Jason Zellner, First Weber + Winfield Homes, Talks FDL Real Estate + Homebuilding

YPF Event at Thelma

Adam: That was a really fun event.
Thelma — that venue is awesome. And just seems like a really good group of
people. We're getting more and more involved with Envision, and the young
professionals in Fond du Lac. Becca and Josh have done a great job of getting
WiLL more involved with that organization. Just being at the event — just a
really good vibe, good group of people. And congrats on the nomination.

Jason: Oh, thank you. I completely
agree, it is a great event. Normally I don't get to go to it because I play
volleyball — I've played volleyball for the past 20 years on Thursday nights.

Adam: You're on the four-night-a-week
schedule?

Jason: No, just one night. I like to
keep a variety — we won't go into that. But this is the first event, so I
actually requested a bye for that night so the team could come watch us play or
do the event. It was really cool to be there and see what all goes into it.

Adam: It's all volunteer stuff — just
what the Megans alone do, and everyone else that's involved. The only two
people that got paid there are Jovi and Crystal Decker. They're the only ones
that actually get paid to do what they do. Everything else is — and that's what
you could sense, like everybody's there for the right reasons. Sometimes with
events like that, that's not the vibe, but everybody there is giving back to
the community, wanting to grow professionally, but also always giving back.

Jason: And I think a lot of people
don't even realize — so many of the businesses, like Thelma, I'm sure gave us a
great deal for the venue. The flowers were probably donated by Hensey Floral,
wherever they came from.

Adam: And the podcasting studio —

Jason: Yeah, the podcasting studio, it
was all included. So businesses such as you guys, for sure, to really help and
go along with the vibe.

From Dairy Farm to Electrician

Adam: How did you get into real estate
and home building? What was that progression like?

Jason: I'll start from the beginning.
I grew up on a dairy farm —

Adam: I have a few people around here
like that.

Jason: Right. I hated it. It was
something that I did not want at all. I just looked at my parents and it just
seemed god-awful. I had to do chores before I went to school, come home and do
chores again. You don't really make any money, and the government sets your
wage, the product you're selling — so there's just no freedom to it at all. We
had some projects that we had done on the farm that were electricity-related,
and it always just kind of interested me as to how that worked. You can't see
it — the electrons flow and then stuff, you know, lights turn on. So it sparked
an interest. As soon as I could, I got an apprenticeship with Spec Electric,
which is local in town here. I started doing that. I'll never forget, in high
school, we had a guy from the local — I don't know, he was a construction guy,
I forget what he was, some consultant or whatever. He's like, yeah, there's so
much need for construction workers. If you get into that, you're going to have
work for as long as you can remember.

Jason: I got my apprenticeship, and
then I actually bought a house right away. I bought a house at 19. I didn't
want to rent, so I rented for six months and bought a house. Then I think two
years later, we had the recession, and suddenly I'm down working short hours —
32 weeks, still had the bills to pay. So I had to get a second job. I ended up
getting a job working at Kohl's.

Adam: Which recession was that?

Jason: That would have been the
beginning of 2002.

Adam: So the dot-com crash.

Jason: Yeah, things just kind of
slowed down. I remember getting a job at Kohl's for six dollars an hour,
loading trucks — it was just awful. But you've got to do what you've got to do.

Getting Into Real Estate

Jason: And then my buddy mentioned
real estate. I never considered real estate. I always liked the idea of being a
landlord, but I never thought of myself as a sales person, so to speak. He's
like, oh, you should do this. I'm like, I don't know. After a couple of years
of things being slow, I'm like, well, I have nothing else to do, I'll read the
books and watch the videos. So I got my license, which was the easy part. The
main reason was just to get into rental properties — that's what I wanted to
do, which the timing kind of worked out better. I got some really good deals in
that regard. I started buying — the first one was in 2006, which was still a
little bit — things were still coming down. The first one I overpaid for quite
a bit, still working on that one. But after that it worked out much better. I
came to find that I really enjoyed helping people go through that process of
buying a house. Having the construction background —

Adam: You can add a lot of value in a
lot of areas during that buying process.

Jason: Yeah, exactly. I know what's
behind the drywall. I know how much things cost and what it takes to fix them.
So I found myself to be a really good resource, and I just loved it. There's
nothing better than having that close relationship with someone for two months
or two years — however long it takes to buy a house — and then you'd see them a
year later and they just love the home, they're starting to raise a family in
it. It's just so fulfilling within itself.

