Learn How To Underwrite Commercial Real Estate With Hunter Jarvis

On This Episode of Peak Market Watch...

Learn How To Underwrite Commercial Real Estate With Hunter Jarvis

Hunter Jarvis, Owner of Legacy Home Buyers, LLC and previous Director of Acquisitions at BPH Capital, as our featured guest speaker. Anton Mattli will dive into Hunter’s expertise in underwriting massive commercial real estate deals and his own perspectives in buying and selling during COVID-19.

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Show Host

Guest Speaker

Connect with Hunter Jarvis

  • Email: hmjarvis6@gmail.com
  • https://www.legacybuyers.com/our-company/

VIDEO TRANSCRIPTION

have you with us today why don’t you
00:02
give us a brief background about you as
00:04
well as
00:05
bph capital yeah absolutely thank you
00:08
for having me on anton
00:10
a little bit about me i am based here in
00:12
dallas texas i was born and raised here
00:16
i’ve been in the multi-family space on
00:18
the acquisition side
00:19
since about 2017. i started with a
00:23
i started with a private equity group
00:25
that was based out of tampa
00:27
and i was just an acquisitions analyst
00:30
so i was underwriting deals all day long
00:33
it was a big shop we owned about 14 000
00:35
units
00:37
across multiple states in the south and
00:40
so it gave me a lot of exposure to
00:43
to deal flow to underwriting to
00:46
financing
00:47
to equity partners how to structure a
00:49
deal negotiate a deal
00:52
so it was really it was really a
00:54
valuable experience for me at a young
00:56
age it was my very first position
00:58
in the multi-family space and so over
01:01
about a year and a half time period
01:02
maybe even two years
01:04
i underwrote you know hundreds of
01:06
millions of dollars of real estate deals
01:08
and then i was on the acquisition team
01:10
that was a part of actually running the
01:11
diligence
01:12
and and taking down these assets
01:16
since that time i’ve transitioned to bph
01:18
capital
01:19
as you mentioned in the introduction and
01:23
bph is based out of la out of los
01:26
angeles but i
01:28
office out of dallas and just kind of
01:30
head up the acquisitions in the state of
01:32
texas and
01:33
in surrounding states we’re a little bit
01:35
of a smaller group
01:37
very lean so we all wear multiple hats
01:41
but we are slowly and surely kind of
01:44
building our team and um we’ve added
01:46
personnel this year
01:48
and we’ve got very aggressive uh growth
01:51
targets to hit
01:52
so 2021 should be a pretty busy year for
01:55
us
01:56
very good to hear uh so just to give a
01:59
little bit of a
02:00
picture here from my experience of how i
02:03
got to know you
02:05
uh i i saw uh some of your underwritings
02:09
of of deals right yes you may not be in
02:11
that market for that long but i
02:14
i must say i was very impressed with uh
02:16
with you and
02:17
writing skills uh compared to what some
02:19
of the other underwriting
02:23
tools that we have seen as well as the
02:26
packages that were put together
02:29
so yes you may not have been in in in
02:31
the multi-family market for that long
02:33
but you definitely have
02:35
have built up your knowledge very
02:38
quickly
02:38
right so i think that’s important for
02:41
for the audience to understand that
02:44
you you have jumped right in and as you
02:47
mentioned with the previous
02:48
group you worked with you have had the
02:51
benefit of
02:53
of underwriting a massive amount of
02:55
deals and obviously with
02:58
bph capital you have been continuing to
03:01
do so
03:03
so that’s uh that’s great uh
03:06
now uh i would say uh
03:09
with bph i i know that you recently sold
03:12
a property here in texas
03:14
uh and uh you did that uh
03:18
just last year at the end of last year
03:20
and
03:21
uh as we all know uh 2020
03:24
uh was essentially overshadowed
03:28
for everyone uh with call with 19.
