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02 Sep Ep. 19: Investor/REALTOR® Alicia Sierra

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In this episode, Adam talks to investor/realtor Alicia Sierra about knowing what kinds of properties to send investors and the future of city living in St. Louis.

Email questions to [email protected]

WHAT’S INSIDE

1:02 The Hermann London company picnic is coming up

1:11 Adam did the Realtor City Tour in the Tower Grove East and Compton Heights area

1:30 Adam is excited about finishing the Hermann London audit by the Missouri Real Estate Commission

1:45 Adam introduces investor and realtor, Alicia Sierra

2:20-How does Alicia keep all of her deals straight

2:57 How did Alicia fall into a real estate career

4:24 What are the changes Alicia is seeing in the investment market

8:15 What was it like getting into the business right as the market crashed

8:49 What kind of properties are her investors buying and what is their formula

9:36 What is gross rent

10:28 What is cap rate

12:13 It is important for realtors to know what an investor wants and how they like to invest

12:51 Is one particular investing formula more successful

13:33 Are investors who only buy near colleges or in low income areas more successful

14:25 Alicia is also an investor. What kind of investor is she

14:53 What is a turn-key rental property

16:03 Why would an investor want a low risk/low profit turn-key rental

17:15 Are turn-key homes found on the open market

19:10 What are the properties that Alicia finds to be the most difficult on the market

20:45 If you have a home listed, is it better to do a price drop or to update the fixtures

22:42 Alicia studies trends to figure out what will make a house sell

24:06 What affect will IKEA have on St. Louis

26:35 National Association of Realtors put up an infographic predicting the future of city living by 2050

28:35 Urban environments, micro apartments, communal living, and green spaces

31:28 What should an investor consider before calling a realtor

34:00 What if an investor wants to invest with their mortgage

35:27 Who lives under Alicia’s roof

36:29 When is Alicia at her best

36:53 What is Alicia’s favorite blog or podcast 38:22 What is Alicia’s guilty pleasure

39:35 Who is Alicia’s mentor and how has she thanked them

41:30 Contact Alicia by phone 3147660847, email [email protected], and Twitter @StandUpAgent

 

  Alicia Sierra and Adam Kruse      

 

 

 

 

 

 

TRANSCRIPTION

Adam-Welcome everybody to The Hermann London Real Group St. Louis Realtor Podcast live from the rooftop of The Hermann London Real Estate Group in beautiful downtown Maplewood, Missouri. I’m Adam Kruse and we’ve got our producer here, Joey Vosevich. I’m excited because we have a very special guest in the studio. Alicia Sierra is a realtor extraordinaire to the stars and clients worldwide. We are going to jump right into our interview but I want to give a couple quick updates. We’ve got our Hermann London company picnic coming up soon. I did the realtor city tour today. We toured a bunch of properties in the Tower Grove East and Compton Heights area. We went through about 10 different houses. There are so many interesting properties. I was actually surprised that there were houses in the $400,000 area. Also, I just cracked open a beer because the Hermann London Property Management Team was just audited by the Missouri Real Estate Commission and we just finished that. I’m going to jump right in because Alicia is a very very busy woman and I don’t want to take up too much of her time. How are you today, Alicia?

Alicia-On my way out, actually. I’m doing well, thank you.

Adam-I’m excited to have you here because we’ve never interviewed a realtor that works so closely with so many different investors and closes so many deals. You are closing a lot of deals. How do you keep it all straight?

Alicia-Assistants help with the paperwork.

Adam-I am always encouraging agents to get assistants and I don’t think they are listening to me. Do you believe in having assistants?

Alicia-Yes. I think that delegation in all areas is good. It makes a lot more sense for me to find the next investor than to be dotting the last ‘i’.

Adam-You are very successful. Were you born into a real estate family?

Alicia-I was born into a family that left some great real estate in Havana for some better real estate in the U.S.. I’m going to completely give away my age. I’ve been catfishing the heck out of you guys thus far. It all started with insomnia and some cheesey late night Carlton Sheets infomercials. As far as selling investment property in St. Louis, I’m about 9 years into that gig.

Adam-You are a realtor and an investor and you rehab and flip. Tell me some of the changes you are seeing in the market.