The Farming Work Ethic

Adam: It's interesting when you talk
about that. One thing I've really realized as I've gotten older is how
important the farming culture and work ethic is to the area. Growing up, I grew
up in Eden — you just assume that's the way the world is. You assume that every
other house or every other piece of property is a piece of farmland. It's
interesting — when I was in grade school, I would say half of the kids in the
class came from farming families. My dad talks about how when he was in grade
school, he went to grade school in the same town — he was the only one in
school that was not part of a farming family. But that work ethic, going from
farming to an interest in electrical or mechanical things, or fixing the
combine, or all the things that you need to do on the farm — it's interesting
as you get into other industries and other markets, how those skill sets just
follow you as you go.

Jason: Yeah, definitely. You just have
to figure stuff out, you have to. There's no ifs about it. This doesn't work —
how do we make it work? You can't just say, oh, it doesn't work, we're not
going to finish the day today. You have to make it happen.

Adam: I remember I interviewed a kid —
it was probably five years ago — for an assembly position on the shop floor. He
had just gotten done rebuilding a combine, the entire combine, every nut and
bolt, all the electrical. Just talking to this guy — he didn't even appreciate
how much knowledge he had. It was just really interesting to see that
perspective, how you can learn really anything if you have to.

The Trades Shortage

Jason: Yeah. I worked — so I was an
electrician up until six or seven years ago. I did real estate while I was an
electrician, double duty. So yeah, I did that for 15 years. I actually worked
in Milwaukee for 10 years. You talk about the farming community in the
background — nothing against Milwaukee people, but you get kids that are off
the street, they're 20 years old, they don't know what a drill is, how to screw
in a screw, which end of the hammer to use. It's pretty amazing. Now my
eight-year-old son — obviously I have him help me at the rental properties — he
does better than a lot of the kids that I worked with back then.

Adam: And that was one thing I wanted
to talk about — just where you see the trades going. I read something recently:
for every five people retiring in the trades, there are only two people
replacing them. My dads and uncles and — I've been hearing for 20 years that
there's a shortage of people in the trades, and clearly that's accelerating.
And we look at the average age of somebody in the trades — they're a little bit
on the older side at times. So what do you think — whether home builders or
industrial contractors, commercial contractors — what can be done to kind of
reverse that trend?

Jason: That's the question of the day.
It's really hard to get people interested in that.

Adam: Why do you think that is?

Jason: Well, people younger than me —
I'm 40 now — I wasn't necessarily in the generation of just the technology and
all that stuff. I think that's part of it. People do everything from behind a
computer or a tablet, or whatever the case may be. They have no interest in
getting dirty and working in that sort of environment. That's honestly the
reason I got out of it — you're working in the cold all day. The pay is great,
but it's hardly enjoyable. It's really hard work. There's great opportunity too
if you're going to be a job foreman or something like that where you don't have
to do that type of stuff. But someone has to. The pay is just going to continue
to absolutely — at some point it's going to get to a point where, hey, I can
make $100K a year as an electrician, as opposed to sitting behind a computer
all day making $50K. Some people, depending on what they want to do, can make
that work. I think it's just the money factor, and prices are just going to
continue to rise for those types of people.

Jason: You do still have — there are
some good programs with some of the schools, like Fond du Lac High School. They
have, I forget what it's called, a trades program that they're trying to get
people to do, which is really good. But you still have to want it. Whether they
take it in high school and can move on, that's great. But the reason I got into
it is because I never went to college, I just went right into that, so I had no
student loans and I was making money right away. Like I said, I bought a house
at 19, bought my first rental at 23 or 24. What a great way to accumulate
stuff, starting early. But for someone that has to go to college for four
years, and you have that student loan, and you get a late start, it's much more
difficult. If we can — that's the way that some of these employers are pushing
people, just to say, hey, you can jump ahead almost eight years, because you're
going to be so much further ahead by going into this. And then you still have
the opportunity to start your own business. You could get a van and become a
contractor of any sort if that's the type of work you like to do, or just find
the right people. So yeah, there's no short answer to it.

Appreciating the Trades

Adam: So the market will adjust from a
compensation standpoint, attract more people. That makes a lot of sense. I
think the other thing too is that there has to be a shift back towards really
appreciating those skill sets. For so many decades, people were pushed to go to
college because somebody convinced you that was the right thing to do, and you
almost felt bad in some cases about not going to college. There's been a loss
of focus on how important those types of positions are — could be electrician,
mechanical contractors, welders, machinists, press brake operators, just all
the stuff that happens in the background to really keep the world moving. I
feel like people need to appreciate that a lot more. Even if the money
adjustments happen, if there's not an appreciation for who builds things around
us, the money is not going to take care of it at all.

