Building passive homes: A-1 Builders

Tom Houghton:

You are listening to The Building Code. I’m Tom Houghton.

Paul:

And Paul.

Tom Houghton:

Still just Paul.

Paul:

Yeah.

Tom Houghton:

I thought you said you’re going to go with PW this time.

Paul:

Well, I mean, we’re 25 episodes in, so it’s like everybody, we’re friends.

Tom Houghton:

We’re greater, this is our 33rd episode, actually.

Paul:

We’re friends.

Tom Houghton:

Yeah.

Paul:

And I mean, the listeners and I.

Tom Houghton:

You guys are friends.

Paul:

I’ll start going to PW, what I’m known to around here.

Tom Houghton:

We’ve digressed so much that we’ve lost our intro music at this point.

Paul:                            

Oh, yeah, that’s right.

Tom Houghton:

Let’s just dive in-

Paul: 

I didn’t even notice that.

Tom Houghton:

… to the episode. Today, joining us on The Building Code, we have Maggie Bates, a passive home consultant. She’s a co-owner at A-1 Builders and Adaptations Design Studio based in East Bellingham, Washington. Welcome to The Building Code, Maggie.

Maggie Bates:

Hi. Thank you. Glad to be here.

Paul:

Welcome, Maggie. A little off-brand for me, my honeymoon was in Seattle. Isn’t that interesting?

Maggie Bates:

Oh.

Tom Houghton:

That’s very interesting.

Paul:

Would you have guessed that?

Tom Houghton:

No, that’s very off-brand for you.

Paul: 

Yeah.

Tom Houghton: 

Yeah.

Paul:

I would have gone somewhere like sunny and bougie.

Tom Houghton:

But marriage does that, right?

Paul:

That’s right.

Tom Houghton:

It just extends your brand.

Paul:

That’s right. We’re going back, going to go see a show.

Tom Houghton:

There you go.

Paul:

I’ll tell you which show it is in the show notes.

Tom Houghton:

In the show notes. Show notes plug number one of the episode right there.

Paul:

Enough about you, Tom. Maggie, so you guys are in the Northwest. Just for everybody who doesn’t know, are you outside the suburbs of Seattle or where are you guys located?

Maggie Bates:

No, we’re the Northern-most deep water port. We’re just South of Vancouver, Canada. It’s about an hour drive, it’s quicker to go to Vancouver than it is Seattle. It’s about an hour drive North to Vancouver and two hours South to Seattle by the I-5 corridor.

Tom Houghton:

Okay.

Paul:

Fun fact.

Tom Houghton:

That is a fun fact.

Paul:

It is, that’s cool.

Tom Houghton:

Yeah, I wish we could designate ourselves off of a port, but we’re landlocked. We have no water around us.

Paul:

Thanks for the geography lesson from Tom.

Tom Houghton:

Thanks, you’re welcome.

Paul:

That’s good. Yes, we are landlocked. Maggie, you actually are familiar with Omaha, Nebraska. You were here recently.

Maggie Bates:

I was, yep. I went to Buildertrend University, which was awesome. I had a great time.

Paul:

You hear that? You hear that, sports fans?

Tom Houghton:

Yeah.

Paul:

It was awesome.

Tom Houghton:

It was awesome.

Paul:

So if you’re listening, please come. Go ahead.

Maggie Bates:

We’re still spending our Starbucks gift card for the best photograph.

Tom Houghton:

Hey, that’s right. So we use an app for our Buildertrend University, and that kind of helps everyone who’s attending stay on top of things. And one of those things inside the app is a little contest we do a for a photo contest during the conference, and if you take a whole bunch of photos or great photos, you can win a gift card.

Paul:

This is news to me. So are you saying you guys won?

Maggie Bates:

We did, because we were walking through the airport on the way to the university and we saw these tee-shirts that said, “Be good to people.” So we all bought a be good to people tee-shirt and we all wore them on the same day. We were all matching.

Tom Houghton:

That’s cool, awesome.

Maggie Bates:

And we took a selfie and and we won.

Tom Houghton:

We’ll put a picture of the shirts, if you can send that to us, we’ll put it in the show notes.

Maggie Bates:

Okay.

Paul:

That’s great.