03:32
so it would be kind of interest for
03:34
interesting for our listeners to hear
03:37
from you
03:38
how you have been able to get through
03:40
through the year
03:41
as as property owners and also how it
03:44
all worked out with
03:46
selling that property in a in an
03:48
environment that obviously
03:50
was challenging for for everyone
03:53
who is active in in commercial real
03:55
estate
03:57
yeah absolutely i appreciate the
04:01
uh mention of my underwriting skills
04:02
that was nice to you to state
04:04
but um but yeah fast forward to 2020 and
04:07
it was
04:08
it was a very interesting year as it was
04:10
for everybody else
04:11
because i mean for us though we were in
04:13
the middle of
04:14
both an acquisition and then getting
04:16
ready teeing up a a disposition in texas
04:19
as you mentioned
04:20
and i i would i would say fortunately
04:22
for us probably
04:24
um we sold that asset towards the end of
04:27
the
04:27
end of the year kind of when ever i
04:29
think the shock factor
04:30
of covid had worn off a little bit um
04:34
and and groups were getting much more
04:36
comfortable with with the situation
04:38
with more comfortable with what we’re
04:39
dealing with lenders were more
04:41
comfortable
04:42
with it um and so we
04:45
experienced you know really a pretty
04:47
normal
04:48
disposition process from my standpoint
04:51
um
04:52
now you are always dealing with um kind
04:55
of
04:55
the little the little coveted
04:57
contingencies that go into
04:58
you know the daily life that we live
05:01
right now with
05:02
with lender financing contingencies and
05:04
hold backs and
05:05
and things like that but we really
05:07
haven’t felt that it impacted
05:09
the uh the sale price of our asset at
05:11
all it was a very aggressive
05:13
bidding process ultimately it came down
05:16
to a few groups
05:17
um all of them um were coming out of
05:20
1031 transactions they needed to place
05:23
money so um i think that that
05:26
led to um why it was such an aggressive
05:29
bidding process and
05:31
and really at the end of the day why we
05:33
got a price that we felt
05:34
great about yeah yeah very good
05:38
and i think one obviously what is
05:40
important in
05:41
uh doing that time as a seller is that
05:45
you
05:45
make sure that your collections stay up
05:48
so what what did you do there to ensure
05:51
that you didn’t have a collection drop
05:53
and
05:53
obviously that would have an impact on
05:56
also on loan proceeds potentially if the
05:58
noise
05:59
right yeah well it was a couple of
06:02
factors for us
06:03
um in our opinion um first of all the
06:06
the location of the asset the market
06:08
that it was in so it was in el paso
06:09
texas
06:10
um and el paso really did well um it’s a
06:13
very
06:14
it’s a smaller it’s not as big as what
06:16
you would imagine it’s not going to be a
06:18
dallas or san antonio or houston or
06:19
austin but
06:20
it’s a very steady eddy market
06:22
diversified local economy
06:24
so we did not have a big tenant base
06:26
that was concentrated in any one
06:28
field or company or anything like that
06:31
so
06:32
that helped with the collections as well
06:34
as um
06:35
just the fact that we had really good
06:37
property management um so we do not
06:40
uh self-manage we third-party all of our
06:42
property management
06:44
um but the group that we have a
06:46
relationship with has
06:47
has done a a great job for us on that
06:50
asset and
06:51
all of our assets across the board um in
06:54
in texas
06:55
so that helped out tremendously yeah
06:57
that’s uh
06:58
that’s great to hear now when we
07:02
obviously here you were on the selling
07:03
side so with uh
07:05
with a great performance at the asset
07:08
level
07:09
and uh working towards year end with
07:12
multiple 1031 buyers that were bidding
07:14
for the property that
07:16
was a perfect situation for you
07:18
undoubtedly
07:20
but overall i would say from what we
07:22
have seen it was really 2020 was
07:24
a multi-family at least was definitely
07:28
a seller’s market and i would say that
07:32
was also
07:32
to your benefit so my question for you
07:35
is since you’re not only on the selling
07:37
side but also want to expand
07:39
how did you experience uh 2020
07:43
from a buyer perspective yeah so
07:46
um we came out of nmhc in orlando this
07:50
year was
07:51
it’s january every year this year it was
07:53
uh 2020 it was in january so we came out