Jason: You're right. You have to have
kids that — there's pride to get into it. I have an 8- and 11-year-old. You
always ask them what they want to be. My daughter wants to be a teacher — they
see the teachers, they like the idea. My son wanted to be a garbage truck
driver, because he sees that. So it's interesting, the perception of kids as to
what they see that they should do. Now my daughter wants to be a doctor, so
obviously that requires college, and she doesn't understand what it's going to
take and what it's like. So it goes back to the school system as well, as to
how they portray it.

Adam: It's as much of a marketing
issue as it is anything else, at the school level, but just culture and
society. There are companies out there — large companies — that I think are
trying to shift that narrative. You look at SpaceX, Tesla, some of these other
large engineering and manufacturing companies that are doing a much better job
of making building things cool again.

Pride in Building Things

Adam: We try to do that obviously on a
much smaller scale. When we design something — we engineer, we make it — we
want our brand on it. There's a certain amount of pride that comes from — when
a sports field fires up for the first time, it doesn't matter if it's sales,
marketing, engineering, manufacturing, accounting, purchasing — everybody's
taking credit for that. Whereas in a specialized economy where part makers sell
to the sub-assembly makers, who sell to the part makers, who at some point
along the line it gets turned into a product, I think that just gets lost, and
people lose that kind of pride factor. So the narrative is shifting, but I
think that's an important component.

Jason: You hit the nail on the head.
There's nothing like turning those lights on for the first time when you're
working on a project, knowing all the work that went into it, how much it took,
all the wiring you pulled through all the studs, and the breaker didn't trip
when you turned it on for the first time — that's always a good sign.

Field Construction vs. Manufacturing Repeatability

Adam: Another interesting aspect of
home building and construction — I remember probably about a decade ago, you
just realize that contractors are manufacturing in the field, and everything is
always one-of-one. Whereas in manufacturing, you try and produce repeatability
and scale to drive costs down and increase efficiencies. The contractor world
is a difficult one, because if you're a home builder, you have a spec that you
can repeat over time, but there's just a lot of improvising and decision
making. I think that's another thing where those professions are going to be
great professions for the long term, because you cannot automate that stuff
away. I know Boston Dynamics is trying to make construction robots, where they
can move materials and things around on site, but if you're remodeling a
100-year-old house, you never know what you're going to encounter when you rip
up a wall.

Jason: Yeah. You can have panelized
homes and things of that nature, and even on some big commercial projects — I
found it interesting, there are a couple of local contractors that are
utilizing pre-built stuff. They'll have the box connected to the conduit, they'll
pre-ship it, put the panel together, and then they'll just connect it in the
field.

Adam: Faith Technologies does that.

Jason: Exactly. I think Pieper
Electric does as well. So — I was the City of Fond du Lac electrical inspector
for five years, so I got to see a lot of this stuff that I never did just
working for the company I did. It was always interesting to me. I don't think I
would have liked doing that if I was in the field being the installer — I'm
like, oh, I've got to find this piece, I just want to put it together myself,
because I know how it is. And you have a lot less waste — if you can pay
someone eight dollars an hour in an enclosed environment to put it together, as
opposed to the electrician at eighty dollars an hour, maybe it works. They
claimed it did — I asked them all the time, like, is this worth it? He's like,
oh yeah.

Pre-Built Homes & Modular Construction

Adam: I think there's going to be a
lot more of that. Our building across the street used to be a manufactured
homes building — Stearns, something like that, that moved to Chilton, I think.
But there's going to be a lot more of that. There's a company called Boxabl
that's making more or less a pre-built home that ships on a semi-trailer, and
you can unfold it and put it together in the field. So I think there's more and
more of that that's going to happen. I'm curious from a regulation standpoint —
with local building codes and licensing, how much do you think that will slow
down some of the standardization and scalability of what could happen in a
manufacturing environment?

Jason: That's the biggest issue. You
have so many municipal codes against pre-built homes, and the building codes
are so unique. As much as they try to standardize them, there's still certain
nuances within certain municipalities, every inspector has a certain kind of
thing. So short of an actual mobile home — that's a complete separate entity in
and of itself, that's got a stamp on it, that has nothing to do with the
building code — everything else needs to comply, and it's difficult to
standardize that and make it work for different locations, different
environments, different wind loads, just all kinds of different factors. By the
time you save money on the front end, do you end up with a better product
that's more valuable that someone's going to want to purchase? That's the
thing. It'll be affordable, but who's going to — does someone want to pay for
an 800-square-foot house on a tiny little lot? What's that cost going to be? Is
it going to be $175,000? Maybe you buy a 50-year-old house for the same price
that's bigger, and you upgrade it, just because it's more traditional.