Tom Houghton:

Let’s dive in though and talk. Let’s get to know you, Maggie, and the company you work for, the company you co-own. That’s one of the things we want to talk about today is how your ownership structure is different. So can you give us a little background to yourself and the company, and kind of maybe dive into that ownership structure that you have there?

Maggie Bates:

Yes. Well, I’m the design manager. We’re a design/build company. We’ve been around for many, many years. Prior to us being a worker-owned cooperative, it was a partnership by two folks who wanted to retire, Cindi Landreth and Rick Dubrow, and they decided to turn it into a worker-owned cooperative. It took us several years to actually get there. I’ve been working for the company, gosh, I think I’m around 13 years or so, and I would say it took us a few years to get the worker-owned cooperative structure in place.

Maggie Bates:

So it went from what’s called a sub S corporation to a sub T corporation legally. That’s the designation. And it means that you can join our company as an employee, and after a few years you can buy in and become an owner if you’re invited.

Tom Houghton:

Wow.

Maggie Bates:

Yeah, so right now we have four owners in the company. We have six people who are going to be eligible. Either they’re eligible right now or they’re eligible in about a year, and they’ve got to go through some training and then make a small donation. It’s their own money that they get to keep, but it goes into our capital and then they go through their training and they become members.

Tom Houghton:

That’s awesome.

Paul:

I have questions.

Tom Houghton:

Paul’s got questions.

Paul:

I’ve got questions.

Tom Houghton:

Here we go.

Paul:

Okay, so there’s obviously tangible and intangible-

Tom Houghton:

Intangible.

Paul:

… qualifications of becoming an owner, right? So you have to be there X amount of days or years?

Maggie Bates:

Yeah.

Paul:

So what, if you could tell us, are some of the things that are intangible ones that would disqualify you from becoming an owner?

Maggie Bates:

You know, you have to want to become an owner.

Paul:

Right.

Maggie Bates:

So that’s one of the big things. Part of the reason that we have the three years is we want, first of all, people to be good at their jobs and it takes a couple of years. It takes people a year to learn their jobs. Even if they’re an experienced person, they have to take their experience and adapt it to our little world.

Paul:

Sure, yeah.

Maggie Bates:

And so that takes time. Then, they get through that phase and then it’s more like, are they part of the family, so to speak, do they get along with everybody? Is everything working out? And then is everything working out in their home lives where they’re not going to be moving in two years or whatever the case may be?

Paul: 

Sure, that makes sense.

Maggie Bates:

Everything has to align. All the stars have to line up for them.

Tom Houghton:

There you go.

Paul:

That makes sense. That’s a really cool setup.

Tom Houghton:

It is. I think as business owners, as anybody who’s running a business, you want to make sure that your employees are putting forth the best effort. And I think a great way to do that is you can make them owners or just teach them to think like an owner, of course, you know, that’s important. Tell us how this has impacted your business because this is a pretty radical shift for you guys.

Maggie Bates:

Yeah, well, one of the things that you just said is that you have to teach them to think like an owner, and the reality is, is once they have decided that they are going to be an owner, that they want to be invited. You see a shift in their personality, in the way that they conduct themselves, in the way that they communicate, in the way that they basically attack their work. It was noticed in me by the previous owners, and I remember one of the owners mentioning that to me. She’s like, You’re thinking like an owner.” She goes, “It’s kind of interesting how that happened.” And now that we have several people who are going to be starting all the training, I have started to notice the difference in their personality. They just volunteer quicker. They are looking for solutions always. They’re not in the parking lot committee complaining, you know? It’s really positive. Having ownership is a position. It gives a person personal power, a personal stake in their everyday lives in a new way.

Tom Houghton:

That’s awesome.

Paul:

That’s powerful stuff. I think a lot of, especially in this industry, obviously it’s a lot of small businesses, it’s a lot of family-owned, and so for a lot of owners, they’re looking for that exit strategy always. And if you don’t have the son or daughter that you think you’re going to leave it to, then you think you’re going to have to do this huge, like to an employee come up with this big lump of money that my business is worth and I’m just going to give it, I’m going to sell it to you. This is a really unique angle at it, which I think solves a big problem for a lot of business owners, which is when I’m done working my tail off for 50 years, what the heck? How am I going to exit?

