Episode 29 - Ryan Abernathy, DROP Structures

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Prefab Review

Hi, my name is Michael Frank and this is The Prefab Pod presented by Prefab Review where we interview leading people and companies in the prefab housing industry. Today, we're speaking with Ryan Abernathy, the founder of DROP Structures. Ryan, thanks for joining.

DROP Structures

Thanks, a lot man.

Prefab Review

Well, it's great to have you. Just to start, can you tell me a bit about the history of DROP Structures?

DROP Structures

Sure. So DROP Structures started in February of 2017 over a chance meeting and beer which is always a good start to a good story. And it was myself and 2 other people - brother-in-laws. And I previously built a small unit and the first 2 people were my partners Brandon and Matt and they had built one. They'd had an idea for doing small spaces for about 6 years I had built one and actually approached someone about doing it: my brother-in-law. And he was busy and couldn't do it,. And then I got heavily involved with photography and advertising. And then, when we met, we we like, “hey, let's do this.” We had a couple of beers shook hands. And then we started to build the first one in February of 2017. We incorporated in October of 2017 and we've been along on the ride ever since.

Prefab Review

That's awesome. And it sounds like you said your partners have backgrounds as builders?

DROP Structures

No, so I'm from California and the first job site I remember being on was in Pacific Palisades and my dad's been in construction. So I've been in construction on and off my whole life. Brandon was in Restaurants. I guess you could say that he had started a couple of restaurants and Matt was an amazing all-hand and he does everything. Each of us have a lot of skills in a lot of varied areas. But yeah, I'd say I came with the most construction background knowledge.

Prefab Review

Got it. So you built the first unit. And yeah, then what happened?

DROP Structures

So we built the first unit in the back of an Arctic Spa warehouse. Artic Spa is a hot tub company. And it had no electricity and no lights and was based on a random design but we built it. The reason that we shook hands and got started is that three weeks later, we entered it into a home and garden show here locally in Canada and had some amazing responses and then it was like a handshake deal. It's like, “hey we've both had or we've all had this idea, let's just see if this works.”

Prefab Review

Oh, cool.

DROP Structures

It got tons of reviews and did amazingly well which was really good but then, when we were like, “okay, we're gonna make a go of this” it was all under just a handshake partnership. We ended up selling the unit. We had to learn how to transport a unit: wrap it and do everything in that regard. And once we sold that one, we were like, “hey, lets have a go of this.” We locked in a massive contract. Well, not massive. It was massive to us at the time. And we got a Caterpillar to build them a portable office. And once we locked in that contract, that got our foot in the door. And we were able to get some capital to get started. We didn't take on any money. It was just bootstrapped the whole way. So yeah, then it just continued to grow from there.

Prefab Review

That's great. And was the that first basically a version of the model that you have on your site or is that different?

DROP Structures

No, so it's funny. The “Mono, ”I would say for the time being, was our flagship. It was definitely the most iconic piece. Like our banner picture on our website which was a picture that I took. So it goes on to the design aspect and photography and that was just the amalgamation of nature, material, and architecture. Our first unit actually, what would say now would be our Alpha model. It was a side entrance with a shed roof and patio doors on the front. It was 8’6” by 12’.

Prefab Review

Oh, cool. Okay, so then you got some capital and then at that point did you have your own factory? How does this work?

DROP Structures

Yeah, that's one thing that's super important for us. I really like Tesla and Apple. I like brands that uncrate things that are super classy and one of the things that's great about Apple is that I bought an Airpod yesterday, and the packaging was awesome. I pushed the button on the back and it seamlessly integrated with my phone and everything else. And so I feel like Apple has done a really good job of looking at it from the client's perspective and being like, “this has to be simple for the client.” We've always built everything in-house. And there was an aspect where we were going from this transitional period of being like, “hey, we're just doing the backyard.” You don't necessarily need a permit. We need a permit and we didn't have the infrastructure for it. We didn't have the ability to build it right down in the area where we live. There's a massive pre-manufactured home builder we like. And I think this is really good and interesting, where a lot of companies divert and go different ways. It's like, “hey you know what would be really easy? We've got our plans. We will get these guys to build it. And so we had this other company build it.

Prefab Review

Yeah, I mean we see that all the time. Like ADU builders that are you know, building their homes out of a Champion factory or something like that.

DROP Structures

Yeah, Champion is a really good one. They actually have a facility or one of their subsidiary companies has a facility here in the town that we're in and you know it's just different. I'm not saying one's better or worse. It's a lot about the owners and what they want to do with their company and where they want to go and…

Prefab Review

Yeah, and one's more capital intensive than another etc.

