Out Fox The $treet

The latest results from Silver Bay Realty Trust ( NYSE: SBY     ) continue to highlight a concerning problem with the structure of the company. It is the prime reason that investors aren't interested in the company's stock despite it trading considerably below the net asset value that grows on a quarterly basis. Silver Bay Realty was created to exploit an opportunity to invest in attractive housing prices and the expanding single-family rental market. Prior to the financial crisis, mom-and-pop investors with a few rental homes dominated the sector. Silver Bay, along with other recently established companies like American Residential ( NYSE: ARPI     ) and American Homes 4 Rent ( NYSE: AMH     ) , rushed into the market. While a lot of the rental properties were purchased during the ongoing housing crisis at values below replacement costs, the firms still have the important task of...

Investors still aren't convinced that the single-family rental house market provides an investable opportunity, and for good reason. The cost for a corporation to build up a portfolio of rental houses, renovate them, and lease the properties continues to be expensive. Missed by the focus on cash flows, Silver Bay Realty Trust ( NYSE: SBY     ) continues to grow its net asset value (NAV) by seeing the valuation of its houses rebound. Fellow rental property owner American Homes 4 Rent ( NYSE: AMH     ) has seen similar stock weakness. Read the full article here . Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

Numerous companies are attempting to take advantage of the previously weak housing prices and the surging demand for rental properties. So far, all of the models are unproven as the complexity of managing houses with individual characteristics at a corporate level faces many hurdles to reach an efficient scale. The traditional model has been to purchase distressed properties in housing markets hit by the financial crisis and turn the houses into rental properties. Altisource Residential ( NYSE: RESI ) purchases distressed mortgage loan portfolios with a strategy to work with borrowers to modify and refinance loans to either keep them in their homes or convert the unmodified loans into renovated rental properties. Read the full article here . Disclosure: No positions mentioned. Please review the disclaimer page for more details.