Jason: That's another thing a lot of
people don't realize — when you remodel something like that, when they're
pre-built, you have a lot of different challenges. If you wanted to add on or
just remodel something inside, the construction is so much different that it
makes it so much more of a challenge to do that. I've found a lot of buyers
that are hesitant to purchase something like that. They're very nice homes —
Wausau Homes has a really nice product — but there's still — you have that beam
down the middle, and if you wanted to finish the basement, you've got to hide
that somehow, and you can't get any mechanicals through there, so you're going
around it. I try to keep an open mind of that stuff, but it's never easy.

Fond du Lac Square & Post-WWII Housing

Adam: That type of transition is not
easy. The old Fond du Lac — I know one of the more popular older house layouts
in Fond du Lac is the Fond du Lac Square. Wasn't that a Sears catalog order
after World War II?

Jason: I honestly don't know the
history of it.

Adam: After World War II, I know Sears
had all of these — they weren't pre-built, but more or less pre-spec,
pre-configured — and I think the Fond du Lac Square was a Sears order. So
that's interesting — kind of how things do come back full circle at some point.

Jason: As you probably know too, there
are a bunch of homes that were built in the 60s, 70s, after the war — all of
these people just came and needed jobs, and they just created all these ranch
homes that were almost identical. I used to live on Sterling Drive, and you
could look down the block and you can almost tell that all the houses were
almost exactly the same, just with some different changes. Very interesting as
to how some of that goes.

COVID's Impact on Real Estate

Adam: What was the COVID era like in
terms of real estate and home building versus other economic downturns? It was
interesting where the previous recession was largely driven from issues in real
estate and home loans and things like that. This one was completely different
when it came to real estate and home building.

Jason: Correct, yeah. This was very
much inventory-driven. Just very little inventory, still a lot of demand. I was
in real estate a lot longer than I was in home building. When COVID hit, no one
knew what was going to happen. Suddenly, oh, we can't go out, are you an
essential service, all this stuff — all the chaos. I'm like, well, I'm just
going to keep doing what I do until someone says I can't — that's just kind of
the way I do things. I remember, can I still show houses? Well, I can't sell a
house virtually, you've got to get a feel for it. So I still showed houses, I
did what I could, took any precaution. But people were stuck at home so much
that they realized that they didn't like their house anymore. That was it. So
what do you do? You're like, god, I hate this place, look at other houses. And
interest rates were extremely low, so they just had time to really look into
that. That was a big factor for the demand for homes.

Adam: And people were spending less
money in other areas —

Jason: Correct. So there was more
income to allocate towards remodeling. And when you're working from home, you
need more space. You need a home office — maybe two home offices. Kids weren't
going to school, so you needed a playroom or makeshift —

Adam: Spending a lot more time with
the family.

Jason: Exactly. And the stimulus
really drove a lot of it. A lot of people didn't just throw the money away.
They're like, well, here's the money. I'm still working, I'm still getting a
paycheck. Now suddenly I have extra down payment. With the interest rates as
low as they were, suddenly the person that could typically afford a $200,000
mortgage payment — suddenly a $300,000 mortgage payment was not unattainable at
those interest rates, at 2.8% or whatever we got down to. That's what everybody
looks at — they look at their payment, they're like, oh, I can afford this.
Suddenly the price goes up and up. So anything above $200,000, probably all the
way up to $400,000, you just had a lot more demand than you ever would before.
First-time home buyers were buying $300,000 homes, because they're used to
paying $1,000 a month for rent. You take that, that gets you a pretty good
mortgage payment if you're used to that payment. Just a lot of those factors
played into that.

Supply Chain & Home Building

Jason: As far as home building, I'll
be honest — I bought into it just as COVID was starting. I'm like, oh god, is
this the right thing to do? No one had any idea, but I already committed to it.
When I commit to something, I'm going to move forward with it. I'm like, well,
we'll hope for the best.

Adam: Well, they're very related. You
have a spike in demand, which is going to affect existing inventory, and then
you have a way to produce more inventory via home building. I'm sure the
challenge there is — everything is so connected, where then all the supply
houses run out of parts to actually build the houses. That's what's
interesting, where — never has the word “supply chain” been talked about so
much at family gatherings, right? Everybody's got this lesson in supply chain
and logistics in the last two years. I think if there's a positive in all this
— and there's always positives — people are absolutely more aware of how
interconnected everything is, and how important local manufacturing is, and
local relationships. That is one of the positive things that will come from
this.

Jason: Yeah, I completely agree.

Adam: So how has home building been
the last 12 months?