DROP Structures

Oh for sure. It's not my concern, as long as the client gets an amazing product. That's the end goal: have a happy client. We actually went through a third party and if you go to our website or our Google website, we have a 100% horrible review and it's actually my favorite review ever. Because we stepped out and went with a different company. We lost control of the process and unfortunately, the client had to suffer the ramifications. It was like February, 14th of 2020 in the middle of winter, and I get a phone call. “There is water leaking underneath the unit. I don't know what's going on.” One of my guys and I drive out there and we had to rip out the whole underside of the building because the dishwasher or the laundry was discharging into the sealed floor and wasn't actually draining anywhere. So for the previous nine months, it was just collecting water. But yeah, he was hands-down one of the best clients we've ever had. He's phenomenal. His name's Chris. I'll leave his last name out but he is amazing. But the reason I love that review is because well first, it shows the reality of we're human. No company is a 5-star company. Every company has issues. But in the comment, what he said, “the guys at DROP structure are amazing,” and then for lack of a better word he said that their product is shit and I love that because it was in that where we decided that going and outsourcing it limited our control on the quality of the product and since that day, we build everything in-house and we will continue to do that. I'll be honest, it's a lot more work. We've had to scale for that. As an owner, there's a lot of risks. I lie awake at night and I'm like, “holy cow, we've got so many people working for us.”

Prefab Review

You’ve got a lot more overhead. Yeah.

DROP Structures

But for me, I'd rather take that on and know that we kick out a quality product that I can literally walk five feet or not five feet, let's be realistic - fifty feet behind our office and I can go and see every single unit that we're building. That's really important to us. But I guess that's a very long answer to a short question. Yes, we build everything in-house. So it's been really interesting.

Prefab Review

No, that's awesome. So what scale are you at now? How many structures do you have going at one time? What can you tell me about sort of where you are now?

DROP Structures

On average, we would do anywhere between 120 to 180 units a year. And so that 60 unit gap is, we have a lot of what I would say are your standard offerings. We have 12 different offerings that are drag, drop, click. And just be like, “hey, I want this one.” But we're really starting to get into more of the custom and that's something that's been really interesting for us because every unit that we've ever put out, we have done one of two things we have thought, “hey, this is a really cool design - we'll build it in-house and then we'll just see if they like it or not. But we're going to start with we're gonna build it and I think that's a good point to start because if you're passionate about it, then you have a lot of energy and zeal for it. And we'll get clients that are like, “hey, I actually want to try this and so we actually have, it's called “Arlo” and it's from a client. And his last name is Arlowicz and it was like Arlo and it just went in line with our Mono, Duo and so we called it the Arlo. And it was a design that he came to us and he was like, “hey, I'd really like to try this.” And so we were like okay, we'll try that. And so we partnered with him to do that and it became one of our standing offerings that people can come and purchase but with that, there are a lot of custom projects that have come our way and we're like, “hey, this is really cool.” We're pretty simple. We're like, “hey, is this cool? Yeah, okay, let's do it.” Obviously, with a business, does it make us money? Yes, so that's a good check to have. We have to make some money but with this custom aspect we're finding that area for us is really growing so much so that we took on another facility specifically for building custom units. So there is a big gap. We'll do between 120 - 180, as of right now. We were just in the states last week looking at another facility, so that might grow as well.

Prefab Review

Yeah, that's super cool. I love this. You're not explicitly crowdsourcing it, but you're sort of understanding what the market or your customers want. It's funny. My suggestion for that, just because we get a crazy volume of people who are like, “where can I find this? Where can I find that.” Not a lot of small structures, I don't know if this would work for all kinds of areas with high snow loads with roof decks. We get a lot of people in like Southern California who want to put this small ADU in. But they have like a 4-year-old and don't want to give up their whole backyard. And they want to know, “can we do something with, you know, just moving my backyard up twelve feet or something?” So I think there are some reasons that it doesn't exist now. But that's my it's my special request.

DROP Structures

Oh no, that's actually really interesting. So we send a lot of our units to California and so hearing that, I get excited. And don't get me wrong, I love my business. I absolutely love it. I'll be very honest. I love my business because the people I work with are absolutely amazing. I'm like man, we could do something else. We could I don't know, go pick up manure somewhere and if I'm doing it with these guys, then it's awesome. The team is really good. But it's also really exciting because once you see like 60 Monos go out, it's just another Mono which is great, because our clients love it. But I like new iterations and so with our team, we will go over designs and one aspect that you actually mentioned with the rooftop patio, was there's an engineering element to that and then there's a safety element to that. And it is complicated but one thing is that when I say that we have things in-house. So we've grown at quite a large rate and we continually grow, and as we bring things in-house, there's a faster turnaround time. And engineering is one of those too. And so it's finding engineers. So we have an engineering person that we work with. But as kids based in Canada, just finding someone in the United States and seeing if we can get that, and instead of outsourcing that stuff we are bringing it in-house. Because then we can design and iterate and we'll build it and that's what I was saying is, “that's a great idea.” You know, instead of putting it out to market, let's build it and build it for ourselves. And then, because you never get it right the first time - I wish we did. And I'm sure every business was like, “I wish we got it right the first time.” You always make mistakes. We'll build the first one and say, “we think this is awesome.” So we'll put it out to the market, and if it takes off it takes off, it's awesome. We're lucky enough that it's like, “hey, we got to build it.” It was awesome and even though the market didn't like it, we liked it.