07:55
hot everybody
07:56
you know all the brokers push their
07:58
deals out
08:00
a lot a lot of deal flow a lot of
08:01
touring a lot of
08:03
you know aggressive bidding and um and
08:06
then everything just kind of
08:07
came to a screeching halt for a little
08:08
while you know when when march came
08:10
around and
08:11
everybody kind of realized what we were
08:13
dealing with it was just kind of a
08:15
standstill
08:16
for for a little while i would say
08:18
through the spring and even into the
08:19
summer a little bit
08:21
because what what you had was you had
08:24
buyers that were expecting some kind
08:26
of you know quote-unquote cobit discount
08:29
um but you had sellers who really
08:31
weren’t
08:32
um hurting yet or or at all
08:35
you know collections especially in the
08:38
texas market
08:39
for the most part held pretty pretty
08:41
steady um
08:42
all the way through so you didn’t see as
08:44
much
08:45
of the distressed play that we all maybe
08:47
kind of thought that we would see
08:49
at the beginning of the year um so it
08:52
was kind of a standoff situation where
08:53
you just had
08:55
he just had unrealistic expectations
08:56
from the buyer side that there was going
08:58
to be a discount there and then i think
09:00
once summer rolled around and people got
09:02
on with life
09:03
um and and kind of dealing with with
09:05
what we’re dealing with
09:07
we realized that the market is great you
09:09
know it’s it’s a good time to still buy
09:10
it as a seller’s market but there are
09:12
still deals to be done
09:14
um and and that’s what we did as well i
09:16
mean we um
09:17
we acquired a 568 unit portfolio
09:20
in northeast dallas went under contract
09:24
over the summer and closed on in the
09:25
fall
09:26
so we were still buying and we realized
09:29
that
09:29
everybody else was still buying as well
09:31
yeah very good
09:33
did you see any particular challenges
09:36
with with that purchase
09:37
due to call in 19 yeah absolutely i mean
09:42
you know when we went under contract on
09:44
that property um
09:46
you know it was it was during a time
09:48
when um there’s still a lot of
09:50
uncertainty
09:51
so the way that we the way that we’re
09:54
structured we have an internal
09:55
discretionary fund
09:56
that we use um to jv
09:59
with um limited partners right so we’re
10:02
we’re going out to a big stable of
10:05
family offices private equity groups
10:07
pension funds that we have relationships
10:09
with
10:10
and at the time a lot of those phones
10:12
still weren’t getting
10:13
answered you know people weren’t in the
10:15
office everybody in new york was in
10:18
you know the the red zone right so
10:20
everybody’s working out of their
10:20
apartment with
10:21
with their kids on their back and you
10:24
know so so voicemails went unreturned
10:26
emails went underturned from some of our
10:28
typical groups
10:30
um so that was challenging for a little
10:32
while but
10:33
fortunately um fortunately we were able
10:36
to find more than enough
10:38
uh equity and we had we have great
10:40
partners on that on that deal but
10:42
um so from the equity standpoint it was
10:43
challenging and then also from the debt
10:45
side
10:45
everybody’s kind of dealing with the
10:46
same p i reserve um
10:49
that uh that’s just market standard
10:51
right now so that’s something that we
10:52
needed to account for
10:53
yeah that’s uh it’s a very important
10:56
point
10:57
right so i think the uh the advantage
11:01
with
11:01
that is uh is that it it adds you
11:04
an additional cushion to it uh the
11:07
disadvantage is that the p
11:09
and i sits with the lender right so
11:11
that’s kind of the
11:13
the negative part i would say that you
11:15
don’t have control over the money but
11:18
we we always say from a lending
11:20
perspective it’s actually not a bad
11:22
thing that you have
11:23
to to have that cushion in place it’s
11:26
just a question of who has
11:28
control over it and obviously as an
11:30
owner you
11:31
you never really want that sometimes
11:32
it’s an escrow with a lender
11:34
right so so you touched a good point
11:38
right
11:38
so suddenly march and april were pretty
11:41
tough
11:42
for everyone and we also have seen
11:44
buyers getting some discounts
11:46
but uh i would say the max that we
11:49
probably
11:50
saw of what was originally asked for was
11:53
maybe five percent
11:55
off that initial price
