Citi Upgrades Invitation Homes (INVH) to Buy from Neutral

Invitation Homes Inc. (NYSE:INVH) is one of the best residential REITs to buy. On June 6, Citi upgraded INVH to Buy, and trimmed American Homes 4 Rent (NYSE:AMH) to Neutral, based on relative value and the view that Invitation Homes’ financial performance is expected to catch up to its competitor.

According to Citi, INVH’s recent 6% underperformance compared to American Homes 4 Rent has increased the valuation difference, presenting an attractive buying opportunity.

Citi observed that INVH trades at a cap rate approximately 30 basis points below AMH’s, placing it near the historically lowest spread levels.

A contemporary single-family house at dusk in a residential neighborhood.

The analysts commented that Invitation Homes Inc. (NYSE:INVH) is in a strong position to handle these risks because it knows the build-to-rent (BTR) market well, including rent prices and property values. They also mentioned that the company’s outlook seems cautious, which means it might actually do better than expected when it comes to occupancy and rent growth.

The firm sees more upside potential from INVH’s lending strategy, estimating it could lift yearly earnings by 7 cents, which is an increase of about 3.5% over the coming years. The program also increases the potential to secure built-to-rent assets from residential developers.

Citi believes both Invitation Homes and American Homes 4 Rent will keep growing rents by around 4% in the next few years, even though lease growth has slowed down recently. While AMH might have already hit its peak in new lease growth in May, Citi says the differences between the two companies are small and probably just because of how the data is measured or seasonal changes.

Invitation Homes Inc. (NYSE:INVH) is a major American REIT that focuses on single-family homes. It provides modern houses in good locations, close to jobs and schools.

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