By Jennifer D. Meacham
RISMedia, September 2008-After 19 years working as a detective for the Sheriff’s Department in Palm Beach County, 45-year-old Dennis Marcott last December quit his job to chase his real-estate investing dreams.
“There’s more than one way to be profitable in real estate,” Marcott says. “I learned that people were successfully using their IRAs to invest in real estate …so I decided to go ahead and take early retirement, and put my pension money into a self-directed IRA.”
Now a Realtor for Keller Williams Mountain Properties in Blue Ridge, Georgia, the long-time real estate investor is happily hunting for investment properties. And he’s doing so for his lump-sum pension fund. “I was already successful as a rehabber, land developer and wholesaler,” Marcott says. “Doing that for an IRA is just an extension.”
With around $500,000 to work with, he rolled it over to a self-directed IRA account managed by Asset Exchange Group in Texas. With one IRA already, he invested 13% of this new IRA into stocks and the rest into real estate. He also began scouting properties for the IRAs of his fellow early-retirement colleagues.
“Being an investor myself,” Marcott says, “after evaluating a property I usually can advise my clients on a proper exit strategy for that property. This comes in handy if they are a new investor.”
Here are the real estate projects he’s financed with IRAs:
Project 1, six-acre multi-family development: Marcott used his IRA funds with another investor’s IRA to buy the Blue Ridge, Georgia., land outright. Both had checkbook control, so checks were written from their IRA business checking accounts to the title company’s escrow account. There’s a rental house already on the property, with plans to develop the rest of the acreage with duplexes, triplex or quads, “depending on what the county allows,” he says. “We are currently approved for 12 units.”
Project 2, land foreclosure: “The builder had approximately $90,000 into it, and [my IRA] bought it from the bank at approximately 45 cents on the dollar.” The plot already has a foundation, started by the builder that went under. Marcott plans to build a house on that parcel “when the time is right,” he says. “I have several options for this property and I can sell it outright, use it as a rental or place it on a rent-to-own program.”
Project 3, house flipping: One client is successfully using his IRA to flip two houses. He bought bank-owned properties, well below market value. Needing a lot of work, the properties are evaluated for repairs and a team of contractors and subcontractors are brought in. Rehab costs are then paid directly out of his client’s IRA.
Project 4, existing rentals: “I’ve been looking for a duplex for another client’s IRA,” Marcott says. He found one, appraised at $200,000; the current owner was unloading it for personal reasons. Both sides of the duplex have tenants, one with a lease, so the property will generate automatic income for his client’s IRA. “We just closed on that duplex, for $135,000,” Marcott says.
Whether in hot pursuit as a sheriff, or running down the best real estate, Dennis Marcott enjoys a good chase. With nearly 90 percent of one retirement account invested in real estate, Marcott expects above-average returns: “Based on my investment plan, I am confident that I will double or triple my IRA within 10 years.” Meanwhile, he’ll be helping his clients’ build their own retirement accounts in the process: “It’s a buyer’s market right now,” Marcott says. “This makes it a great time to buy if you’re an IRA real estate investor.”
Short Sale Opportunity
“My goal right now is to work with distressed homeowners and see what I can do as far as saving their houses,” Marcott says of his latest deals. “If I get a short sale out of it, then I have a list of IRA buyers who may like the property enough to help the people out of a foreclosure situation. The bank doesn’t always approve it, and sometimes it takes so long that the investor wants to move on to another property. But if [my clients] had a self-directed IRA, I think short sales are a great way for them to hold and build wealth within their IRA.”