Tom Houghton:            

Pass this on.

Maggie Bates:

Yeah, well, and if you compare it to the chances of actually selling the business on the market for what you want, it’s a much better option. So you really have to hire wisely well in advance of doing that, just doing that shift.

Paul: 

Yeah, that’s a great point. So as a business owner, you’d better be looking two, four, six years ahead at who you’re hiring, and you might not go for the person who’s got the best skillset when you hire. You might go for somebody who can mold in. The skill’s a different part, right? You want good people who have good management skills, who have good communication skills, that you can sort of teach this skill to, right?

Maggie Bates: 

Yeah, yeah, yeah, you really kind of want to look for that like-minded, you know. We’re a pretty sustainable company. We’re pretty socially conscious. I really feel like we’re a really good guy company, good guy, good gal company. We call it coopertition because there’s another worker-owned cooperative in Bellingham, another build/design builder, and they’re friends of ours. There’s a couple of other builders who are right around our level of clientele and dollar amounts, and so we actually party with them. It’s an attitude of cooperation that goes beyond the walls of our company.

Paul: 

Yeah, you see a lot of that. I’ve said this before in one of our podcasts, but 10, 15 years ago it was such a competitive environment within a market, I don’t want to tell anybody my secrets, I don’t want to share subs, and it was me against everybody else. And I don’t know if it’s because of social media, but I know it is playing a part in it that there’s much more of a collaborative attitude amongst like-minded companies who are going after the same clientele, which I think is great for the industry. There’s enough out there.

Tom Houghton:            

Yeah, I think it’s great, and I think part of that thought process behind it is we can do more together than we can separate.

Maggie Bates: 

You know, houses across our culture, if you think about how energy is used, people think, “Oh, it’s your car, it’s what you’re driving.” No, it’s what you’re living in.

Tom Houghton: 

That’s good.

Paul:

That’s actually a really good way to look at it. I know Tom is all about that. He’s got solar panels on his mind. But a good lead-in, Maggie. So why don’t you explain? We do this with everybody. So what is your business? I’ll tee you up. How many employees? What type of work do you do? What’s your price point? And I think that you have something very unique that you had just alluded to in sort of your passive way that you guys build.

Maggie Bates:

Sure. So we’re a worker-owned cooperative. We are a design/build company. We have right now, I think we’ve got, we hover around 17 employees, so it can drop as low as 16 and go up as high as 22 sometimes. But I’d say we hover in the high teens. We historically have done some new home building, not a lot, mostly remodels, additions, renovations of old houses. We’re moving into a mix of remodeling and new home construction.

Maggie Bates:

With the new home construction, we’re really, really focusing on high performance, which includes passive house, but it’s not limited to passive house. High performance has a broader definition. So I would say our average job is a couple hundred thousand dollars actually, because someone is adding a small addition or they’re going to redo the whole inside of the main floor. So our jobs really range from 45,000 all the way up to 500,000. That’s historically been the way it’s gone. The new houses, depending on the size, will probably be a little more than that sometimes. It depends on the client. Every project is different.

Paul:                            

And for people who don’t know, I mean obviously I do, but for somebody like Tom, what’s the definition of a passive home?

Maggie Bates:              

From the passive, I’m certified with the Passive House Institute of the United States, which is a different-

Paul:                            

Sounds official.

Maggie Bates:              

Yeah, it is, it’s very official. It’s a different organization than the passive house out of Germany. But all of the passive house really, if you look in the history of it, had its roots in the United States, which is super awesome, way back in the ’70s I think. But the way that PHIUS defines it is a passive building compromises a set of design principles used to attain a quantifiable and rigorous level of energy efficiency within a specific quantifiable comfort level. Optimize your gains and losses based on climate summarizes the approach.

Maggie Bates:              

So what that means in my climate is that I’m really going to be focused on energy efficiency. Air tightness goes hand in hand with energy efficiency. I am going to focus on comfort and durability of the products that I’m using to build the structure. And it’s going to be very climate and site-specific so that we use the sun to its best advantage among other things.

Paul:                            

So in summary, and this is something I didn’t know, I mean you could probably kind of guess what passive house meant, right?

Tom Houghton:            

Sure.