Prefab Review

Yeah. If you guys actually do that one, we'll send an email out to I don't know, 50,000 people and see if they like it. I'm totally serious about that.

DROP Structures

Ah, oh nice that that sounds awesome.

Prefab Review

All right, so we talked a little bit about kind of the variety on your site. It looks the primary focus is on small spaces and offices and then I guess almost like, would you call them one bedroom units? How would you describe your product selection, right now?

DROP Structures

I don't know. We have a variety of options for anybody, anywhere. That would be a good description, I guess. Yeah, so there's what you see on the website and then there's a reality of what we're doing. So a little bit of history, I come from an advertising background - all of the photography and all of the design and everything was something that we've done in-house. And we haven't actually updated our website or anything in almost two years. And so you'll look on there and it's like, “oh yeah, they build up to 400 square feet.” We have units that are up to 640 square feet right now. And we just haven't had time to put them on and get them out there for people to see them.

Prefab Review

Yeah. You know, are they all essentially one module wide, or do you do things that are more than that?

DROP Structures

Oh, that is a great question. We get asked that question all the time. And what we found for us is, a good basis of what we do is anything 640 square feet or smaller is a single deliverable.

Prefab Review

Yeah, yeah.

DROP Structures

We want to be the best at it. The engineering and everything that goes into doing modules and connecting, if people want that there's another company. They're about 5 hours away from us. Their name is Hona Mobile. Yeah, they are amazing. Like Matt, he's one of the guys that actually shows up on site. He helps with everything. Then you’ve got Cam and Daniel. And Cam's the one that's actually running a lot of it. Daniel was the one that originally started it. And so when people come to us, we've really gotten cool with just being like, “yes we want to do that.” Like I would love to do modules. Don't get me wrong. There's a whole new field of excitement. But right now, we're really focusing on just 640 square feet or smaller and being the best at that. But knowing the people like Honomobo, that's like, “hey, you want to do a module. You're in California. You want a 1,200 square foot bungalow that's on top of a concrete garage. Man, you guys should contact Hona Mobile. Talk to this guy.” There's other people that do modules that are phenomenal at it. And I think that we are really okay with just being like, “hey, go talk to these guys,” and just stick in with where we're at and refining and getting better and better at what we're doing.

Prefab Review

That makes total sense. So can you tell me a little bit about the process of being a customer? So I come to your website and I see, hey I really like this unit. What are the next steps and the timing from there?

DROP Structures

Yeah, so I like this answer or I like this conversation because we always try to view it from the client's perspective. And so, if you hear back that this is not how that process is, we would love to know. People usually come on our website and they'll fill out our contact form. Then, it goes to our two salesmen: Corey and TJ. They're phenomenal and their whole job is to answer questions and provide everybody with as much information as possible. You will deal directly with Corey and TJ and we have a single main office. They are five feet away from our drafting. They're five feet away from me our accountant. Our operations guys is right in there. So you'll send an email and be like, “hey, I'm interested in a Holo Plus,” but you're trying to decide between the Holo Plus and the Holo off-grid because you have a really cool piece of property. It's located up in, let's say Big Bear. And you have the potential for deep services but at the same time, you don't. And so you're trying to figure out what should I get, the Holo Plus or should I get the Holo off-grid? They will spend a lot of time with you either via email and answering questions back and forth or we really suggest a Zoom call. It's usually face-to-face and with email while we absolutely do email. We try to make sure to track everything so there's a document so we ourselves can go back and confirm everything. When you get on a Zoom call with either Corey or TJ with a lot of questions that you asked, they can actually answer them right there, which then leads to more questions which, they have an amazing amount of knowledge. They can answer, I would say, 90 to 95% of the questions that are asked. They'll be able to answer those questions. And then there are upgrades. There are options. You'll have a conversation with them and then we will send you a contract. And the way that we work is we take a 50% deposit that secures the build queue and actually gets you a tentative delivery date. Once it's in the build queue, it will be buit. So anything 240 square feet or smaller, once it gets into the build queue and we start production, it will be five weeks. Anything larger than that goes up to eight weeks ,depending on it. And then there's usually 3 or 4 days in regards to delivery and arriving. And the whole time, we're communicating with you and making sure that, “hey, delivery is this date and the crane needs to be there.” And on the majority of our units, we actually, it is a really fun situation, we communicate and help with transportation so much so that we started an in-house transportation company because we ran into a really awkward situation where we had a unit that went down to California. And we used a third-party I was getting phone calls from the actual trucking company saying, “hey. this is crazy. We can't do this. We're taking away this unit and you're never going to see it again.” And we had already paid the brokerage. Like so much money. And they're saying we need more money and it was just a really bad situation. So we took on transportation. And so once it gets close to the end of the build queue, you will be put in contact or you will be in contact with Luke. We call him the minister of transportation and he will be arranging the arrival date and delivery of the unit. And at that time, we require the final deposit.

