Moving Up in the Enterprise Challenge

Today we are excited to announce, we made it to round two of the Yakima/Kittitas Enterprise Challenge! You can read our pitch deck here and project Memo below. Our next step will be a live trade show on February 10. Location details will be coming soon. We hope to see you there!

PROJECT MEMORANDUM

Date:    January 30, 2022

To:       Competition Judges

From:  Nathan Poel

Inversion Design Build

Re:       Enterprise Challenge ADU Project Narrative

Thank you for the opportunity to share with you some of the exiting plans we have at Inversion Architects and Inversion Design Build. If you haven’t already, please read through our pitch deck first, then come back and read more about our plans below. We are proud of what we are creating through our Accessory Dwelling Units and are so excited to share them with Central Washington.

What is an Accessory Dwelling Unit? An Accessory Dwelling Unit (ADU) is a small house that adds an extra unit to an existing home. ADU’s are known by many names including casitas, mother-in-law unit, Carriage house, Pool House, Basement Apartment, etc. Regardless of terms they are all referring to the same thing.

There are a number of types of ADUs. You can have one that is built in a basement, a converted garage, a bonus room, or addition to the primary house, but the type we are focusing on are detached ADU’s (DADU) where the ADU is a separate, stand-alone unit, usually built in a back yard. In all these cases, an ADU can be a studio, one-, or two-bedroom unit that is 400-1000 square feet depending on the jurisdiction.

One point of clarification: A ”tiny house” is not an ADU. They are usually less than 400 square feet and are often licensed as a recreational vehicle (RV) and are not considered real property like a house. An ADU is real property just like your house and is recorded on the title to your land just like a house.

The Need: Hands down we are not building enough homes in Central Washington to keep up with demand. In Yakima and Kittitas Counties we have less than 1% vacancy rate over all rental units (normal is considered 6-8%) and we are averaging around 180 new units per year in the City of Yakima even through the need is growing at 360 units per year according to the City’s housing report.

There are several reasons why we are falling behind, and they are slowly being addressed. One of these was the lack of land that was properly zoned for new development. The City took a few steps to address this in 2019. Amongst the changes was a simplified process to permit Accessory Dwelling Units. This change created an opportunity where there wasn’t one before but so far, very few people have taken advantage of it. Accessory Dwelling Units could be a key contributor alleviating our housing shortage but only if homeowners know that they are an option.

Along with the raw numbers, there are specific types of housing that are hard to find in Yakima and Kittitas Counties right now. There is a much higher need for smaller ‘right sized’ units for individuals or couples that do not want the hassle of keeping up a yard or extra bedrooms. Smaller units are also more affordable. Average house prices have been rising 17% year over year in Yakima and Ellensburg, so affordability is quickly becoming a concern for many households that are renting or looking to buy. ADU’s typically are the size of a studio up to a two-bedroom maximum so they are the perfect size to address the need for smaller, more affordable homes.

Competition: Defining competition is tricky since this is an emerging market. Only five ADU’s have been permitted in the City of Yakima over the past six years even though there are over 16,000 lots in the City that are eligible. For that reason, it is hard to point to anyone in town that is our direct competition. We are competing with other designers and contractors to be ‘front of mind’ when someone has an idea for a new project but even more so, we are competing for people’s conception of what is possible. To address this, we are focusing on educating the public about ADU’s with our marketing material and positioning ourselves as the go-to ADU builders in Yakima. Along with our own social media we are launching a referral program to make sure our name comes up whenever ADU’s are discussed.

Our Referral Program: As a new player we are not currently the ‘first call’ that most people will make when they are interested in moving or building something new. We hope to change that over time but to start we need a way to incentivize established professionals to send people our way when they are contemplating an Accessory Dwelling Unit. Our referral program is designed for realtors but will work with any professional group as well as our clients. We offer $1,000 referral fee to anyone who sends us a lead that buys one of our units. The buyer also gets a $1,000 discount, complements of the person who sent them ($2,000 total cost to us, roughly 1.6% of an average unit contract). Each program participant will have a unique code and that code is used to track who the referral fee should go to. The discount is added to the initial contract and the fee is paid at construction completion.

Key Technologies and Competitive Advantage

We are an architect led design-build firm which means we control our process from start to finish. It is a business model that has not seen a lot of use in the past 60 years but is growing in popularity for a few key reasons.

Fewer Contracts means more Conversation: Construction is a liability rich industry that is notorious for lawsuits legitimate or otherwise. Because of this, the industry has worked hard to define and minimize the liability that any one professional has on the project by creating thorough contracts that say what is and is not their responsibility. That’s fine for the status quo but it keeps the different trades from often working collaboratively to enhance quality and drive down cost. We are an architect led design-build and development firm which means our architects and builders are incentivized to talk to each other freely because we are on the same team. That results in better products, faster delivery, and lower costs to our clients which in turn makes them happy, which is why we are in business.

Direct-to-Model Pricing: Ask an architect or builder how much a project will cost, and they will give you a range and a lot of hemming and hawing. We do it too and it’s because the materials market is so hard to pin down, especially early on when you don’t know all the details in a project. One tool we have that helps is that we input all our pricing and labor data from our factory and suppliers right into our 3D modeling software. That way our designers can see how different design decisions affect the end product in real time and give more accurate pricing from the get-go. This keeps our margins competitive and allows us to offer better pricing than a typical contractor.

Panelized Construction: There are a whole basket of advantages to building panelized walls and floors offsite and we are excited to take advantage of them. Since we can get a home dried in in about a day, weather is only an issue for a very small window, and rarely causes project delays or damage. Our factory is much safer than an open job site, we can capture cutoffs for recycling and produce much less waste, our framing is more accurate using a dedicated lofting table, and we don’t lose time setting up and tearing down a jobsite each day. We are fully convinced this is how all homes will be built in the future, we are just getting there sooner than most. Beyond all this, in a factory system it is much easer to measure every aspect of building a unit and what can be measured can be improved.

Green, and net-zero energy ready out of the box: Building a green building is not just a nice warm fuzzy thing to do. It is the right thing to do, and it makes for a better living environment for the homeowner. All our ADU’s exceed the energy code and are built to ‘breathe right’ so they have plenty of fresh air and minimize air contaminants. We create a passive level of insulation and air tightness on all our buildings which saves hundreds of dollars in heating and cooling bills each year and easily puts our units in the ‘net-zero ready’ category for anyone who wants to add solar panels. They are the best built and greenest homes on the block even without any upgrades.

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