11:58
uh whisper price or will asking price
12:00
whatever you want to call it
12:02
so it was really just a brief period and
12:04
as soon as we entered into july and
12:06
august
12:07
it reversed and it became the opposite
12:09
right so
12:10
yeah so did you feel for that portfolio
12:14
that you
12:15
uh that you had to deal with with other
12:18
strong
12:19
buying groups or was it because you had
12:21
a uh have
12:23
a a longer track record and a stronger
12:26
balance sheet with your own funds that
12:28
that helped you
12:29
to still compete with them oh yeah no it
12:32
was absolutely a competitive process for
12:35
sure
12:36
i mean it was um there there was an
12:39
original call for offer process and
12:41
and then there was uh you know your
12:42
traditional best and final process
12:44
as well and and we provided we were
12:46
vetted very hard by both
12:48
you know the the brokerage group and the
12:50
and the seller group
12:52
so we had to scratch and claw for that
12:54
deal and um
12:55
we had to you know um
12:58
exude the confidence in our abilities to
13:00
close that transaction because if it
13:02
wasn’t going to be us and there were
13:04
other you know very well qualified
13:06
groups that were in line to buy that
13:08
to buy those properties for sure yeah
13:10
okay so i think
13:11
when it comes to uh being on the buying
13:14
side particularly in texas
13:16
why it’s hard money and when that hard
13:18
money is due is
13:20
always a a big issue uh it’s only
13:24
uh uh has been for a while over the last
13:27
few years i think in march and april
13:30
that was a period when
13:31
hard money went away i don’t know how it
13:35
worked with your deal that you then
13:37
then you that you completed but
13:41
where do you see in general not
13:42
specifically to that deal but just in
13:44
general where you
13:46
feel that hard money requirements are
13:48
now compared to la
13:50
uh in 2019 yeah i mean i
13:53
i think it’s it’s right back on the
13:55
table i mean we’re kind of
13:57
you know we were we were doing a little
13:58
bit of a happy dance you know
14:00
it was like the one silver lining of you
14:02
know the the covid
14:04
situation was hard money kind of went
14:06
away for a while people
14:07
that wasn’t even a topic of discussion
14:10
but then very quickly you mentioned
14:12
you know over the summer things kind of
14:13
reversed and heated back up and
14:15
i mean it everybody kind of slid right
14:18
back into the normal flow of things and
14:19
so
14:20
to be competitive on an offer in a you
14:22
know a major metro
14:23
in in texas like like a dallas or in
14:26
austin or san antonio or houston
14:27
you’re going to probably need hard money
14:29
on your on your offer for sure
14:31
sellers are going to want to see that
14:32
and if they don’t if they don’t see that
14:34
on your offer then
14:36
they’re probably going to move on
14:37
towards offers that have that
14:39
yes definitely in
14:42
dfw in particular i would say
14:45
texas as a whole but certainly the fw
14:48
and austin
14:50
also now are on the on the map for a lot
14:53
of institutional players that have not
14:55
been really interested in these two
14:57
markets
14:58
san antonio and hewson is probably less
15:00
so maybe you have seen a little bit of a
15:02
different
15:03
picture there when you competed for
15:05
deals but it’s only dfw and dawson i
15:07
would say
15:08
are definitely now clearly on the map
15:12
for
15:12
for institutional players and naturally
15:16
they are competing with you too then
15:19
absolutely yeah i mean the secret is out
15:21
if there was ever a secret on on dallas
15:23
and austin i mean it’s um
15:25
they’re both those are two of the
15:26
hottest real estate markets in the
15:28
country so
15:29
um people are getting out of la and and
15:32
new york is
15:32
you know asap and we’re seeing that flow
15:35
of capital and we’ve seen it for
15:37
for quite a while now and you know i
15:39
don’t know what would cause that to stop
15:41
so i would imagine
15:42
you know 2021 to be another year of
15:44
increasing presence of groups like that
15:47
yeah definitely so looking into
15:50
2021 you you mentioned that you have
15:53
aggressive
15:54
plans without giving any details right
15:57
of your secret sauce
15:59
uh can you give us a little bit of a of
16:02
a picture what what you
16:03
think that is going to happen and how
16:07
how you can take advantage of it thanks
