The fire started in the garage of the foreclosed home on the rural Loxahatchee home. Five minutes north, a two-story pool home had been raided by vandals and thieves who sprayed graffiti and smashed windows.

Don Cameron bought both at auction. He’ll gut and rebuild with granite and stainless steel. And then he’ll flip.

But the business of flipping is flagging in Florida as small investors are stymied by rapid price climbs and a Wall Street ambush.


Cameron, president of a West Palm Beach franchise of We Buy Ugly Houses, said he’s more often taking on homes that barely survived the real estate crash because that’s what’s left after the billion-dollar hedge funds move through like farmers harvesting only the fruit destined for Whole Foods.

“Wall Street came in so strongly to build these huge rental portfolios and that has driven out a lot of the smaller investors,” said Alex Seehaver, vice president of Cameron’s franchise.




Statewide, the number of property flips between July and September dropped 40 percent from the previous quarter and 20 percent from the same time in 2012, according to a report released last week by the market analysis firm RealtyTrac.

In Palm Beach County, home flips _ defined by RealtyTrac as when a property is purchased and sold again within six months — were down 30 percent in the third quarter of the year from the second, and down 21 percent from last year.

RealtyTrac’s flipping data goes back to the beginning of 2011, the same year many economists believe Florida’s home prices hit bottom. It shows home flipping peaked in Palm Beach County during the fourth quarter of 2012 when 528 homes were flipped. That has since dropped to 220 flipped homes between July and September this year, which coincides with a pricing uptick.


Median sale prices for a single family home in Palm Beach County shot up 22 percent between January and the year’s high so far of $265,000 in April — a sign that mom and pop flippers should be wary.


“I spoke to one guy the other day who wanted to get into the flipping game and, unfortunately, I had to crush his dreams,” said Brian Saver, principal broker for McWillams Ballard real estate in West Palm Beach. “There’s still flipping taking place, but it’s a little bit too late to join in the fun.”

Today’s flippers aren’t the speculative buyers of eight years ago who came in with high-risk mortgages and left a trail of foreclosures behind them. Cash is the only thing with real buying power now unless the home is considered a buyer’s primary residence.


 “You cannot get a mortgage to flip a property,” Saver said.


That gave Wall Street an edge when buying, which it began in earnest during the spring of 2012 with the intent to rent out homes until real estate prices rebound enough to sell for a profit.

Connecticut-based Starwood Property has about 300 homes in Palm Beach County. Colony American Homes, whose parent company Colony Capital is based in Santa Monica, Calif., has spent $1.9 billion to buy 12,358 homes nationwide, including 2,119 in Florida. The New York-based Blackstone Group has about 230 Palm Beach County homes.

But the rental business for much of Wall Street is not yet a moneymaker. Starwood’s second quarter financial statement says the venture has operated at a net loss since its inception. The statement notes that most of the homes bought were vacant or had tenants living there with either no lease or not paying rent to the previous owner.

Preparing the homes, which could mean tedious court-ordered evictions and remodels, cost $21.6 million during the first six months of the year.

RealtyTrac Vice President Daren Blomquist said corporate buyers are both competition and customers for local flippers. They are looking for the same product, but are willing to pay more because it’s a long-term investment.

“It cuts both ways,” said Blomquist. “Institutional buyers aren’t so dependent on a quick turnaround.”

Not all flipped homes are accounted for in RealtyTrac’s data. Cameron will spend more than a year renovating the Loxahatchee home on 73rd Court North that had the fire damage. Smoke saturated drywall and a weakened structure meant tearing out the interior and rebuilding trusses.

For the effort, Cameron estimates he’ll net a $25,000 return.

“We understand the complexities of dealing with a house that needs more than just carpet and paint,” he said. “But we don’t make a huge profit on any job.”

By Kimberly Miller