Prefab Review

That makes sense. So, that totally makes sense. And I think you have stuff that sort of makes this point on your website - the kind of non-design review areas of the world. I mean, so we mentioned California. There, it seems like every planning department we run into for ADUs in California had some kind of fun in common. Yeah, so in those situations, are people just doing a design contract? Are you like sending them permits that they submit and then there's potential opportunities to slightly tweak your house or how does that work in those situations?

DROP Structures

Yeah, so the original question is a very good question. And I realized I answered 1 of 3 ways you can answer. So when you go to places like North Dakota or Montana where they're very open to things showing up you don't really need permits. You just drop it off. And sometimes I would just say those are the wild west where they ask, “is it built? Well yeah, okay, then just drop it off.” When you go to California, there's the permit route, and then there's the custom route. And so whenever we're going to do a permitted route, you'll contact us, talk with TJ or Corey. We get asked a lot of questions by the clients about, “hey, what's going on here. Do you know what, your local jurisdiction is going to be doing?” And what we found, is that a lot of times you have people that are in these high-density areas that don't know the answer to the questions. The people we’re asking, they didn't even know those questions exist. So we do one thing where we'll take a permit deposit and we will work, we have someone in-house, that will work on their behalf. And I can tell you, we have between 15 and 60 of those deposits right now. We're working with clients to go through this process. I know there are locations like San Jose where they're very fast. I think that there is…

Prefab Review

They're fast.

DROP Structures

Abodu has something really big there that they have streamlined theirs.

Prefab Review

Yeah, we had their CEO on maybe a month ago. And I think John is a nice guy and he was talking about how they can do it in a day in San Jose as a turnaround.

DROP Structures

Oh oh man, that's amazing and if you talk to them again, his designs are spot on. I like his designs a lot. But in these areas, we realize again, from the customer perspective and the client perspective, these people bought a house. They don't know what to say when we're talking setbacks or zoning or what's the density in this area? How close are you to a bus stop? If it's going to go down the ad route, a lot of these things. If we are to leave that on the client to figure out, we actually just created a problem for the client. While we’re for all intents and purposes, trying to sell our product. And I don't think that's very kosher to the client. And so we started taking on the process of, “hey we'll jump in.” There's a fee that you pay and there are some documents that you can sign, where you sign off and allow us to… It's like when you build a house and you sign so the GC can represent you in front of the local jurisdiction. We're going down that path more and more. A lot of this growth is stuff where we're going into these areas because we believe this is an area with high demand.

Prefab Review

Yeah, sure.

DROP Structures

We designed the product we think is going to go really well and then once we get into it, it's like, “hey, we have a solution for this.” And once you put that solution forth, you find out there's still a lot of problems that you have to deal with.

Prefab Review

Right You end up playing whack-a-mole for all these other things.

DROP Structures

Exactly. And I think we've all had a really bad customer service experience where you feel like you were just left hanging. And for us, we don't have any shareholders. We don't have anybody that is coming and telling us we need to make a certain percentage. We have no debt in this company which allows us to pivot and say, “hey, do we think we need to hire?” It's me and 3 other people on the leadership team. Do we need to hire this. Do we think this is going to be a problem? Yes, we do. And we will go out and we will find some way to fix that problem instead of having to go to a board and get things justified. We're able to pivot really fast and be like hey this is a problem. It's not necessarily a problem for us. It's something that the client is capable of doing but it's a problem for the client. So let's take that problem on and take it off the client. At the end of the day, it is helping to sell our products which then we sell more products which, we are a business, that's what we're going to do. But it takes a lot of the client lying awake at night wondering, “okay, so I need to have a half-inch of drywall on both sides of this unit or just on the side. That's got the fence on it or do I need sprinklers? And stuff that, they could be doctors and they're trying to figure out like a double bypass heart surgery, and all of a sudden, they're thinking about drywall and zoning. And so we'll take a lot of that on and don't get us wrong or don't get me wrong, it's a learning process. We're still learning.I would say we're not the best at it. But I think with today's society and with ADUs and how there rarely isn't like are you title 24 are you a 27 even are you HUD code? There're a lot of unknowns and I think there're a lot of people and a lot of really good companies out there that are trying to get this nailed down so that we could all work through, and first and foremost, show up with an amazing product for the clients.