Alicia-My impression of the market is from watching the inventory everyday as opposed to looking at a graph. I started at the beginning of the crash and it was a feeding frenzy on the countless foreclosures. It was hard to track all the properties everyday. The number of foreclosures seems to have dropped off dramatically. However, at the same time, only cash buyers could play that game because all the financing opportunities went away. Now it seems inversely related. The foreclosures have dropped off but there are more buyers at the same time.

Adam-Does that make it harder for you because most of your clients are cash buyers?

Alicia-It does make it harder even though cash buyers can offer quicker closings. The great thing about real estate is that the market is always changing. Inventory will change but it won’t come from the high number of foreclosures.

Adam-I’m not seeing a change in the number of deals you are doing.

Alicia-The volume is lower for me than it was at the peak 4-6 years ago, however you just have to diversify the type of deals you are going to do. I wasn’t doing so many listings of renovated properties but I’ve been doing more. I think the inventory is going to come from baby boomers downsizing, moving, or estates and older people that have been in homes for a long time. There were also a lot of dealers buying those low priced homes, fixing them, and selling them and many of them made bad deals and now they want to get rid of them. I’ve been seeing more private properties being sold for a loss because it was managed poorly or the tenant damaged it.

Adam-And they don’t want to poor money into it and they have a bad taste in their mouth for some reason so now you can buy it?

Alicia-Yes. The sources for inventory is shifting.

Adam-I also got into the game as the market was crashing and a lot of realtor got out of the business because they thought their wasn’t money in it.

Alicia-The retail people did suffer but you have to adapt to the market.

Adam-Are your investors buying specific types of properties? What is the formula you are seeing?

Alicia-I see buyers in different camps. The most successful investors choose a certain plan of action and focus on it. There is a camp that buys purely for cashflow and they will use a simply formula like the gross rent has to be 3 times the total investment of the property.

Adam-What is gross rent?

Alicia-If the house cost $30,000, they are trying to hit somewhere between 2 and half and 3 times that. A rent rate of $800 or $900 a month. That is an extreme example. That might be a 2 family in south or north city. That is a quick simple measurement. Others are more precise. They put in all the real numbers like maintenance costs, taxes, insurance, and calculate the cap rate. A cap rate is your total investment in a property divided by your total annual net income. You take your total income for the year and subtract out a percentage for vacancy. Conservative people will say 1 month year. You subtract maintenance costs. In high cash flow properties you should anticipate higher maintenance around 20 percent. Also subtract real costs for property taxes, insurance, and utilities,

Adam-Cap rate ignores mortgage rate?

Alicia-That’s a cash on cash calculation. If you are mortgaging part of it, your cash investment is going to come out higher. You are going to take out your payment if that’s the case. A prepared investor will have already chosen a calculation that they’re comfortable with. The higher the cashflow, the lower the potential appreciation of the property because they are in more economically depressed areas of the city.

Adam-It is important for realtors to understand the methods an investor may use. The realtor should be able to ask specific questions about their formula.

Alicia-They should also know what information to provide to help the investor evaluate a property. Some clients like to do their own research and some will want last year’s property tax rate.

Adam-Have you seen investors that only buy within that formula?

Alicia-The most successful investors have a game plan and specific parameters and they want to see something that will reasonably fit in those parameters. It’s my job to bring them properties either off or on the MLS that are potential opportunities.

Adam-I used to go to a lot of networking events and meet with a lot of investors and I would be sitting at a table with 15 investors and they all had their models and formula. One of them only bought near colleges, one bought multi-families, and one bought only single families in lower income areas. I guess none of them are necessarily wrong or right. It’s just about what works for them.

Alicia-I measure success by if their own game plan is working out. One of beautiful things about real estate is that there are countless ways to grow wealth. It’s like a multi-dimensional game of Monopoly.

Adam-Does being an investor yourself and having a pulse on the make it make it harder to decide what kind to be?

Alicia-Currently I’m the kind of investor that takes advantage of opportunities that present themselves. Right now I am flipping turn-key rental property, which means they are sold in complete rent ready condition and maybe tenant placement. They are lower risk and lower profit spread renovation projects that are easier to identify than retail flips. There are a lot of investors competing for retail flips that are also competing against owner-occupants because as a result of the crash we have grownups who are accustomed to terms like Fannie May and HUD foreclosure.

