Rental Demand

The growth in all-cash deals occurs amid rising demand for rental housing as more homeowners go into foreclosure, Fratantoni said. The U.S. homeownership rate fell to 66.5% at the end of last year from a high of 69.2% in December 2004, according to a Jan. 31 Census Bureau report.

Mortgage financing to buy homes to rent is also shrinking, Fratantoni said. Residential-mortgage originations are expected to fall to $1.03 trillion this year from $1.57 trillion in 2010, his association said in a March 15 forecast. Investors submitted 6% of mortgage purchase applications in February, down from a 2007 average of about 10%, Fratantoni said. That's a drop to about $6 billion in February from a monthly average of about $20 billion in 2007.

"What financing options will be available to investors in single-family properties who intend to rent them out?" Fratantoni said in a telephone interview. "That really has been cut back substantially."

Delavaco, which hired Theocles as a consultant, financed about $400 million in deals last year, mostly in international oil and energy projects, said Andrew DeFrancesco, founder and chairman of the fund. Delavaco raises money from institutional and high net-worth investors in Canada and the U.S.

Delavaco Deals

The fund started buying homes in January 2010, acquiring about 70 foreclosed properties in Broward, Dade and Palm Beach counties with cash offers to get discounts, DeFrancesco said. While there's still risk in Florida real estate, the downside is less than drilling for oil in the Ukraine or other places Delavaco has invested in energy projects, he said.

"Every time I drive by that house I know it's there," DeFrancesco said in a telephone interview. "I know the property and I know what county it's in and I know it has a tangible value to it."

The plan is to hold the properties between five and seven years, enough time for the market to absorb the glut of foreclosures and for resale values to rise, said Dallas Wharton, Delavaco's chief operating officer.

In January, Delavaco paid about $32,000 for a bank-owned four-bedroom home in Pompano Beach, Florida, that had sold at the top of the market in 2006 for $285,000, Theocles said. Delavaco spent $11,000 to replace the interior sheetrock, plumbing and appliances. The house rents for $1,250 a month, and annual property taxes and insurance cost about $2,500, he said.