16:09
to your
16:10
experience and purchasing power and all
16:13
that
16:14
yeah absolutely so um i started
16:17
with bph back in what i guess it would
16:19
have been 2019 now so i’ve been here for
16:21
almost
16:22
almost two years uh in may i believe
16:24
it’ll be two years in may
16:26
and in that time we’ve we’ve acquired uh
16:29
roughly right around a thousand units
16:31
just in dallas fort worth
16:33
um and you know that was slow for our
16:36
standards i mean
16:36
um it might it might seem like that’s
16:39
that’s a good a good pace but
16:41
um 2020 we had big we had big plans and
16:44
um the first kind of half of the year
16:46
was was a little bit shot
16:47
you know so um we were able to finish
16:50
off strong with that with that large
16:51
acquisition but
16:52
um you know 2021 we we feel set up to
16:56
to to really kind of put the put the
16:58
pedal to the metal and
17:00
and expand and and dallas and then other
17:02
markets in texas like
17:04
like houston where we’re looking at all
17:06
the time um
17:07
san antonio and austin as well um we’ll
17:09
look at secondary markets in texas as
17:12
well
17:12
we’ll go to waco we’ll go to abilene if
17:14
if uh if
17:16
if it makes sense um outside of texas
17:19
we’ve got a deal lead who does what i do
17:22
in
17:22
orlando florida and he controls all of
17:25
florida and up into the
17:26
east coast a little bit so we’d love to
17:28
crack into the carolinas
17:30
and then we also have another
17:32
acquisitions director out of atlanta
17:33
so um we’ll continue to build we’ll
17:36
continue to build in
17:37
uh in georgia as well very good so
17:40
when you talk to your uh colleagues
17:43
and kind of sharing information with
17:46
each other how would you see
17:48
that these three main markets compare in
17:51
terms of
17:53
deal flow as well as opportunities to
17:56
actually
17:56
find a deal that potentially could work
17:59
for you
18:01
um deal flow in all three and all three
18:03
markets
18:04
is very strong it’s uh it’s pretty
18:06
constant
18:08
um orlando was a little bit uh
18:11
it slowed up in in florida for the most
18:14
part
18:14
in uh in 2020 just given the the
18:18
you know it’s it’s a it’s a tourist
18:19
destination like orlando
18:21
you know um so florida’s slowed down a
18:23
little bit
18:24
dallas is going to be dallas as always
18:26
there’s going to be you know constant
18:28
deal flow and um you know in our
18:30
conversations
18:31
atlanta the atlanta area seems to be no
18:33
different for sure
18:34
yeah okay very good so you don’t really
18:37
see any big
18:38
difference there right now um
18:41
you know we didn’t have nmhc this year
18:43
in january or we’re not going to so
18:45
um i don’t i don’t know that we’re going
18:47
to just see a
18:48
a big you know floodgate of uh of deal
18:51
flow like you typically see at the
18:52
beginning of every year
18:54
um i think it’s just gonna kind of be a
18:56
slow and steady triple
18:57
um at least at least from what i’m
19:00
feeling and seeing right now but
19:01
um but that doesn’t mean that there’s
19:03
not more than enough to
19:05
to keep you busy that’s for sure yeah
19:07
okay very good
19:08
so i know that you are on the
19:10
acquisition side but i’m still a little
19:12
bit wondering uh
19:13
how how your uh how uh
19:16
bph is is approaching the
19:19
uh the expiring uh hopefully soon
19:22
expiring eviction moratoriums and all
19:24
that
19:25
and how you foresee that
19:29
that will impact the multifamily space
19:32
as we move into
19:33
at the end of this quarter and then into
19:35
the next quarter
19:37
yeah well you know fortunately for us um
19:40
we we’re our headquarters is out of
19:42
california but we don’t own property
19:44
there
19:45
um so i’ve heard some pretty pretty
19:47
tough circumstances out that way
19:49
um but in texas um we’re still able to
19:53
evict
19:54
you know um there’s a process that you
19:56
go through
19:57
it’s a little bit more extended um but
20:00
it’s
20:00
it’s still it’s still in process but we
20:02
you know we we try to really we try
20:04
very hard to be understanding of the
20:06
situation and if if tenants are willing
20:08
to work with us
20:10
you know we’ll put them on a promise to
20:11
pay program and
20:13
uh and and kind of and try to avoid
20:16
evictions at all costs in a time like
20:17
this
20:18
but it’s certainly it’s certainly
20:20
something that we keep an eye on
