. That’s going to be smaller homes trying to fill that gap with the lack of product out there for this sized home. We’ve built several homes already where people are linking units together. We’ve gone through all the trials and tribulations over the past couple of years. We’re feeling very good about Studio Home, and ultimately, trying to help solve some of the demand issues now with housing.
I want to make a couple of quick comments as a layperson who got to read this. One of the very cool things about this is the basic studio shed unit. You often don’t need a permit to do this at the smaller sizes. This can be a low-cost way to add space to an existing home and a regular run-of-the-mill general contractor or a savvy DIY person can put it together. It’s amazingly low-cost in terms of construction and it’s very easy to do. Can you get it together in a day?
For a finished unit, it would be 4 to 5 days.
The first thing that is very interesting about it is the ease, speed and lower cost because a permit can be expensive in certain places like California and so on. The next thing that is very interesting and what I liked about it as a business school professor is that it competes simultaneously with the low-cost gross option, which is the barn-style shed, and with the expensive fancy option, which is to renovate your home, “We need more space. We have a newborn. We have a home office.” Adding to a house is incredibly expensive. Instead, you can drop this into your backyard.
When you’re describing the different types of uses, Mike, laneway houses would be another one that seems to be popular in certain cities in Canada now.
In America, it’s alley homes. In Canada, it’s laneway homes.
It’s the same thing. It’s just they’ve changed the zoning laws because of the housing crisis. They’re allowing people to put these houses into their lanes or alleys.
What’s interesting about our product and a lot of other products out there that you’re starting to see whether it’s design build ground up for some other competitor or whatever it is, thinking about urban infill in a new and fresh way. There’s so much dead space in cities that can be repurposed and oddball lots and laneways or alleys.
It was all illegal up until a certain point because of the issues we’re having with shortages. Something had to give.
I also knew that they passed new legislation up there in regards to accessory dwelling units as far as zoning goes because historically, they’ve been very hard to do all over the country to pull a permit form.
Toronto and Vancouver changed a lot of their zoning laws. It’s happening here too. It’s a set of necessities.
Let’s talk about that necessity. You used that term housing crisis. I hear this term a lot. For me, one of the interesting things is that because housing is so regulated by the government, it often will inhibit innovation when the options are 90% of people live in an apartment condo or house in North America or in Europe. Where’s this crisis coming from? What’s happening? Let’s understand this before we can talk about how to solve it and solve it specifically for solos.
I had a very interesting illuminating call with a professor. He has a little tiny book and he talks about this and why we’re here. I recall that 100 years ago, there was way more multigenerational living going on, grandparents, parents and kids and relatives. There were more people living in one dwelling. As we’ve seen over the past 100 years, people are all over the place. They’ve moved out. They don’t necessarily want to live with their parents because everybody is living in the same walls and things have changed. They just don’t want to do it. People are transient and there’s a lot of moving going on.
That is part of the problem as far as the number. The last report I read is that the US is six million doors short of where we need to be for housing. By doors, we’re talking about a door to a dwelling. That can be an apartment, condo, townhouse, house, or other structure. That’s one of the issues. I’d be curious to hear what you guys think about that 100-year span and how things have changed. I suspect that that’s part of the problem. The other immediate problem is there’s a labor shortage. Before the pandemic, there was a construction labor shortage that had become even worse.
I’ve observed something that is especially the case in the United States because Americans love to make money buying and selling homes to each other. You get a lot of what we call NIMBYs, Not In My Backyard. You buy a house in Boulder and it becomes a popular place. One of the things that we’re seeing is you have more singles in the world than you did several years ago. There is more mobile than ever before. They’re even more mobile now because you can work on Twitter and live wherever you want.
What do you do? You go, “I don’t need to live in Springfield anymore. I’m going to move to Boulder, to Denver, to Los Angeles, to somewhere warm and has outdoor activities that have other people like me and so on.” If you already own a home in one of those places and have this influx of people, it raises your house value, which is quite good.
Anybody who comes along and says, “We want to build this building because we need space.” Folks go, “No.” It artificially constrains the market. It doesn’t allow the market to operate efficiently, which is there’s demand for housing, and now there are people who want to develop it. You have locals and government that says, “You can’t do that. You can’t build too high. You can’t do all these kinds of things.”
I don’t understand why the vacancy rates for rentals have gone down to virtually zero everywhere. This is what it feels like. Maybe the statistics would be different. How can there be shortages everywhere? Where’s the population moving from? That’s what I don’t understand. Where are the places where the vacancy rate has gone up? It feels like there’s this sense of scarcity almost everywhere.