Paul:                            

Or high-performance home, but this is interesting. So beyond just trying to be efficient, right, with the material you use and how the house breathes, lack of better term, you’re actually going to be specific to the environment you’re in. So in the desert of Arizona, it’s going to be wildly different than-

Maggie Bates:              

Wildly different.

Paul:                            

… the humid climate of Seattle and Denver and Nebraska and all over the place. So it’s sort of based on the environment.

Maggie Bates:              

You have to figure out… So you have to figure that moisture is going to get into your structure one way or another. It’s either going to come from the inside or it’s going to come from the outside. We guard against that as much as we can, all builders do. So when we’re talking about your particular region, you have to understand, what does moisture do with a building in my region? Where does it come from? Which way is the wall going to to dry? Is it going to dry to the inside or is it going to dry to the outside? It’s different in all different climates.

Maggie Bates:              

And that was actually part of the problem with the German passive house being applied to the United States housing market or industry because we have so much difference in their climate from the Northern part of the country to the Southern. And then if you take in Alaska, holy cow, now we’re really different. So PHIUS was born, Passive House Institute of the United States, which takes into account all those original ideas. They’re the underpinning, but then they have actual climate data sets for all the different regions.

Tom Houghton:            

That’s awesome. I feel like one of the biggest challenges I would assume you’re facing, probably not, I feel like the Pacific Northwest is a little bit more open to ideas like this, but I feel like a lot of people don’t want to go green or do something like a passive house because of financial concerns. So maybe you could speak to how building a passive home is actually financially beneficial for the owner, but also, I mean, you guys have kind of based your business on this.

Maggie Bates:              

Well, right, and very rarely do we end up doing the calculations of how much money you’re going to save based on this thickness of wall and that type of ductless mini split. Very rarely do we actually get into the minutia of those calculations. We have some general guidelines we go by to get there, and we’re getting better at energy modeling. That’s something that’s new to us. But put all that aside and talk about what does a client value? That’s what’s really important because if I can prove that people do not actually value what you’re asking about, what you’re asking is what’s my return on investment? And the reason that I say I can prove that people don’t value that the way they think they value it is because of a thing that we call a senseless remodel of a perfectly fine house.

Maggie Bates:              

A person will buy a house. It’s got walls, floors, countertops, mirrors, all sorts of things that work great. Just leave them in place. It doesn’t cost you a penny. But people rip them out all the time. They rip stuff out all the time and they recycle it or they take it to the dump or they do all sorts of crazy things, because they feel like they need to update. They feel like they want it to look different. So the value that they have that they don’t speak about is aesthetic value. People value aesthetics really highly, and what is the monetary return on aesthetic value? It’s pretty small. In fact, a house with three bedrooms with ugly carpet is valued way higher than a house with one bedroom with a beautiful wood floor. You see what I’m saying?

Tom Houghton:            

Yeah.

Maggie Bates:              

People think that they value, that what’s important to them is I need a return on my investment. But they contradict that constantly through their behavior. So what we focus on is what do you value? And the way that we promote what we value is to talk about it. We value energy efficiency, we value durability, we value comfort. And what does that mean to you? What does that mean to you in your house? It means a lot of things as far as comfort goes. It does mean at the end of the month, your electric bill is lower. But then beyond that it means, do you value that your home is not an energy suck on the planet?

Maggie Bates:              

We say stuff like that out loud to our clients. Do you value that you can be part of a larger picture in our industry, in our culture, in United States, so that homes don’t have to be, they don’t have to be a negative. They can be a positive when it comes to the future of our culture and our planet.

Tom Houghton:            

That’s awesome.

Paul:                            

Are you sold?

Maggie Bates:              

I know it’s really big and groovy to say all that stuff, but we actually do say it in a lot of different ways that are very palatable and people get on board.

Paul:                            

You got Tom feeling groovy. What I was going to say to Tom’s question is I’m sure your market comes to you, right? There’s not a lot of convincing on an ROI. If you place yourself correctly in the market, there’s a big market for exactly what you just said, caring about the environment and caring about your impact on the environment. It’s why Prius is well-sold, it’s why Tom has a Tesla, one of the reasons, besides it looks cool, too.

Tom Houghton:            

Sure, that’s a benefit.

