Invitation Homes Inc. INVH is poised to benefit from a high-quality portfolio of single-family rental units in infill locations in the Western United States, Sunbelt and Florida. Its asset-light model through partnerships with homebuilders for built-to-rent units offers healthy yields with limited risk. Efforts to leverage technological moves to enhance operational efficiency augur well. Its focus on a strong balance sheet position and disciplined capital distribution is encouraging.

However, the elevated supply of residential rental units in some markets where this REIT operates is concerning for INVH. High-interest expenses add to its woes.

What’s Supporting INVH Stock?

Invitation Homes targets infill locations in high-growth markets with limited experienced third-party managers, desirable neighborhoods and a young population. The company operates on an asset-light model by building relationships for built-to-rent units with top homebuilders like D.R. Horton, Lennar, Pulte, Meritage and many others who develop homes and deliver them to the company. The company aims to drive profitability with the value-added platform and minimal capital investment.

Invitation Homes is leveraging technological initiatives and process enhancements through the ProCare application for enhanced customer experience and margin expansion. Such efforts are likely to capture additional net operating income, driving long-term profitability.

Invitation Homes continues to focus on its strategic priorities, such as disciplined capital distribution and maintaining an investment-grade balance sheet. As of Sept. 30, 2024, the company had $2.03 billion of liquidity through a combination of unrestricted cash and undrawn capacity on its revolving credit facility. The company’s total debt outstanding as of the same date was $9.1 billion and Net debt/TTM adjusted EBITDAre was 5.4x.

What’s Hurting INVH Stock?

The struggle to lure renters is likely to persist as the volume of new deliveries remains elevated in several markets where Invitation Homes operates. Particularly in markets like Tampa, Orlando, Dallas and Phoenix, the company is witnessing supply pressures on the new lease side and slower absorption, resulting in lower rental rates.

Despite the Federal Reserve announcing rate cuts in the second half of 2024, the interest rate is still high and is a concern for Invitation Homes. The company has a substantial debt burden, and its total debt as of Sept. 30, 2024, was $9.1 billion.

Over the past three months, shares of this Zacks Rank #3 (Hold) company have lost 4.8% compared with the industry's downside of 5.7%.

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Stocks to Consider

Some better-ranked stocks from the broader REIT sector are SL Green Realty SLG and Welltower WELL, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for SL Green Realty’s 2025 FFO per share is pegged at $5.52, suggesting year-over-year growth of 9.7%.

The Zacks Consensus Estimate for Welltower’s 2025 FFO per share stands at $4.86, indicating an increase of 12.5% from the year-ago reported figure.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.

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