It’s not everywhere. I know this because I have a colleague at the University of Colorado who says there are five different types of housing markets in the United States. There are a bunch out there that are depressed. If you want to live cheap and live in one of those places, you can do it. It’s just there’s a reason it’s depressed.
With that said, it’s not the major metropolitan areas. The cities are thriving in that way. It’s a problem, and it has multiple determinants that are there. One of the things I want to talk about with the two of you is how these other ways to solve it that might be cooperating with the government or entrepreneurial of sorts are? Let’s use Studio Shed and Studio Home as a case study.
To speak to the government, either Portland or Seattle overhauled their zoning for backyard homes or accessory dwelling units. California followed suit and they passed AB-68. What that did is it eliminated single-family zoning. You can theoretically have up to three individual units on most properties, not all, but many in California. You can convert your garage into an ADU. You can build and put another ADU on your lot if it fits, and then you have your house.
You have three structures on a property. They were okay with the parking issues, which can be something like in Boulder. From a governmental standpoint that they get it, you have Freddie Mac sending newsletters, mentioning ADUs. I see it once a month. That’s interesting to me. Ultimately, what we’re talking about is urban infill.
Let’s talk about a case study then and use this example. Suppose you own a home or you’re considering buying a home. How might you approach this situation, whether from a multigenerational standpoint or an investment standpoint? I’m not anti-home buying. I just think it’s overprescribed. One of the benefits of buying a home is savings. It’s a way for people who might not otherwise save money to save money. It’s an investment that you live in, so it’s a twofer. I have a quite reasonable view of this.
You have the potential to buy a home, but then you can also put 1 or 2 other structures on there. Let’s talk through two case studies. One is a multigenerational one that might involve some solos like a widowed grandparent or a twenty-something who’s not quite ready to launch. Let’s talk about it from someone who’s a solo who might be thinking about one of these alternative forms of shared living.
I’m not going to say we’ve seen all the case studies, but we’ve seen all of those and more over the years. We’ve even seen the Golden Girls.
Let’s talk through some of these. What does it look like?
Let’s start with the Golden Girls. We have an ADA option. It’s the bars in the bathrooms and the tub that you can walk into. It’s American Disability Act. You install these things in the home. What it can also do is if the children want to monitor an aging Alzheimer’s father in the backyard, you can have a video and make sure everything’s okay back there.
The Golden Girls, they’re three widows. One of them owns a home. She was in Northern California, and her friends were getting lonely. They didn’t want to go into the nursing home, so they ended up putting two of these ADUs in the backyard. It’s almost like a hacienda where there’s the one in the front, the two flanking in the back and a courtyard in the middle. They all have their own space. They can have their grandkids come and visit and have a space for their grandkids to stay. They can also commune in any of the units or outside there. We’ve seen that. That’s the Golden Girls.
One of our employees wants to build an ADU in his parents’ backyard to have his own space. He’s younger and a graduate of CU. He’s probably 27 and can’t afford a home, and that seems like a great option for him. We’ve done a ton of that over the years where it’s either the parents getting rid of their big suburban home downsizing.
That’s a huge demographic group that is downsizing and trying to figure out a smaller and smarter way to live. The Boomers were moving back in with their kids. We probably do one of those cases every couple of weeks. We call that multigenerational living. Often, the middle generation has kids. That is so beautiful.
What’s happening with my own parents living in suburban Virginia is they have this big house. I’m like, “I’m not sure I’d want them out here. I’ve been talking to my brother.” I said, “You should put an ADU in your backyard.” He’s like, “I don’t need one. We already have a guest suite and I’ve talked to my parents.” I said, “That’s great. Get them over there.” There’s something about families coming back together that is very sweet.
Before we get to the third case study, there is something and you alluded to it, and that is people don’t like to share walls with their family members. They don’t like sharing the walls with anyone. The thinner the wall, the less they want to share it.
This is why this still happens in other countries. I call it hacienda-style living, where you have multiple units of individual homes on a property. Usually, these families congregate in the middle generation, the big kitchen and cooking and hanging out. The kids are running around all over the place.
It does sound a lot like co-housing. Have you ever fulfilled an order from a group of people who were talking about creating a co-housing development per se? That seems to be gaining popularity as well.
That is one of our target markets. Studio Homes, one of the strategies there is to target developers, builders or individual investors who want to build pocket communities, cluster cottage communities or micro-communities, where you have an acre of land and you have 3 or 4 different sized units. Maybe some of them are duplexes and you can pack a lot of units. It’s a smaller yard and everybody has their own yard. There’s a common building with a little pool or community garden. That’s one of the objectives with Studio Home. We’ve already been talking to developers and thinking about doing it ourselves.