Paul:                            

It’s a benefit. But your main reason is probably impact on the environment or one of the reasons, right?

Tom Houghton:            

Yeah.

Paul:                            

So I think it’s great, you have a little niche, right?

Maggie Bates:              

Yeah, we keep working on it too. We keep trying to spread the word.

Tom Houghton:            

That’s good. It’s a good mission to drive out there. You talked about building and having a sustainability, of course, is one thing, but reliability of products. Are there some products that you guys have come across where you’re like these are great because they’re long lasting or they just have such great benefits to houses? Could you speak to anything about that?

Maggie Bates:              

Yeah, and part of the reason that we’re good at choosing those products is because through the remodeling history, we come across all the things that fail, all the things that really only last three to five years before they start to look old or they actually don’t work anymore. So your question was what products am I excited about? Or what products really work?

Tom Houghton:            

Yeah.

Maggie Bates:              

Well, in our climate, it’s kind of a tried and true, the cement board siding works really great in our particular climate, so that’s something we’ve been using before passive house came along in our field of vision. I would say that metal roofs are better than asphalt roofs, but a good triple laminate shingle is a great idea.

Maggie Bates:              

I would say triple-pane windows in our climate are awesome, and then the frame of the window is important, too. So I’m kind of excited about the fact that you can now get windows that incorporate insulation inside the frame. You can get a lot. The windows that we can get that are manufactured just across the border in Canada are actually way superior to anything that we’ve been able to buy that the US manufacture. In those cases, they have triple panes, they have pretty durable materials. You’re not going to find a vinyl window in their product lines. Vinyl is, it’s cheap and it helps keep the building costs down, but the reality is, is it moves and it warps and then it kind of looks crappy after awhile and it tends to fail. So the vinyl windows get pulled out. And then what do you do with the vinyl windows? They go in the landfill.

Maggie Bates:              

Oh, that’s something that I just can’t help but mention, because I’m dealing with interior products and exterior products all the time, and vinyl is like the quick, cheap, go-to for so many builders. You see it in siding, you see it in windows, you see it in railing materials, you see it now flooring everywhere, vinyl flooring. Well, do you know in the state of Washington, if you take out a piece of vinyl from a building, there is no place to recycle it. It goes to the dump. And vinyl is being sold like crazy on the market, especially in flooring right now, and it’s all just going to pile up when people pull it out in five years, beCause that’s what they do.

Paul:                            

#nomorevinyl.

Tom Houghton:            

That’s a good hashtag.

Paul:                            

We’ll start a movement.

Tom Houghton:            

Let’s do.

Paul:                            

You should start a movement.

Maggie Bates:              

I know, probably the vinyl industry will target me now.

Paul:                            

It’s okay.

Maggie Bates:              

I have no problem with vinyl.

Paul:                            

I think you’re over-exaggerating our reach.

Maggie Bates:              

The problem with vinyl is how to recycle it. Please recycle it, if you can.

Tom Houghton:            

Definitely.

Maggie Bates:              

So as far as as great building materials though, natural building materials are super. I love a wood floor, a solid wood floor. You can get six sandings out of a solid wood floor.

Paul:                            

That’s true.

Maggie Bates:              

If you sand it 10 to 20 years apart, that’s your lifetime. You can put in a floor when you’re 20 or 30 and never have to change it. Some of the natural stones or the engineered stones are great because they’ll last forever and they’re super durable. As far as great building materials, some of the metal stuff is fantastic because it’ll last forever. I would say the life of the materials is really important to consider. How long will it last?

Paul:                            

Are metal roofs making a comeback? Because, I mean, you count me in on metal roofs because I think they’re cool.

Tom Houghton:            

They’re very popular out on the coast. Here in the Midwest-

Paul:                            

Also in Texas, there in Texas, like a really dry hot town.

Maggie Bates:              

Metal’s great for shedding snow. So if you’re in a snowy climate, they’re usually more popular than other climates. I haven’t actually incorporated a metal roof on a passive house yet, and there is some considerations there because of the heat transfer that that you have to consider. So I can’t actually speak to that super intelligently on the passive side, but I can speak on the durability side. Metal roofs will last for a very long time. Generally when you’re looking at a warranty from a manufacturer, let’s say it’s a shingle roof and they say, “This is a lifetime roof,” and you look at the actual warranty and it says, “Lifetime is actually 50 years.” 50 years means at end of 50 years, your roof is totally failing. You have water coming in your kitchen. It doesn’t mean that your roof is great for 50 years.

