Nathaniel Barrett’s 500 Fitzhugh

 

Nathaniel Barrett, a Dallas-based accountant, attended IncDev’s second workshop in Oak Cliff, TX in 2016. Going into the training, he had a side-hustle development project in mind, but working with IncDev cofounder Monte Anderson helped him realize that the project wasn’t doable. Disappointed but undeterred, Nathaniel went back to his Old East Dallas community and purchased an abandoned commercial building on the 500 block of S Fitzhugh Ave, just down the street from his house, that had been on the market for years with no interest.

Nathaniel says it quickly became evident why the nearly 9000 square foot space hadn’t sold; it was “in terrible, terrible shape.” He thinks many developers in his shoes would have torn it down and built from scratch. But Nathaniel loves the history of his 150 year-old neighborhood, renovated by entrepreneurs and makers who transformed tattered warehouses into thriving clubs and social venues, and he wanted to preserve it.

The $1 million project went over-budget, costing Nathaniel $1.3 million in the end. The only building elements that didn’t need to be replaced were the foundation, some floors, the exterior brick, and the original trusses. For a first-time developer it was a lot to take on and Nathaniel believes he was naïve.

“Once I’d raised the additional money it wasn’t that hard, but it brought me a lot of stress. I started grinding my teeth at night, and I had to buy a night guard. I took a second mortgage on my house, I sold all my stock in the company I used to work for, and I borrowed $150,000 from family and friends,” he explained.

He remembers IncDev cofounder John Anderson telling him that the project was the equivalent of skipping a master’s degree and going straight to a PhD.

“And I was studying every night until midnight to get a C-,” Nathaniel laughed

In hindsight, Nathaniel says a lot of his stress could have been avoided and urges small developers to learn from his mistakes. His first piece of advice is to always have a contingency plan if you need more money. Nathaniel relied too much on early cost estimates and was overwhelmed when things didn’t work out as expected. He also encouraged developers to take the time to understand each piece of construction work that needs to be done in order to ask contractors the right questions.

With perseverance and guidance from IncDev, Nathaniel’s company Barrett Urban Development completed renovation in the summer of 2017. Their work maintained the building’s original façade while giving tenants the freedom to make the suites their own. Nathaniel signed the first tenant in June 2017, a tattoo and body modification shop that occupies a 2,110 sf space for $2,405/mo. Through word of mouth in the community, the next three spaces filled quickly - a 1,834 sf ice cream and juice store ($2,425/mo), a 1,280 sf tortilleria ($1,800/mo), and a 1,280 sf studio dedicated to introducing kids to STEM ($1,700/mo). The last suite in Nathaniel’s building, 1,280 sf going for $1,500/mo, took much longer to fill, which he believes was mostly due to a lack of parking. After Nathaniel built an additional parking lot, the space was leased to a tax firm in December 2018.

Today, the dust has settled and Nathaniel’s stress has faded. What remains is a newly invigorated community. The street is livelier than Nathaniel has ever seen it, and he says it all feels worthwhile. The building cash flows well; when he crunched the numbers, Nathaniel saw that the project still made a profit despite the overruns. The building is now worth $1.5 million, and Nathaniel anticipates all investors will be paid off in the next two years.

After completing the large commercial space, Nathaniel transitioned to something smaller: a 3,200 sf fourplex in the same neighborhood. This project, though smaller and better funded, presented its own set of challenges.

“There were obviously some plumbing issues when it was originally built, and over the years, there’s a lot of rot from that,” he said. “There was a lot of work done incorrectly, so we’re trying to slowly fix all that.”

Even so, the four two-bedroom units are cash flowing well, each bringing in $875/mo, and the plumbing issues gave him the opportunity to work with construction expert and fellow IncDev alumnus Pete Cioe. The pair have been partnering on projects in Dallas ever since. 

Nathaniel and Pete are renovating a Vermont Village church into a mixed-use space and recently closed on a new building in the area. There are no definite plans for the newest project yet, but the guys are excited to clean it up and start moving forward. They know that every project will have its challenges and stressors, but Nathaniel said that when he sees his neighbors going for walks, supporting local businesses, and showing pride in the community, the rewards are palpable.