Is there a lot of competition with tiny homes?
We get that question a lot because some people refer to what we’re doing as a tiny home. Technically, a tiny home is mobile and on wheels. It’s a trailer.
It seems to be a lot smaller than some of yours as well.
They’re much smaller because they can only be typically 8’6 wide. Most of them don’t meet DOT, Department of Transportation and Safety. I’m like, “Buy an RV.”
I’m not a big fan. It feels a little bit like you’re trying to live in a dollhouse.
It’s an Instagram phenomenon. Let’s be honest. It’s not a great solution.
In Portland, I’ve heard that they’re going to allow these as a permanent residences and start building out more modern-style RV parks for these tiny homes. In Boulder, you can’t park 1 for more than 2 days in front of your house. That’s the tiny homes on wheels. What we’re doing is residential construction. It’s permanently affixed to the ground. If it’s permitted, it becomes part of your real estate. You’re inherently adding a ton of value to your home.
Two things to follow up on top of this. Let’s get back to that third case study about a home and a lot, and then we’re going to return. You had the Golden Girls and modern family. Is there a third case study for owning a home and having a Studio Shed or Studio Home in that space?
If you’re single and interested in the real estate market and don’t have a dual income, the mortgage could be challenging. Granted that interest rates are low and that’s all good and fine, but if it were me and I were buying a single-family home, I’d find a place where I wanted to live and shop for the right home. I would do the due diligence to make sure that I could put something in the backyard that I could immediately run out and start generating revenue from. I suppose that could be a third case study.
If I understand you correctly, for example, in my home in Boulder, what I could have done at some point is instead of having roommates, I could have built a studio home or studio shed built out in my backyard and put a roommate or renter back there. That takes the pressure off the mortgage for me. I don’t have to share a wall and deal with it.
This is a perfect pivot into this idea of solos who might want to use a house as an investment but find it prohibitive. It ramps up the risk because you’re a single person and so on. You’re describing a situation where someone who was very entrepreneurial could buy a plot of land. They populate that land with 3 to 10 studio homes, build that common space and essentially create a community that Darlene and our previous guests, Ben, would be interested in being part of and developing and so on. It could be a co-op or built around some common interest and so on.
Maybe you hate your job and have a little bit of a nest egg that you want to start investing in. One of our customers, he is single and a little older. He purchased his 7th ADU for his 7th Summit Series from us. He’s buying properties and putting these in the backyard. He started with 1 and now he’s 7. He’s renting these out and building this portfolio.
I don’t know a lot about this, and I have zero interest in owning anything. The idea that you could buy a house and drop 1 or 2 of these units into the backyard suddenly adds so much value and decreases your risk. It’s an amazing hedge because you can have multiple tenants on the same property.
Especially with all the changing policies with the cities that are rezoning to allow for that. It wasn’t always possible to do that.
That’s the key. It’s easy to pull the permit and do it. Whether it’s us or somebody else, that is a good option if you want to get into real estate. I’m thinking of doing it myself. I’ve been starting to look at some properties in Denver.
Speaking of being in Canada, are these suited for cold weather?
We can accommodate any zone.
All the new standards like the net-zero, do you guys adhere to any of those standards as well?
California passed net-zero a couple of years ago, and we were on top of that. It all comes down to our factor. The insulation and the roof might be a little thicker up there. Energy efficiency, it’s in our DNA here and with everybody that works here.
One of the things that we were discussing before is as someone considers alternative housing like this specifically, we have our five Cs. I’d like to talk through these five Cs before we pivot into some advice and wrap up. We have Cost. We’ve already covered that pretty nicely. One of the great things about these units are they’re much lower building costs because you might not have to pull a permit or need the same skilled labor like an architect. These are way lower costs.
I looked on his website and they are significantly less expensive. I don’t know if you want to get into specifics, but it depends on your options.
There are two main reasons why we’re able to offer this very high-quality product at the price that we do. 2020 has been pretty difficult on materials, but we are still way below your average square foot price in nearly every major metropolitan area, as far as Costco builds. The two main reasons are architectural fees and engineering fees and all these things that you have to assume, even for a small structure, they’re gone. We don’t need an architect.
The second is that 98% of our supply chain is one step directly to the manufacturer. Marvin Windows and Doors is an example. We ordered direct from them, so there’s no double markup through a dealer and GC markup. GCs typically mark materials up 10% to 20%, unless it is a fixed bid project, although they are baking their profits into the project.
