American Homes 4 Rent (AMH): This Newly Public REIT Appears Attractive

Silver Bay shareholders have not fared well. The company has paid them two $0.01 dividends so far. Those won’t help to ease the pain in the stock’s drop.

Although it hasn’t neglected to generously reward Two Harbors Investment Corp, its former parent company. In addition to giving 17.8 million shares of its common stock, Silver Bay also gave Two Harbors 1,000 shares of redeemable preferred warrants with a 10% dividend. The company easily could have borrowed money at a lower rate. Cronyism like that is harmful to shareholders, so be aware!

Foolish final thoughts

REITs that specialize in renting out single-family homes are an interesting play on the rebounding housing market. As acquisition sprees come to an end, profits should manifest. The underlying strategy seems solid. Pick up distressed homes at discount prices, fix them up, and then have rent checks flow in for decades.

Implementing such a strategy takes more than a hint of skill. You don’t want to be investing in a REIT that does not have competent management, or engages in practices that destroy shareholder value. As for Silver Bay’s management team, their actions speak for themselves.

But I see a much better opportunity in this field for American Homes 4 Rent (NYSE:AMH). The company has a high occupancy rate for properties owned longer than 90 days. And the founder of the company played a key role running one of the most successful businesses in history. As far as real-estate investments go, American Homes 4 Rent has the potential to be a winner.

The article This Newly Public REIT Appears Attractive originally appeared on Fool.com and is written by Ryan Palmer.

Fool blogger Ryan Palmer has no position in any of the stocks mentioned in this article. The Motley Fool has no position in any of the stocks mentioned. Ryan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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