Some of the world's best investors are betting that the U.S. housing rebound will continue in 2013.
John Paulson, the billionaire hedge-fund manager, made a fortune betting on the collapse of the housing market in 2008. Yet today, he's posting strong results in residential housinginvestments .
The total value of the properties in Paulson's $298.4 million Paulson Real Estate Recovery Fund has roughly doubled on paper since it was launched in 2009.
Warren Buffett is betting on the U.S. housing rebound by buying up real-estate brokerages around the country. He recently announced a partnership with Brookfield Asset Management ( BAM ) , a Canadian real-estate investor, that will more than double the size of his brokerage business.
In February, Buffett was quoted on CNBC saying that he'd buy "a couple hundred thousand" single family homes if it were practical to do so.
But that's the catch. It hasn't been a practical option , even for Warren Buffett.
Until recently, investors who wanted to get into the residential real estate market were forced to spend thousands of dollars to buy houses individually, renovate them and either rent them out or try to sell them for a profit . As you can imagine, that's an incredibly time-consuming process (not to mention expensive and risky).
Still, I'm convinced it's the single best way for individual investors to profit from the housing recovery.
So you can imagine my excitement when I learned that on Dec. 14th, a new publicly traded company was launched that allows you to do what Buffett can't -- own a stake in thousands of residential properties.
The name of the company is Silver Bay Realty Trust Corp ( SBY ) .
Silver Bay is a real estate investment trust (REIT) with a portfolio of 3,100 single-family properties. It focuses on buying distressed homes in hard-hit regions like Arizona, California, Florida and Nevada.
The company has no debt, and it just raised $245 million during its December IPO . It is now the largest REIT on the market to concentrate solely on single-family homes.
As a REIT, Silver Bay is legally required to distribute at least 90% of its taxable income to investors. This income comes from rent, management fees and leasing of properties.
Silver Bay offers investors the benefits that come with being a landlord , like dependable rental income and capital appreciation through rising home prices.
Phoenix is a good example of the gains to be made from rising home prices. The city is one of Silver Bay's target areas, and housing prices are up more than 20% in the past year alone.
By investing in Silver Bay, you also avoid the hassles that come with being a landlord...
You won't have all your money tied up in property. You won't have to worry about finding and keeping tenants. And you won't get phone calls to come fix someone's toilet at 2 a.m.
Risks to Consider: Silver Bay is a brand new company, and as such it has no history of profitability or success. However, it is an off-shoot of Two Harbors Investment Corp ( TWO ) , and its management team has years of experience working within Two Harbors' successful business model . Also, the stock is thinly traded, so be sure to place a limit order when purchasing shares so you don't end up chasing the price higher.
Action to Take --> The housing recovery is here. In fact, Nathan Slaughter, Chief Investment Strategist of Scarcity & Real Wealth says, " Now may be the best time in a generation to buy real estate. " The only question is, what's the best way to profit? If you don't have the capital or the time to go out and buy, renovate and rent properties on your own, then investing in Silver Bay can be the next best thing.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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