Paul:                            

That’s a good point.

Maggie Bates:              

So that’s something to remember when you’re looking at warranties.

Tom Houghton:            

For sure.

Maggie Bates:              

It means that’s the life of it. So if something goes wrong with your roof at 25 years, you’re only going to get half of that money back.

Tom Houghton:            

Sure.

Maggie Bates:              

A lot of people don’t think about warranties that way.

Tom Houghton:            

That’s very true. Nobody reads the fine print.

Maggie Bates:              

A little plug for our company, when we switched from being a partnership corporation to a worker-owned cooperative, we wanted to change a lot of things, but one of the things was we wanted to increase our warranty. So our warranty for a remodel is five years instead of one year, and it starts at the end of your construction, not when you sign the contract. It’s when we leave the job site, your five years starts.

Paul:                            

That’s a great selling point. It makes sense, right? Because you build with more high quality material, so to not have a longer warranty would really just be shooting yourself in the foot, right?

Maggie Bates:              

Yeah.

Paul:                            

It makes sense, and then you use it as a selling point, and that’s obviously got to be a really big trigger for people who are worried about one of their biggest investments, which is remodeling their home, making sure they don’t go with the wrong person or that it goes caput in a year.

Maggie Bates:              

Yeah.

Paul:                            

I said caput.

Tom Houghton:            

You did.

Maggie Bates:              

If you think about the warranty in the terms of a small town, if something goes wrong with a building that you’ve built and you don’t go and take care of it, everybody’s going to know because you live in a small town.

Paul:                            

That’ll get around.

Maggie Bates:              

So your approach is you’re going to take care of it anyway, so why not just have a warranty for it? Why not just get credit right from the get-go for what you’re actually going to do, which is you’re going to actually go and take care of the problem.

Tom Houghton:            

Absolutely.

Paul:                            

That’s my point, yeah.

Tom Houghton:            

Maggie, we have a whole list of other questions that we could probably keep talking about forever with you on. We got to wrap this up because-

Paul:                            

We got wives and kids, my goodness.

Maggie Bates:              

I’m sorry.

Tom Houghton:            

No, you’re good.

Maggie Bates:              

Did I talk too long?

Tom Houghton:            

No, this has been so great. We’ve really enjoyed having you on the podcast, and maybe we’ll have to have you back to continue talking about this.

Paul:                            

It’s been great.

Tom Houghton:            

Anyway, so let’s wrap this up really quick.

Paul:                            

Key takeaways, Tom.

Tom Houghton:            

Key takeaways, look at the new ownership structure of a co-op because there’s definitely something to be said about that.

Paul:                            

Big time.

Tom Houghton:            

Another key takeaway is passive homes, there’s something there for everybody.

Paul:                            

There is.

Tom Houghton:            

It doesn’t matter where you’re at in the United States or the world, you can definitely look at it because that obviously applies to-

Paul:                            

By region.

Tom Houghton:             .

.. your region.

Paul:                            

That’s cool, yeah.

Tom Houghton:            

I think the last point we talked about, about warranties, is great. If you’re going to cover it, why not just get the credit up front?

Paul:                            

Right, if you’re going to build quality stuff and use quality material, extend your warranty, cover it, and you’ll get the benefits with referral business, right?

Tom Houghton:            

Absolutely.

Paul:                            

And they won’t be talking bad about you in the local VFW in a small town.

Maggie Bates:              

I guess you’re right.

Paul:                            

See, she’s right.

Tom Houghton:            

Boom.

Paul:                            

See, connected, boom.

Tom Houghton:            

All right, Maggie, thank you so much for giving these great points to talk about today. We hope you had a great time because we sure did.

Paul:                            

100%.

Tom Houghton:            

Thank you so much for your time and sharing your knowledge and wisdom with us, and we wish you guys continued success in your business.

Maggie Bates:              

Thank you so much for having me on your podcast. I really enjoyed it.

Paul:  

It was great. Appreciate you.

Tom Houghton:

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Paul:

Appreciate you.