Prefab Review

Yeah.

DROP Structures

And also a product that endures and lasts forever but also makes it easier for the client. So it's not a headache for them.

Prefab Review

Yeah, so one of the questions we constantly is just trying nail down cost, right? The number one question we get are people being like, “okay what's this going to cost?” So, you guys do an awesome job of listing everything in the starting price. For the unit on your website, I assume, but I don't know if the Holo Plus is the right example, but assuming it is, does that cost include transportation? Does that include any foundation etc for a unit like that? You can pick any geography you’d like, just be specific. What would you expect, and let's just assume a flat site, from an all-in cost standpoint. How much does the sort of post modules leaving your factory end up adding in costs?

DROP Structures

Yeah, there's a massive range on that. And that's one thing that I don't think clients or for us, it's communicating that, “hey, this is something that's outside of our control but we will help with this whole process.”

Prefab Review

And I understand that there could be a tremendous range.

DROP Structures

We've got units all over the United States. So one thing that we do enjoy doing, is when someone comes back to us and they're like hey is this pricing fair? You can tell right off the bat that it's like $36,000 for 6 tubes. That's a little bit crazy. You’ve got to be doing some dynamite or something like are there other variables leading to that? And we'll work with our client on that. But with pricing, this goes back to something that in inside our company we had a conversation about. And we we're like, “do you guys like not knowing what the price is?” And nobody in our company was like, “I hate going to a website and they're like, ‘call for price.’” And so we made the decision that we would put our starting price for every single one of our units. You're not going to have to email us to find out what the starting price is.

Prefab Review

Yeah, it's smart. I think it's dumb. I think that if we made any contribution in the industry, it's that we do our best to list this, but I think you're helping your salespeople out by doing that too. Because them answering that question over and over is.

DROP Structures

Exactly. And well, our sales guys, they're like, “we're here to help clients.” So I mean they don't enjoy it when they get more answers on the website.

Prefab Review

You're using their time better if that's listed.

DROP Structures

But it gives everybody a good starting point. If someone's like, “oh, I really want this.” And they saw somewhere that it was and we had a specific situation where the price that was given went out to a lot of people was not the correct price and all of a sudden we were inundated for like three or four months because the company wouldn't change the price. And everyone's like, “oh, I saw this picture and it's this price.” And we had to say no, “it's actually 3 times that amount. That was a mistake.” So we will always provide the price for the unit. I'd say, look at it like Tesla. You can go onto the website and you can choose the car you want. They're a bit further ahead because they're well, they're Tesla. And they're amazing. To where you have a configurator and you can drag and drop put these in. And we have a lot of those options. We have a brochure that we can send out that has those options as well. I think the biggest thing is we don't want people to get sticker shock. We want clarification and communication to be clear. So with us, a really good example is transportation. If it's going to be 240 square feet or less and it can go a little bit bigger then we're having a conversation with the client and we can get you a very good and accurate transportation quote. So when you purchase your unit from us, it's all included on the site.

So we're going to California and we're gonna take a Holo plus. We know it's going to generally be about $7,000 because we're hauling it and we can actually put that price in. And one thing good about having a transportation company: pricing for third party pricing has doubled in price. So over the last three months with fuel surcharges and everything like that, we've seen transportation costs go from like $9,000 to $19,000 just because of that and we can't control that. Whereas a lot of these transportations we can control because it's in-house which is, if I got quoted $9,000 then it came back at $19,000, I could just buy a really nice used car for that price. So we will deal with that. That's the price when you pay us, it is for the unit to show up completely wrapped to your driveway. Other additional costs are going to be cranes or however you're going to offload it.

Prefab Review

I was going to say, yeah, how do you do these get installed? Via cranes? Do you roll them off the truck? Like how does that work?

DROP Structures

We've done so many different things. We've had a tilt deck that we chained to a telephone pole because that was the only way the client could do it. And we drug it off her trailer. Crane is the preferable way to do it. There is a bit of a sticker shock when people are like, “well how much is this going to cost.” And I would say sticker shock most places with the crane there for about 4 hours and some of the larger ones you're looking between $400 to $600 and that's for the larger ones if we can pull up right next to it. You're looking at about.