Adam-You said some of these deals are lower risk and lower profit but you take on a lot of the the risks and what ifs. You deal with all of the inspections but you are going to get profit from what you are doing because the buyer will be more confident that it will be in good condition.

Alicia-They are smaller homes with smaller rooms. You are not covering as much ground. Something that is mid-century is a lot less risk than a 100 year old brick stock buildings.

Adam-Are they lower price too?

Alicia-Yes.

Adam-If a buyer is looking between $80,000 and $140,000 and they see your house that has been rehabbed, do they still need convincing to buy it?

Alicia-These homes are not on the open market. With a turn key rental, you already have a buyer waiting for that product which is why it is reduced risk and profit. Some of the bread and butter St. Louis neighborhoods around Christy Park with a $80,000-$100,000 retail home doesn’t take as long to finish and it doesn’t require as nice of fixtures so if the market shifted and the house didn’t sell, you don’t have as much invested. You could rent the home until the market shifted back. If I do enter into retail, I prefer those lower end projects. I know plenty people who do well in higher end projects by including historic tax credits. There’s also  plenty of investors who like to work really hard to find great deals and sell them in their current fixer-upper condition, and we call them wholesalers.

Adam-I love wholesaling.

Alicia-I’m similar in that I am taking a property in its current condition from one owner to the next owner who is going to take on the rehab because the current seller doesn’t have the time or the funds to renovate the property and sell it at a retail full price. The properties I find to be the most difficult sales on the market are the ones that aren’t technically distressed condition but they are not modernized. If you’ve ever watched House Hunters on HGTV, someone would be complaining that there wasn’t granite and steel. There are like the land of misfit listings because it is like your mom or dad’s house because it is nice and clean with awesome systems, but they don’t understand what is wrong with the chanson prints wallpaper.

Adam-I went through a few today. I was walking through these houses and the listing agent couldn’t understand why they weren’t selling. Maybe it’s because I am a millennial but I couldn’t get my head around it. I guess they just need to lower the price.

Alicia-I call them purgatory houses. They are in limbo. Millennials usually want to move in, fill the fridge, and call it a day. They don’t really want to take on more than a Pinterest project. It’s either that or they are looking for the equity and it’s got to be worth it for the trouble.

Adam-If you have a home listed right now and your realtor says that you need a price drop of $5,000,-$10,000, should you be asking yourself about putting in granite, stainless, and hardwood to make it sell tomorrow?
 
Alicia-This is where involving an investor/agent like myself in the evaluation listing is a real asset to a homeowner. I’ve also seen investors make the wrong calls on the updates to do, especially part-time investors. Especially when they are older, they apply their own aesthetic sensibilities instead of finding out the priorities of their end-buyers. I know I put importance into very different things than 25 year old now. You have to consider that if you are selling a house in Tower Grove East, there is going to be a younger and hipper buyer. There is a difference to one neighborhood to the next even in close proximity in the city. You really have to know those neighborhoods and I really recommend more of a neighborhood specialist when it comes to getting more bang for your buck.
 
Adam-You love talking about millennials and trends. Any seller should consider calling you because you do do a lot more analyzing of the market than the average realtor.
 
Alicia-I do read a lot of articles. This is my new obsession with the Twitter feed because you get really quick and easilly accessed information, and a lot of it straight from the millennials’ mouth. They are the ones writing for NextSTL, STLSocial, and Treehouse Networking. I like to see what they are talking about, what events they’re talking about, and where they are living. NextSTL put a lot of good data out about the developments that are going on. It’s really easy to connect and you can do a little at reply to NextSTL on Twitter and you will get feedback and data just by connecting.
 
Adam-What do you think IKEA is going to do to St. Louis? Will there be IKEA kitchens all over?
 
Alicia-I think we are going to see a resurgence of the meatball. Is that where I am going to find you now after they open?
 
Adam-I’m going to wait until the lines die down.
 
Alicia-I’m too old for the lawn at the music amphitheater and I’m too old for lines at IKEA.
 
Adam-I do want to buy one of their closets for a rehab I’m working on. Will we start to see more IKEA stuff in houses in St. Louis and will millennials like it?
 