Jason: It's been still challenging —
trying to get people to understand where the prices are going. If I've been
working with some people for a couple years where I'll send them the pricing,
I'm like, well, here's where it is today. You try to be as upfront and accurate
as you possibly can, but as you know, the material prices are so unpredictable,
change day-to-day. You're like, well, here's your price today, this is what we
have. If you come back to me in a month, I can't guarantee that price. I can
hold it for a week, maybe, and hope for the best. But you also have some people
that are thinking prices are going to come down, and I just don't see it
happening anytime soon.

Adam: If any crazy disaster — if they
come down, there's going to be a lot bigger issues that we're all dealing with.
Because you can't ramp up the supply of parts overnight. You have to retool
factories, you have to build more factories, which requires parts to build
those factories. So if suddenly there's a big oversupply, it means demand has
crashed. And like we talked about before, we're looking at labor shortages too.
I don't think the labor costs have caught up yet to what they could be
charging.

Jason: Hopefully none of my
subcontractors are listening, but yeah, it's only a matter of time before that
stuff just keeps going up. Once again, we need people to do it.

Winfield Homes' Pricing Approach

Adam: We're putting in a new building
— working with Keller Builders, they've been great to work with. We weren't
exactly sure on the timing of everything, and we do a lot of steel and aluminum
production for light poles and other parts. We got nine price increases last
year on steel, aluminum, raw materials, at the same time we were designing this
building and trying to make a commitment to the building company and the
contractor. Man, things week to week — suddenly Keller would come back and
they're nice, they're passing through costs, at least that's what they said
they were doing. It's up another — you know, it was a good chunk of change. So
you're locking that in and hoping that you're hedging against further raw
material increases. You're not getting locked in at some rate where, since
things go back down — there's a lot of uncertainty on the residential side and
the industrial side.

Jason: Exactly. One thing we do at
Winfield Homes is we actually lock in the price. We don't build any clauses in,
because we'll actually order everything right away. We'll commit to our
suppliers and say, hey, we're building this house, we need you to honor this
price for us. So we don't build in any increases or anything like that. I know
a lot of companies were.

Adam: It must be tough — when you
don't know what you're going to get stuff for. Especially when you're not going
to start for a while.

Jason: It's easier to do on the
residential side than the commercial side, obviously.

Adam: And that's where, when you talk
about costs continuing to go up — labor costs, raw material costs — one thing
that's happened the last 12 to 18 months is the end users or the owners have
not seen nearly as much of a price increase, because the supply chain is
absorbing so much of these impacts. So even from a sales standpoint, if they're
increasing prices, profitability and margin and everything else continues to be
a major challenge for everybody. Definitely the companies making the parts, the
raw materials, they're eating a little bit, and then the next person is, and
the next person is. Eventually, reality is reality, and everybody has to
adjust, and I completely agree, I don't think that has fully happened yet.

Jason: It's a matter of time.

The Ledge Games & Fond du Lac

Adam: Anything else you want to talk
about — Fond du Lac related, or real estate, home building?

Jason: I love the Ledge Games you guys
do.

Adam: Did you compete this year?

Jason: I did. I competed the last
three or four years.

Adam: Nice.

Jason: It's pretty fun. I love getting
out there and being competitive. I'm competitive at what I do, so throwing some
axes around and some arrows.

Adam: That's a great event. Everybody
looks forward to that — fall-time time frame. It's a nice time in Wisconsin,
before it gets too cold, like it has been the last week. It's been pretty cold.

Jason: If you guys want to get
involved with that event, just talk to Becca.

Adam: It's great that you guys do
that. It's just one of the small examples that we have in this area that, for
people that aren't familiar with it, you have to kind of just pay attention,
keep your eyes open to these things.

Jason: Are you saying we need to
market it better?

Adam: No, I'm saying other events need
— YPF could do something to get involved with that somehow. I think it'd be
really cool. There's, you know, Fond du Lac in general, we still need to keep
working to have more attraction for young people, getting them to want to be
here long term.

Jason: Yeah, I think we have so much
potential in the community with Kiefer Park. We have really nice bike trails,
great golf courses, we have the lake. I'm not even — I don't even use the lake,
and it's still too cool to have. So I think we just need to try to keep an open
mind a little bit more and embrace what we have, because we have something
really cool — great people. Your company is so cool, just to have an atmosphere
like this. We just had a presentation from Excel Engineering.

Adam: Oh yeah.

Jason: Man, they're a great local
firm.

Adam: Big time, and just huge
addition.

Jason: Super cool people, and just all
local. They wanted to commit to this. We need to work with those types of
companies to keep them happy, reinvest at every level, and show them that we
appreciate what they do, because they do a lot.

Adam: Absolutely. Well man, thanks for
all you do as well. Thanks for stopping by. We'll talk soon.

Jason: Alright.