Prefab Review

That's not that much. I think because I'm so used to us doing these enormous modular homes with you know, 150-foot cranes for a full day. It's much more expensive.

DROP Structures

Yeah, you're looking like 27 or something like that. Exactly and then there are some crane companies, I know in California and we've done enough crane lifts that we have some really good companies we like working with. They do a minimum of either 4 hours or 8 hours just depending on the location. So there will be crane costs and then all of our units are designed to go on a bunch of different foundation options. It's one thing that we're really proud of - the way that we design these so they could go on tubes, they could go on helical screw piles, they could go on a fully finished concrete basement. They can go on stemwalls. They can go on a grade beam. They could technically sit on blocks or on grass, if necessary. Now we don't recommend that because you need a gravel pad or some substrate that's compacted. But that's where we'll work with the clients. Part of what we provide is we a foundation document so the client's like hey, we need screw piles. It's like Kate, “here are your screw pile locations. Here are the dimensions. Between this range is what they need to be. This is what we recommend for your size. Depending on where they're going, the size is dictated by geotechnical reports. And there are a lot of times where you have to get a GeoTech you have to get an RPR and all of these other things by local jurisdictions. And we have a pretty good idea of what that's going to cost.

If you were like, “hey, so what are we looking for?” So for a 240 square foot, you are looking for a foundation plan, I'd have to be awesome and say you're looking at between $40 to $400 a square foot depending on where you're at. Where you're going, Montana, is great. It's a good example.

Prefab Review

Yeah.

DROP Structures

There're a lot of places you can just drop this off, but there're actually a lot of places where you have to get dynamite involved because you're blowing out the side of the mountain to make a flat spot. And there're massive costs that separate those two.

Prefab Review

Right. And then one of the things which is true in a lot of your photography, is you see snow, which is awesome. We've done some places in Tahoe and there are areas that are like 200 pound snow loads etc. Can your units handle snow loads like that? Or are there special engineering requirements that you have to do? I mean, is that just not something you had to worry about yet?

DROP Structures

Oh no. We have a really good example. The environment that we build in, it's in Lethbridge, Alberta, which is in Southern Alberta. It's a very flat and windy place. We're about an hour and a half east of the Rockies. And just the other day it was, I’ve got to convert this to fahrenheit, I've been out of America too long. It was negative 20 and we had massive amounts of snow. So where we build, it actually makes us sound awesome. It's been very strategic actually because we deal with so many different environmental changes that our units are actually built for that. And so our snow load is actually rated for one of the heaviest snow loads in Canada. It's this location called Revel Stoke. If you're getting ski, go to revel stoke. But that's one thing that we really enjoy about being able to build in-house is that sometimes when you build an advanced framing, which is just a style of framing that is is amazing. If we do go to places that have heavier snow loads or seismic requirements that we don't deal with, or wind requirements. So like we've had a couple of units go to Miami, Florida. Having everything in-house and being able to control that, we know that when you're going to Miami that you're going to need hurricane-rated wind or hurricane wind-rated glass. We can grab that and it's very easy. There is a cost associated because it is enough.Unfortunately, everything has costs associated.

Prefab Review

On the Miami units are they also adding mini-splits or fans or something like that?

DROP Structures

So we don't send mini-splits down because of the frion, it can be considered a hazardous. But we send down plans. And the location for the mini-split to go through, we prep it for a mini-split that will actually have all the electrical in place. And it's like, “this is where you put your mini-split. And that is a warranty aspect and is really big for us. If it goes to Miami and we send a mini-split from Canada down to Miami, then the client has to find someone to deal with the warranty on the mini-split. Whereas, if someone locally puts it in, they can rate it. They actually can put a warranty on that mini-split. So if anything ever happens, there are many auxiliary options. The mini-split is the most common of our auxiliary options. We work to make sure that it is included in the design, where the location is going, but then we allow the client to purchase that so that they can actually get a local person to come and inspect and warranty that.

Prefab Review

Awesome! That's really cool. So this has been really cool learning about the history of your company. While we have experts like you, we try to ask questions that have to do with your business. In this case, it’s probably it's gonna be a little more about your business. But these are questions we get all the time. So these are our fire-round. So if you can answer in a minute or less, that's awesome, but no big deal if you can't. So, question number one. Can you talk about building these small units off the grid. We get a lot of interest in that and most companies we work with actually aren't that well equipped to do that.