Alicia-I think they will love it. I think they like all of those tiny house storage solutions, clean lines, and great designs. We are still St. Louis, though. We still like our historic details and our particular architectural details. We also have some not so pretty housing stock. There is nothing redeeming about some of these shotgun houses. They were built by working class people so they don’t have any flourishes. I think you are going to see renovations in those and the mid-century apartment buildings to appeal to them.
 
Adam-Did you know you used to be able to buy a house from the Sears catalog?
 
Alicia-Yes. I see those all the time in North County. Those post-war tract houses.
 
Adam-How can you tell they are Sears houses?
 
Alicia-Sometimes there is a mark on the house.
 
Adam-A giant S? So you would buy a house and they would send it to you?
 
Alicia-You would pour the foundation and they would send you a house.
 
Adam-It is like an IKEA house. Did it just come in a box?
 
Alicia-We have manufactured homes now.
 
Adam-You found this awesome infographic from the National Association of Realtors on Twitter so I want to go over some of these statistics.
 
Alicia-You are making me more nerdy-spreadsheet than I actually am.
 
Adam-You do have some spreadsheets on your clients but I do think you read this stuff and memorize it. It says here that baby boomers are moving into cities. It says here that by 2050, 70% of people will be living in cities. How do they know that?
 
Alicia-I guess they are basing that on current trends.
 
Adam-Will the city limit just expand?
 
Alicia-St. Louis is different because we drew that hardcore city/county line. I do include some of the counties in the city. I think walk-ability trends are important.
 
Adam-It says transportation is the number two cost of all household spending. That is shocking. How are they not spending more than beer?
 
Alicia-Something has got to give. People are either moving closer to their jobs or telecommuting.
 
Adam-This must apply more to more O’Fallon friend who drives and hour to and from work and pays $10 a day to park. It also says there are starting to be more urban environments with green-spaces and micro-apartments, I guess with micro-apartments people like the IKEA think where a table can turn into a bed and then a kitchen. Have you started seeing any of that?
 
Alicia-I haven’t seen any of that but I did read about a development in the Shaw neighborhood by an out of town developer that is 2-4 bedroom apartments that are designed for roommate living. There are more adults that want housemates to share expenses and pet-sitting during travel.
 
Adam-I guess it’s not like college dorm living. i wonder what makes it designed for roommates.
 
Alicia-I’m not exactly sure but I did see they were having mixers to help people find roommates.
 
Adam-Did you go?
 
Alicia-I’ve got enough roommates as it is.
 
Adam-Maybe each person has their own bathroom in the bedroom and maybe even a living room but they all share a kitchen?
 
Alicia-I didn’t look at the floor plans but the idea of a developer taking advantage of the communal living trend here is interesting. Their is also the startup activity of Cortex in the Central West End that is centered around keeping our brain trust here and attracting out of town, trained, educated professionals because we have a lower cost of living. Not everyone in St. Louis will be mid-westerners.
 
Adam-Those people will want a more urban environment where they can walk to the grocery store.
 
Alicia-Right. We will always have suburbanites. We are not San Francisco or New York but it will not be such a given that people will want to spread out to the suburbs.
 
Adam-You are a realtor that specializes in a lot of different things. You do a lot of work with investors, so much that you even have a word for people that do work with non-investors called retail. Retail realtors don’t call themselves that. Give me a quick overview. If I want to become an investor, what are some things I need to consider before calling you?
 
Alicia-I prefer if someone at least has a notion of their personal financial goals with real estate. Are they building themselves a small portfolio to hold long term to enhance their retirement and/or do they want to make an extra X number of dollars a year flipping property?
 
Adam-You can’t help them achieve success if they don’t know what success is to themselves?
 
Alicia-Right. I can talk to them about what I see in housing trends in St. Louis or the pros and cons of buying property for pure cash-flow or having a more conservative return in areas like Maplewood. However, I don’t think it’s my job to be their financial adviser. I do see people making performa sheets projecting the performance of the property with unrealistic numbers. There is always going to be something that wasn’t anticipated when it comes to real estate. They should also know what their comfort level is with risk.  You can have a goal but you can go after that goal more or less aggressively. What are they comfortable leveraging out of their cash savings. If they want to use a mortgage, then they should also talk to a lender about portfolio and warehouse loans in house and talk to a qualified mortgage lender, preferably one that has worked with investors.
 
