Silver Bay Realty Trust Corp (NYSE:SBY) has a portfolio of around 3,500 homes across Arizona, California, Florida, Georgia, Nevada, North Carolina, Ohio, and Texas. At the start of the year, the occupancy level of the portfolio was just 50%, which means there is plenty of upside for the rent roll as the company fixes up its existing portfolio.
That said, management continues to look for acquisitions in select markets. The recently announced dividend of $0.01 a share, little more than a token, suggests that growth is going to be the bigger focus in the near term.
American Residential Properties Inc (NYSE:ARPI) owns more than 2,500 homes in Arizona, California, Florida, Georgia, Illinois, Indiana, Nevada, North Carolina, South Carolina, and Texas, and manages over 600 properties for others.
At the end of the first quarter, its portfolio was 86% leased. That gives it a much more established business right now. However, it means that growth from within the portfolio won’t be as meaningful, making acquisitions more important.
The company hasn’t announced a dividend policy yet so it’s hard to get a feel for management’s long-term views. That said, additional acquisitions are a must if it plans to grow its business.
Taking on Some Debt
Altisource Residential Corp (NYSE:RESI) buys “sub-performing and non-performing mortgages.” The REIT then forecloses on the homes and takes over the properties to build its portfolio. That is usually a long and complicated process. However, if banks start to depress prices, they might be more willing to let go of a few more mortgages. That would give Altisource a larger pool to select from.
Note, however, that when a home finally makes it through the foreclosure process, it usually needs material repairs before it can be rented out. At the end of the first quarter Altisource had just $434,000 worth of real estate owned and about $87.7 million in debt owned.
It could be a long and expensive process growing the real estate owned category. That said, this REIT probably has the highest, though most uncertain, growth prospects of the trio.
Another Chance
These REITs are in a new and completely untested category. That makes them fairly high risk. While Altisource is easily the riskiest option, it has the most to gain if banks kill the goose that laid the golden egg by flooding the housing market. Silver Bay Realty Trust Corp (NYSE:SBY), meanwhile, has the most potential for organic top line gains regardless of the housing market’s direction.
Reuben Brewer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
The article Will Banks Kill The Golden Goose? originally appeared on Fool.com.
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