Since no paint or sealant is needed to protect it from weather and insect damage, cedar is ideal for blue bird houses. Cedar also has a rough surface that's easy to climb, which will help babies when they leave the nest.
The Entrance Hole
Bluebirds prefer small openings and a hole of 1 1/4 to 1 1/2 inches can keep out larger birds that might threaten them. You can also add a predator guard by attaching a 3/4 inch block to the front of your bird house before drilling your hole. This will keep squirrels from enlarging the opening and prevent most predators from reaching in and grabbing the eggs or baby birds.
Too much heat can keep eggs from hatching and force bluebirds to abandon the nest. That's why the roof of your nest box should have enough overhang to keep direct sunlight away from the entrance hole.
Most birds never use outside perches, so they don't need a perch that will make a predator's job easier. Since bluebirds can land and perch in the entrance hole, there's no need to add another perch.
Ventilation and Drainage
Leave a 1/4 inch gap between the roof and the sides, to allow heat and water vapor to escape. You should also drill holes in the floor, to let water out and avoid conditions that breed disease-causing fungus or mold.
Attach the front of the bird house, or one of the sides, with pivot screws or hinges, to give yourself access to the inside. This will make it easy to clean the nest box between uses.
Bluebirds like their nests 4 to 15 feet off the ground, in an open area, but a height of 5 feet works best for the birds and the bird house owner. The entrance of your bird house should face north or east, to reduce exposure to sunlight and prevailing winds.
Birds like to nest in dead trees, so this is a good place to mount your nest box. A post or pole is even better, since birds can find it easily and predators will have a hard time climbing it.