Adam-Who lives under your roof?
 
Alicia-In my fantasies or in my reality?
 
Adam-Currently. This is a Trey Malicoat question.
 
Alicia-I have a husband and 3 children.
 
Adam-Do you get all your millennial news from your kids?
 
Alicia-My oldest son is right at the cut-off. He was born in 2001. Millennials were born between 1980 and 2000.
 
Adam-There is a statistic that says millennials are going to stay living with their parents for an additional 15-20 years.
 
Alicia-That’s why I live in a place where the upstairs is basically its own apartment.
 
Adam-Any animals?
 
Alicia-We have a 3 pound chihuahua named Chiquita that I can carry around in my hand.
 
Adam-Where are you your best?
 
Alicia-I love to make people laugh. I think I’m at my best if I’m with people that are my family and colleagues. I love to be around smart people with a sense of humor and those are the type of clients I prefer to work with.
 
Adam-Do you have favorite blog or podcast?
 
Alicia-I never listened to a podcast until recently. When I was in Nashville this summer on vacation I did an open mic and I met a young man named Jesse Case. He was on the verge of having his stand-up career explode and he had to move back from L.A. to Nashville because he got diagnosed with stage 4 colon cancer. It was the most incredible stand-up performance I’ve ever seen in person. He’s been doing a podcast during his chemotherapy and it is called Jesse versus Cancer. I recommend it. I hope he gets well enough to tour and come here to St. Louis. That was my venture into podcasts and now I’ve been doing a little exploring.
 
Adam-I think you should have your own podcast.
 
Alicia-That’s why I wanted this young man’s card because I’m working on putting my own blog together and it’s going to be called Get to the Funny Part. It will cover any number of topics including real estate.
 
Adam-Joey, I’m going to need a finder’s fee. What is your guilty pleasure?
 
Alicia-The one thing that makes me forget all of my troubles and makes me feel like maybe I do have my act together on my worst day is reality television. I love Million Dollar Listing Agents and The Real Housewives of New York and Beverly Hills. If you can have that much money and clout and act the fool then maybe I do have my act together. I’d love to have my own called $10,000 Listing Agent where instead of people complaining about there not being stainless steel they ask where are the pipes. Or, instead of getting excited about the granite counter-tops they get excited because there is an A.C. with a cage. I think it could be a really good show. It would put it all in perspective for New York and L.A.
 
Adam-There is a studio here called Coolfire. Maybe they could make it for you.
 
Alicia-Maybe it could be a Hermann London production.
 
Adam-Who is your mentor and how have you thanked them? This one I’m hoping for tears.
 
Alicia-I don’t feel like I have one real estate mentor. I did learn a lot from my former broker, Mark Hoffmann at Coldwell Banker Premiere. He is funny and generous. One of the biggest nuggets of advice he ever gave me was if you can pay someone else to do it, pay them. I think that holds a lot of entrepreneurs back. Other than that, my biggest inspiration has to be my parents. Now this is where you will get the reality show tears. They came to St. Louis on one of the hottest summers on record in July of 1954. They weren’t fleeing Havana but all of the shenanigans started so they never went back. They never experienced that kind of humidity. They didn’t have any money or A.C. and they didn’t speak English. My dad was a resident first at St. Mary’s and then City Hospital which is now luxury condos. My mom was only 18 and didn’t speak the language. Her husband was working umpteen hours a day learning a new language and learning to be a doctor. They raised five kids.
 
Adam-How have you thanked them?
 
Alicia-I show up for dinner and take their annoying geriatric phone calls. We are around and we are there to answer all questions to the mundane to the interesting, on demand.
 
Adam-That is all i have. Anything else you want to say?
 
Alicia-Cheers to real estate because I think it is one of the last remaining democratic and capitalistic venues to build wealth and financial freedom and if you haven’t looked into it you really should.
 
Adam-If you have been looking into it for a long time and haven’t done it, you really should.
 
Alicia-You really should. No harm. No foul.
 
[email protected] on Twitter. Tell everyone your phone number.
 
Alicia-3147660847.
 
Adam-Perfect. Beautiful. You are an amazing guest. I hope you can come back on again. Anyone who has questions, submit your questions so we can answer them on air. Thanks, Alicia.

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