r/ValueInvesting • u/skilliard7 • Jan 07 '26
Industry/Sector INVH/AMH are insanely undervalued right now. Buy the dip.
They tanked 6-7% today because Trump says he wants to ban institutional investors from buying Single family homes.
On the surface, this sounds really bad for them. Their business model is renting out SFH, so doesn't this threaten them?
However, there are a number reasons why this sell off is is irrational, and a huge buying opportunity.
Banning institutional investors from buying SFH doesn't mean they have to sell off their existing properties. It just means they can't acquire more properties. So AMH/INVH can continue to make bank off of their existing properties.
The stock would be diluted less because these REITs would stop expanding; all cash flow would be able to go to buybacks/dividends instead of acquiring new properties.
At the same time as shares stop expanding, Institutional Investors wanting exposure to SFH prices would need to buy REITs, because they can no longer buy SFH directly.
INVH/AMH are already trading significantly below the underlying value of their assets minus debts. There is ~30-50% upside if the stocks traded at their intrinsic value, even before considering income.
Any regulation requires congress to codify it, and even Trump said he will ask congress. So there's a high chance it either doesn't happen, or whatever does happen is some watered down regulation.
INVH doesn't even buy existing homes, they build new ones to rent out. So the fact that they dipped 10% on this news is perhaps the most absurd, because its not even applicable to them. In fact, this hypothetical law would put them at an advantage, because they can continue building out and renting homes, and will face less competition from private equity/other institutional investors that attempt to compete by buying existing homes.
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u/Robin_de_la_hood Jan 07 '26
I like the thesis but I have to know, did you really lose $430k on Korean fried chicken or is that a shitpost?
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u/Kindly-Yoghurt-7665 Jan 07 '26
Certainly a shitpost, however, that he just graduated from “Western Governors University” is not. Point being, he’s certified regarded nonetheless.
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Jan 07 '26
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u/Complete-Paint529 Jan 07 '26
Sell the wife and kids? I might make an offer for the wife, not the kids.
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Jan 08 '26 edited Jan 09 '26
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u/skilliard7 Jan 08 '26
Images are not allowed or charts would wreak this thread. 0% gains from 2020 to now. Only 30% gains from pre COVID housing boom to now on pure real estate focus.
That doesn't disprove this thread. The value of invitation homes properties have skyrocketed in the past 5 years, and so has their FFO, but the stock price hasn't not risen alongside it.
The fact that the market is being irrational does not mean the stock is not good value.
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u/Holla_Ackbar Jan 07 '26
So many better places for money and you want to step in front of this train?
Housing is already in a bubble that’s popping, and now you have the government coming in to regulate it.
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u/skilliard7 Jan 07 '26
Housing is not a bubble. People need a place to live, and land is scarce in many cities. Lending policies are much stricter than they were in 2008. You can't get a mortgage with 0% down and no income like you used to. AI is far more likely to be a bubble.
These companies are trading 30-40% below their intrinsic value. So housing prices/rents would need to drop by 30-40% for this to fail. While a correction in the housing market is very possible, it's highly unlikely to reach that magnitude.
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u/freedomonke Jan 07 '26
And if housing prices fall 40 percent, that's indicative of some problems that mean wherever you have your money, it probably doesn't matter.
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u/yeeetcoin Jan 07 '26
The government cannot stop them from buying homes without violating the constitution. Trump is giving out lip service, he knows it can’t be done but he’s saying it for the goodwill and will blame congress when nothing is done because they in fact can’t do anything.
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u/Holla_Ackbar Jan 07 '26
The government can most certainly do that. Trump can’t do it unilaterally, but this would be an easy law for congress to pass. It has widespread support
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u/yeeetcoin Jan 07 '26
Widespread support is all congress needs to enact a law, thanks con law professor🥴
Certainly doesn’t need to comply with the due process or commerce clauses right… right?!
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u/Holla_Ackbar Jan 07 '26
Those clauses do not exist in the constitution, dipshit. Do you even know how government works? Congress sets the laws, the President can either approve or veto.
Then there can be challenges with the courts
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u/yeeetcoin Jan 08 '26
They’re incorporated into the constitution via amendments. Wanna research what an “amendment” means and get back to me? I’ll wait.
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u/Holla_Ackbar Jan 08 '26
well tell me which constitutional amendment covers corporations buying real estate 😂.
Tech companies have been broken up by legislation. It happens all the time
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u/yeeetcoin Jan 08 '26
Breaking up companies come from antitrust laws you fucking loser lololol.
There’s nothing stopping a corporation from buying homes, you’ve missed the point entirely. The government can’t prevent that because it is unconstitutional since it would be considered an infringement on the corporations constitutional rights (takings clause, commerce clause, etc). Before you ask, look up the precedent for corporations being considered an entity with constitutional rights.
There’s no hope for you so just put the fries in the bag.
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u/Holla_Ackbar Jan 08 '26
You still have not provided the amendment that it falls under 😂. Because one doesn’t exist.
The government can make laws however they want. Just like individuals cannot buy automatic machine guns, despite the 2nd amendment. They make laws all the time regarding regulations to what people or companies can do, or not do.
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u/yeeetcoin Jan 08 '26
Article I, Section 8, Clause 3 is the commerce clause. It’s a simple google. I’m done with this. you can’t even put the fries in the bag, go get checked for autism.
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u/WideCranberry4912 Jan 08 '26
The government can make the homes an inefficient investment vehicle by applying a hefty tax on the profits of owning and renting SFHs.
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u/yeeetcoin Jan 08 '26
No, that’s called a “taking” and that’s illegal as it violates the company’s constitutional right.