The next is Convenience. We’ll put Convenience, Community and Care together in the next three, which is if you can put people in close proximity together without them wanting to murder each other, you can then use these options to make life a little more convenient. Let’s use the example that you had. You have an acre of land and put four of these on there. You have some common space. Now, you can have one tool shed or one lawn. You might have fewer cars right now because you’re sharing cars. You also have a sense of community. You have your fire pit, corn hole and your hot tub. Next, the care you talked about the Golden Girls situation. Implicit in this is not just the fact that you might be avoiding loneliness and have some company, but if you fall or get sick, there’s someone right there close by that will step in and you’ll step in for them as friends.
If you all of a sudden decided our community now needs a live-in nurse, let’s plunk another one of these puppies down right over there and have them move in.
The community thing is so important. There’s something about watching where you walk through Central Park or some of these towns and you see people playing chess together right out in the open. There’s a feeling. It seems to me that there is this need, and we are social creatures. We need each other.
There’s a balance. I did a whole series on solitude and the benefits of solitude. What ends up showing up time and time again for the average person or solo is you want to avoid the extremes. You don’t want total isolation, but you also don’t want to have people around you all the time. You have loneliness on one end and you have loneliness on the other end. Loneliness essentially makes you sad, and loneliness makes you stressed.
Being able to move into solitude and out of solitude is a wonderful option. I do what I call group solo trips, where I get a group of people together and we may share some space when we rent an Airbnb, or we may all get hotel rooms in the same hotel. We’re going to meet at 3:00 to go to the museum and dinners at 7:00, so these things can balance those things. The last thing is the multigenerational stuff almost always involves singles, either a young or an old single or simultaneously both. This is a very nice solution to those.
As far as your solo vacation, I’ve had this dream to buy a piece of land up in the mountains relatively close to a ski resort but not right in town. You’d build a hacienda-style compound, and then you can rent the whole thing out to a group, or if it’s a slow season, you can rent out one bedroom or the studio unit if one person wants to go up there and retreat. My idea is, “We can open this up to all of our employees that they can sign up for a weekend with their family.” For folks that want to come into town and have the experience, they can rent them and then we’re like, “If they ended up buying, we could credit them there.”
The last one is Climate. Essentially, people who want to reduce their carbon footprint or lower their costs to the environment. We know that housing is a tremendous contributor to climate change, whether it be the creation of building materials or the energy associated with it. For example, homes are incredibly inefficient because you are exposed on five sides to the environment, whether it be cooling or heating it and so on. Let’s talk a little bit about how some of the solutions we’ve been talking about lower that particular C for people who care about lowering their environmental impact.
There are a couple of things to talk about that are fact-based. Any new construction has to meet or exceed IVC has to meet this energy compliance. A lot of manufacturers, whether it’s windows or doors or even producing lumber, they have to meet certain energy standards. That naturally forces a company and you have to build it. You won’t pass inspection if your building doesn’t meet or exceed the current quote. The second is that most of our units in somebody’s backyard perform better than the house because the houses might be older. By putting a solar panel on the roof of your old home only solves a little bit. Ultimately, there’s PERS rating. Anybody’s new construction has to meet this.
The interesting thing that we’ve seen and started to analyze is the shift in people’s lifestyles. They’re not commuting on average 30 to 40 miles round trip to work every day. They can work in their backyard. They can do more state staycations. There’s gas associated with this. Our customers have combined and saved something like 12 million gallons of gas the last time I checked. That’s more than all the water in the reflecting pool in Washington, DC. You’re inherently having these lifestyle shifts. Maybe you’re riding your bike more up to the coffee shop. That’s interesting to me that ties into the community. It certainly ties into climate, convenience, cost.
The idea is you’re reducing a footprint when you get down to it.
Smarter and smaller living. You don’t need a huge house.
This is for both of you. I know I’m turning Darlene from a co-host to a guest here. Let’s suppose someone has stuck around to the end of this thing and they’re intrigued by this. They’re thinking about this from an investment and lifestyle standpoint. They have parents that they have to care for. They’re solo caregivers.
Perhaps they’re a solo parent and want to be an empty nester or semi-empty nester like putting the kid in the backyard. What are the questions they should be asking? What resources should they consider as they think about doing something outside of apartment condo, townhome or home, Darlene?
It’s exciting how many options there are out there because there’s this shift happening. It was happening before the pandemic, but it’s happening since the pandemic. He threw three different other terms that I’d never even heard of before. What were those three different co-housing terminologies that I’d never even heard of before?
Pocket communities, micro-communities and cluster cottage. They’re called different things around the country.
I’m looking for something specific that I haven’t found yet. I’ve watched webinars about co-housing. I’ve joined groups, spoken to people, and read the books, and nothing quite fits what I’m looking for, but I feel like I’m getting warmer and there’s a lot of people out there doing the same thing.