20:22
at all times you know it’s it’s a it’s a
20:24
topic of conversation constantly but
20:26
um you know fortunately we feel like
20:28
we’re in we’re in states and locations
20:30
that are favorable for it
20:31
yeah that’s a very good point right we
20:34
hear horror stories obviously from
20:36
california we hear
20:37
them from uh from new york right we hear
20:40
them from chicago
20:42
so all these big urban centers uh
20:45
denser centers appear to be the the
20:48
toughest
20:49
right and you obviously have picked
20:52
three states that are a combination of
20:57
landlord friendliness but also very
21:00
very much growing states right so you
21:03
definitely have picked
21:04
the right markets there uh so that’s
21:08
uh i would say you set yourself up for a
21:11
very good
21:12
uh future whether it’s for 2021 or then
21:16
going forward so do you have any
21:20
anything else that you would like to
21:22
share with with our listeners well
21:24
what do you think will be of value of
21:27
what you have learned over the last year
21:29
with bph as well as just through your
21:32
acquisition processes yeah yeah i think
21:36
um
21:37
one thing that that was kind of uh a
21:40
little bit of an epiphany for
21:41
for me personally and just our group in
21:43
general um
21:44
in 2020 was um we we saw a lot of groups
21:47
and we talked to a lot of groups
21:49
um that were buying deals and they said
21:52
you know
21:53
um we we weren’t and we weren’t
21:55
initially maybe awarded the deal or we
21:57
weren’t the top bidder right
21:58
but we made an offer uh and we presented
22:01
it with confidence and we stayed in
22:02
communication and
22:03
and uh we’re seeing now that sometimes
22:05
deals are falling out of contract or
22:07
maybe not getting quite to the contract
22:09
period after they’re awarded to somebody
22:11
and
22:12
if you had a strong offer at the start
22:14
but maybe you weren’t the strongest
22:16
offer and you’ve stayed in communication
22:17
with that brokerage group and you’ve
22:18
really followed the situation
22:20
we’re seeing deals come back to people
22:23
so one of our
22:24
initiatives is just going to be to be
22:26
more active
22:27
in a bidding process um you know on on
22:30
more assets as opposed to
22:32
focusing on just one or two at a time
22:34
maybe that we really really like and
22:35
we’re going to go really hard at
22:37
just because we’re starting to see
22:39
groups um you know come down with deals
22:41
that uh
22:42
that maybe was just a process of kind of
22:44
following up with uh
22:46
with with uh with it post bidding
22:50
that’s a very good point uh but
22:53
we certainly have seen that too there
22:55
are many deals that fall through
22:58
and some of them do not really fall
23:00
through because of
23:01
collections dropped uh or any anything
23:05
else it’s
23:06
it’s more driven by the sponsors that
23:08
somehow
23:09
are not able to raise the equity or have
23:11
order issues
23:13
so it’s it’s a very good advice right
23:16
particularly for the ones that
23:17
are experienced operators like you
23:21
that keeping in touch with with the
23:24
broke regime though you initially lost
23:26
that deal
23:27
is is very important you never know
23:30
what’s coming back
23:31
and we have seen that with a number of
23:34
our clients that has happened
23:35
over over the last 12 months so and it
23:38
certainly has happened much more often
23:40
than before
23:42
so that’s that’s a very good point you
23:44
you brought up here
23:46
yeah absolutely absolutely yeah
23:49
very good uh so i really appreciate
23:52
your time uh hunter uh how can
23:56
people reach you to uh to discuss with
23:59
you potential deals
24:00
partner up with you absolutely yeah you
24:04
can find me on
24:05
um facebook instagram just my first and
24:08
last name and i’ll also give out my
24:10
email address
24:12
it’s hunter at bphap.com
24:16
okay very good great uh thanks again
24:20
hunter for
24:20
for joining us uh you you added a great
24:24
value here
24:24
and again for everyone uh uh who is
24:28
who is active in the multifamily space
24:30
uh i think it’s it’s definitely
24:32
worthwhile for you if you
24:34
look for a partner or have an asset to
24:37
sell
24:38
uh reach out to uh to hunter
24:41
thanks again for for joining us hunter
24:44
absolutely anton thanks for having me on
24:46
look forward to seeing you again
24:47
yeah same here all righty bye