DROP Structures

Yeah, so building off-grid, you have to define what off-grid is. Is it truly off-grid? No water, no electrical, no septic? And then from there, move forward. We have a bunch of different options with our off-grid units where they can be completely off-grid. Set up for solar, there're composting toilets. We can be truly off-grid or it can be partially off-grid. It's like, “hey, we actually have a septic. So we have septic and water. We don't have electrical.” That's one thing that is really important to us is to be able to take these and drop them off anywhere. The bigger question that we run into is, if it's going to be off-grid, what's the location? And can we actually get it there? We have a really cool project coming up where Helicopters are going to be involved.

Prefab Review

Really cool. Wow, that's crazy. You'll be able to do some cool videographies because I mean we've done boats to islands in Maine and Hawaii.

DROP Structures

And so we're really looking forward to that.

Prefab Review

But yeah, I haven't seen Helicopters. That'll be a first. Yeah, insurance sounds like an interesting thing there. Do you have examples of people using DROP Structures as investments? We get this all the time. Like, “these units are beautiful. Can I Just toss them on my farm and have some nice AirBnBs?”

DROP Structures

Yeah, so that is one aspect. We have a large commercial project we did down in Escalante, Utah. There's a company called Beyonder and so that's more commercial investments. So you're looking at, what I would say is, a lot of. We're moving away from a lot of the traditional go stay at a hotel to, hey, let's go have an experience. And there's a lot of companies that we were working with that we have projects upcoming with using it as a commercial. But it's more of like land development and commercial investment in regards to your question.

Prefab Review

Are there RV-style hookups? Or how does it work from a plumbing standpoint?

DROP Structures

Yeah, so we can do whatever is required. So if it's actually going into a backyard and you're hooking it up to a house, we will actually have our drop. It accepts a typical house drop. Generally, the drop for your water is an inch and a half versus an RV is like a three quarter inch. So again, that's one of the things that we continually, that's why we want to build in-house because we can very easily pivot. There are a lot of people that we find that initially start, we've had, I'd say, about 20% of our clients that are like, “hey I'm going to use this for an AirBnB. And they will. The location actually determines that a lot because, say it's going to California, it's going to be used as an AirBnB and not office. There're different rules and regulations with that one thing. What we have seen is we have had quite a few clients that have purchased our units and then they've sold their house and they've seen a dramatic increase because you can't actually pick these up with the crane and take them away. And when they actually go and sell their house, they're like, “hey, you know what, I'm going to pick this up and take it away because I'm going to do this at my next house.” We've heard of quite a few of our clients being able to get that as an actual selling feature.

Prefab Review

And then financing. How do most people finance these sort of smaller structures? Because that's a pain point for a lot of these. A lot of sort of smaller companies are just like, “ you can use home equity,” and then after that the answers get a little more complicated.

DROP Structures

Oh man, that's a great question. And so that's a problem that we are seeing all the time. Yeah, we've actually thought about starting a finance company. So if anybody is interested in starting a finance company. We have an opportunity for you.

Prefab Review

Yeah, yes, there's definitely a lot of opportunity with this.

DROP Structures

Exactly. The way that we work is: we require 50% down and move forward with that. The 50% is, we're guaranteed the job and for all intents and purposes, the guys that are working for me, when they start working we know we've got this job moving forward. Obviously, it is in the price range that some people can't actually achieve financing. It is really interesting, here in Canada, the code for it does allow for it to be classified under a mobile home.

Prefab Review

And a mobile home means? Sorry.

DROP Structures

So they can put a mortgage on it. Well yeah, on a mobile home. So it's interesting. It's a mobile home and that's another really good thing because a lot of people, when they ask what we do, just to clarify things really fast, I just say we're tiny homes but we're just not on trailers. But when you look into getting financing on a tiny home that's on a trailer, it is way different than getting financing on a mobile home. And this is one of those things from a client perspective that I there's a lot of empathy because there's not a lot out there for people other than a home equity loan. And then they just spend that money on what they want to spend. It's something that I think is really interesting because I think in the next year to two years, you're going to see a lot of companies come up and have solutions. We're going to see in the next one to two years some amazing financial opportunities in this sector that are gonna be coming up.

Prefab Review

That'd be awesome. I feel like we've seen some interesting stuff come up and honestly, most of the interesting solutions end up still being painful construction loans with like different wrapping on it. So operationally, they don't end up being that much and that easily is the biggest issue.

DROP Structures

Yeah, exactly. So whenever I think about this, I'm like, “man, if I personally did this.” Because I always like starting things, if I could get a hold of a couple of these other companies that are in the same building sector as ours, we could probably come together and be like, “hey, we have this and this and this” and there could be a $100,000,000 to $200,000,000 with the work that's just waiting there to get financing. And then I'm like, “okay, like Fannie may might look at it or something like that.”

Prefab Review

Oh yeah, easily.