Darlene, I know a guy who might be able to give you a little bit of a discount.
I tend to get a little bit more philosophical about these conversations, Pete. That leads to the questions that I would have for myself. You have to go deep into some mentation on this, which is, “What do I want? How do I want to live? Do I want to live with other people or do I not?” If you can think about what it is that I want at a deep level, and you can answer those questions, you’re going to get certainly way closer to what it is that you want to invest in.
A couple of years ago, I don’t think I would have even been having this conversation or thinking these thoughts because I didn’t realize the options were out there and that all these other people were thinking this way. The more you open yourself up to it, the more you realize lots of other people out there are going through the same search.
There are so many ways to answer that question. You can be somebody who wants to be transient. If that is the case and you want a home, the real estate tech out there from renting your house on VRBO and having cipher locks to get into the unit and all the resources that are available to be able to do that to own a home and rent it out in Airbnb. That’s easier than it ever has been and that’s pretty exciting.
The 2nd or 3rd question is financing, “How am I going to buy the house? How am I going to afford the ADU?” We’re one of the few companies now that has financing options. We’ve partnered with an amazing FinTech firm called Acorn. The CEO is this guy, Geary, who’s so smart and fun. They’ve helped us launch this within our site. It’s all handled through them. What most people do is leverage. They buy the home and interest rates are low, assuming your credit score is decent. There are lots of different ways to skin that cat. You use the HELOC to build the ADU in your backyard and then refinance the whole thing.
HELOC is a Home Equity Line Of Credit. It’s taking the value of the home as the equity in which you can then borrow against for the short-term. It’s slightly higher interest rates than you would have for a mortgage.
Some banks now will loan you and increase your mortgage to fund the construction of the future ADU. Usually, that requires plans, plan sets and things like that. We and some other companies can furnish those at closing or before closing. Money is part of it. At least now, money is still cheap and it’s a little strange that interest rates are still at zero. That’s a whole other solo episode. It’s those first two, but the third is very important.
The third is, “How am I going to do this? Once I know what I want, how am I going to pull this off?”
With our company, it’s quite easy, because we do the bulk of the work. We’ll do the whole plan set and communicate with the city. We have a good and getting better database where you can enter your ZIP code in our design center, our configurator. We have this online 3D tool. You can enter your ZIP code and you can see what you can or can’t do in your area.
For example, enter Redwood City, California, ZIP code. Generally speaking, you can do an ADU up to 780 square feet in your backyard in this area. It’s taken a ton of work and it’s good and getting better, but we try to take a lot of the painful process. It is super intimidating and wildly confusing when you start talking permits with a homeowner who’s never done a construction project before. It’s not a problem. We’ve got it. We try to keep folks focused on the vision where they started.
I’m going to bring this wonderful conversation to a close. I hope that people find it inspirational. It’s a great way to solve a lot of different problems. For example, if you do want the American dream or the North American dream, we’ve talked about some ways that you might be able to do this. If you want to value community and do so in a way that is alternative to the existing offerings, Studio Shed or other companies like this provide a very nice pathway for people to do it. I would not be surprised when we check back in a few years, Darlene is running a bunch of these things.
Darlene, it’s lovely to see you. I appreciate all the help getting this together. Michael, we’ve been talking about this for several years now. It’s fun to see what you’ve done with it. I’m proud to have you as a friend and to see what value you’re creating in the world, and to see you thriving as an entrepreneur doing this. You always have enthusiasm about this project.
It’s a wonderful case study about how business can do good. When you keep your eye on the important problems and pain points that people have and that you have a healthy dose of entrepreneurship and design chops and persistence, you can solve a major issue out there in the world. For the solos reading, it’s a great way to go, “Maybe I don’t have to just live in an apartment or a condo. There are other ways that I can go about creating a shared living environment or a solo living environment that I can afford.” With that, I want to say thank you to both of you.
- Studio Shed
- Golden Girls – Past Episode
- Reinvention – Past Episode
- Shared Living – Past Episode
- Solitude – Past Episode
About Michael Koenig
Michael Koenig is the President and Co-Founder of Studio Shed. For over 13 years with Studio Shed, and now over 25 years of entrepreneurship he has started and grown innovative companies. Studio Shed offers beautifully designed alternative to barn style sheds that can be used as a home office, studio, or home.
About Darlene Savoy
Darlene Savoy hails from the east coast of Canada, and after a 20 year hiatus has recently returned to live there. A self-described late bloomer, she aspires to create a solo-friendly co-housing development. You may be familiar with her as a guest co-host on the recently launched episode Reinvention with Arlene Dickinson.
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