Getting rich through the stock market is certainly achievable, but it doesn't happen overnight. Wealth is built over decades and the longer you hold the stock the greater the likelihood is you'll earn more money. With the market down notably year to date, right now is the perfect time to buy low and hold for the long term.
eXp World Holdings (EXPI -8.50%), Invitation Homes (INVH -0.99%), and Safehold (SAFE) are three real estate stocks with all the signs of becoming big moneymakers over the long haul. Here's a closer look at each company and why they could make you rich if you hold them long enough.
Changing the brokerage game
Revolutionizing an industry is one of the surefire ways to make a lot of money -- and that's exactly what eXp World Holdings is doing. This real estate brokerage is the first and only 100% virtual brokerage, with over 80,000 real estate agents across 21 countries. eXp has been the fastest-growing real estate brokerage for several years now as agents flock to the brokerage in search of bigger earnings.
The company's unique 80/20 profit split passes on a higher commission to agents than traditional brokerages, which have added expenses related to maintaining physical offices. eXp also has earnings caps, revenue sharing for bringing in new agents to the business, and incentives that pay the agents even more if they reach sales milestones.
For being such a young company it's doing tremendously well, having achieved 976% growth in earnings per share (EPS), a 336% rise in free cash flow, and 12,000%in earnings before taxes, income, depreciation, and amortization (EBITDA) over the last 5 years. Not to mention it has no debt and $130 million in cash and cash equivalents, putting it in a fantastic financial position.
The stock is down 57% year to date and its price-to-earnings (P/E ratio) is 24, which is near its lowest pricing ratio since IPO, making it a favorable time to invest. While there is a chance its stock dips further as the real estate market slows, over the long haul this company has a lot of room to grow and could make investors very rich in the future.
Single-family rental domination
Invitation Homes is a real estate investment trust (REIT) that owns and operates over 80,000 single-family rental homes across the Southeast and Sun Belt of the United States -- which is the fastest growing region of the country right now.
Newfound demand for single-family rental homes, in particular, has helped it achieve stellar results. Its total occupancy is at 98% and its 11.8% blended rental growth illustrates the robust demand for housing. Its funds from operations (FFO), a metric that works similarly to EPS for REITs, has increased 177% over the past five years while its net operating income (NOI) has increased by 6.1% on average since 2017.
The REIT has several acquisition strategies to help increase its inventory in the years to come, like a partnership with PulteGroup that is set to deliver 7,500 housing units over the next five years.
REITs are required to pay dividends, which means Invitation Homes can potentially make investors rich through share price growth and dividend raises. Right now its dividend yield is just over 2%, which is low by REIT standards. But I wouldn't be surprised to see this number grow once the company exits the aggressive acquisition phase it's in today.
One of the safest plays in the real estate industry
Safehold is a ground lease REIT that purchases land and leases it to tenants over super-long-term leases, like 20 to 60-plus years. Ground leases are considered one of the safest investments in the real estate industry because of the structure of the lease. Tenants own any property that sits on the land but not the land itself, so defaulting on the ground lease could put the property in jeopardy.
Because of this, there is a very low default rate with ground leases and notable equity coverage in the event of a default. Safehold has increased its portfolio by roughly 16 times since its initial public offering, now having over $5.5 billion in investments on its books. Its net income and EPS have grown by over 1,300% and 300% respectively since 2017.
The rising mortgage rate environment and inflationary concerns have pushed its share price down 50% this year; however, these short-term headwinds shouldn't stop the company from growing over the long term. It's in a fantastic financial position with low debt and a lot of cash on hand, which can help it ride any turbulence to come.
Liz Brumer-Smith has positions in Invitation Homes Inc. and Safehold Inc. The Motley Fool has positions in and recommends Invitation Homes Inc. and Safehold Inc. The Motley Fool has a disclosure policy.