DROP Structures

And that's why I think in the next year, this sector is growing so much. When you have people like Boxable and Abodu and I don't want to throw my name in there.

Prefab Review

Yeah, there's if you're including the like a full-blown 1,200 square foot ADU providers. There are hundreds of millions of dollars of volume in probably California alone.

DROP Structures

Yeah, so I think that's this sector. Outside of this sector, like in finance, instead of the building, I'm really interested in seeing that and I think once something happens, it's going to blow the sector wide-open, more than it is right now.

Prefab Review

Yeah, affordability. I'll definitely agree. Cool and then I guess last question but you talked about this a little bit. So we get this question constantly - so from a site selection. So if I love DROP Structures and I want to put one of the bigger ones either in my backyard or on a piece of land I own, what are the, I mean, I guess with your helicopter you have quite a variety. But for typical projects, what are the things that homeowners should evaluate to understand, is this a fit?

DROP Structures

I think that they need to go back and just really ask themselves, “okay, why am I getting this? What is the intent and purpose of this? And is that intent and purpose worth going through the process of there being things that I don't know about that I'm going to have to deal with?” Contacting contractors to get a quote for the foundation, dealing with city inspectors for getting their utilities ran, their electrical ran. A lot of just like, “hey, why am I doing this?” And then if they're like, “this is why I'm doing this,” then there will be a lot of hurdles that they're going to have to look at for their site. And it could be like, “hey, I'm on a slope, the backyard slopes. It's got like a 10-degree slope. If you can't drive an F-350 along the side of your house to a flat spot in the backyard, then there are going to be things that you're going to have to deal with. That's where, in that situation, I really recommend when you're looking at a site, the person or the company that you work with, there're some really good companies out there, I'd like to think that we're one of them as well. That the people that you end up having the conversation with will be able to help you and negotiate those different things.

Prefab Review

Yeah and you guys have you, I assume you have done pretty steep slopes with like post and beam or big pylon additions.

DROP Structures

Yeah, we've done, oh, man. We've done anything and everything. We've worked with the Army Corps of engineers on marshlands. And that project never ended up going forward just because they had a site in place and they were able to go to a different site right next to it that was more feasible. So we've done almost anything and everything. It feels like and yeah I really enjoy it. Some sites that we see because generally on the Zoom calls we will actually have the client usually they're on an Android or an iPhone that they can video. They'll actually go in the backyard and show us the site. And we'll Google Earth-it and we'll do topographs. That's where cranes are really awesome because the cranes usually show up and the cranes have to do a site visit so they make sure they can do it. There're some sites that we’re like, “hey, this is really easy” that ended up becoming really hard. And then there's some that we’re like, “oh man, I don't know about this one.” And then it becomes really easy. Again, that's part of the transportation. Whenever we send units down, the drivers have been to almost every site and they're a huge asset for on-site work. One time the crane company actually admitted, they didn't come to the site and there was huge power lines and they're like, “we just talked with the client and were like, ‘hey do you mind if we actually pull this post on this fence because if we do this, the crane can back in here and we can get this done.’” And we ended up making it work.

Prefab Review

That's cool. Thank you so much. This has been awesome to learn both and get your knowledge on these issues and also learn a bunch about DROP. Final question, we ask this to everyone - what are you most excited about for your company or for the industry in the near future?

DROP Structures

Two things. One we touched on - I think the finance aspect, which actually has nothing to do with our company specifically but with the general sector as a whole. I'm really interested in seeing what happens in financing. And then for our company personally. I'm really excited that we're still growing. I have an amazing team. There's me, Connor, who's an owner, Casey, David, my wife. This is the whole team that we have and we've done this over the last three years. And the way that we have grown. And I think we have such an amazing team. The guys in the back, Kyle, Trey, and Key. And we're really excited about where this company is going in the next year or two years. And a lot of the different opportunities. And I'll also release a lot of the units that we have built that nobody's ever seen. I mean have a 640 square foot, 2-bedroom full bath, full kitchen, that no one's ever seen. And just seeing the traction and seeing a lot of the new clients coming in and meeting new people.

Prefab Review

Cool. That's amazing. Well anyway, it sounds like, I didn't realize that you actually started in the last five years or so, so that's really cool. How much progress you've made and I'm sure you feel that way.

DROP Structures

Oh, you just see it in the gray hair, man.

Prefab Review

Yeah, that might not translate to podcasts. But I assure you anyway, thanks again, Ryan. This was great. For more information about Ryan and DROP Structures - dropstructors.ca and as always you can get information about the entire industry at prefabreview.com

DROP Structures

Awesome! Thank you very much.

Prefab Review

Thanks again.

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