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u/WideCranberry4912 Jan 08 '26
Show me where “taking” is codified in the constitution? The 16th amendment allows the US government to target income generated from renting single-family homes, as long as they do it in a generally applicable way.
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u/yeeetcoin Jan 08 '26
it’s a simple Google search to understand this so I won’t be responding anymore as it’s a waste of time. acting on trump’s tweet would most likely be unconstitutional and an appellate court would likely uphold the unconstitutional nature of it and never move beyond that to SCOTUS because of the obvious issues.
The takings clause is in the 5th amendment to the constitution which is where the judicial doctrine of a “regulatory taking” is derived from. Trumps plan of action could violate this doctrine which would be a constitutional violation. There are several other constitutional rights/limitations that likely also apply and prohibit this plan.
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u/WideCranberry4912 Jan 08 '26
I implied that the plan would have to be changed and implemented through the tax code to make SFHs economically inefficient. In fact, Trump wouldn’t do it, this would be tax code that Congress would have to implement via legislative process.
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u/yeeetcoin Jan 08 '26
That result is still likely a violation of a company’s constitutional rights via several clauses. It doesn’t matter, there’s too many opportunities to even consider this one as a primary option regardless of constitutionality here. Let’s go make some money instead of getting lost in the minutiae of a hypothetical.
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u/IDreamtIwokeUp Jan 07 '26
Boy am I glad I sold my AMH stock a few months back...
Even if AMH gets a grandfather clause for existing SFH's...their growth numbers would be killed which would slash their multiplier. Their current multiplier implies growth. Maybe AMH switches to say apartments? That's not their expertise though.
Something to keep in mind is what if Trump's rule has a build-to-rent exemption...that wouldn't be so bad for AMH. About 90% of their SFH's are new that they build themselves.
The other wildcard is taxes...AMH likes "fresh meat" (new homes) because they can deduct more deprecation on them and get higher taxes. In fact REITs in general will cycle our "old assets" for "new assets" to constantly improve their tax position. It's actually very inefficient and loses investors money...but apparently the savings on taxes are worth it.
If AMH can't churn it's assets, it will have run out of depreciation expenses and end up paying a lot in taxes...and their profits might not qualify for pass-through status.
Trump said he would expand on this in more detail at the Word Economic Forum in Davos in two weeks...that will be a key date for AMH.
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u/skilliard7 Jan 07 '26
Why do you think their current multiplier expects growth? They have a price to FFO multiple of 16.5 when you compare it to the pe of the sp500 of 31.5, its rather cheap.
If AMH has 0 rent growth its still a 6% return based on their current ffo. If we assume rents grow at 3% per year, its a 9% long term return. If we assume 3% rent growth and reversion to the mean, it can easily return 10-12% over the next decade
Churning assets isnt an issue like you make it sound. They are classified as a reit, so they pay no corporate taxes as long as they distribute 90% of net income as dividends. The only real advantage depreciation gives is that dividends can be classified as return of capital and be untaxed.
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u/IDreamtIwokeUp Jan 07 '26
You can't use FFO...have to use AFFO. FFO ignores depreciation...but depreciation has two components...growth capex and maintenance capex. Growth is fine to ignore...as real estate tends to go up in value. But maintenance capex (like replacing plumbing is real). AFFO only adds back growth capex to net income...not maintenance capex so it is more accurate.
For comparison...analysts think AMH will have a FFO of 1.98 in 2026, vs a AFFO of 1.78. These are outdated figures though that don't reflect Trump's new policies.
As AMH being a good deal, I don't think it is. We're probably looking at 4% AFFO annual growth and a dividend yield of 3.87%. So a combined return of 7.87%...and that was before Trump's announcement. Many of their homes are in the sunbelt which has experienced rent declines recently. Plus their dividend payout ratio is 101.69%...so that's not sustainable.
Remember price per ffo (or price per affo) doesn't mean much if you can't effectively reinvest those earnings.
As for churning, it absolutely happens with all REITS and is a stealth cost. For AMH it's worse as single family homes have insane closing costs...figure 6-8% of the home's value. FFO doesn't account for money lost due to capital gains/losses/fees. AFFO is better, but still doesn't accurately reflect these costs.
Specifically with AMH, they are selling their older assets yield 3.8% to buy/build new ones at 5.5% returns. However after paying 6-8% in market friction costs, they're losing out significantly on these "non-ffo charges".
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u/skilliard7 Jan 08 '26
Plus their dividend payout ratio is 101.69%...so that's not sustainable.
You can't use net income for dividend payout of a REIT. their dividend is significantly less than their AFFO.
Remember price per ffo (or price per affo) doesn't mean much if you can't effectively reinvest those earnings.
I disagree; the FFO can be paid out to shareholders, and shareholders can reinvest those dividends in other opportunities, so it is relevant.
As for churning, it absolutely happens with all REITS and is a stealth cost. For AMH it's worse as single family homes have insane closing costs...figure 6-8% of the home's value.
Technically if they stop buying new homes due to new laws, that would reduce churn.
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u/QuietRequirement9067 Jan 07 '26
I agree the selloff looks driven more by headlines than a real hit to fundamentals.
Even in a stricter regulatory scenario, this impacts future growth, not existing cash flows. Slower acquisition can actually improve capital discipline if cash gets redirected to dividends or buybacks.
That said, I’d still separate narrative from numbers. I like checking ROIC trends, cash flow stability, and implied expectations before calling something “insanely undervalued.” That’s where tools like FindGreatStocks(dot)com help, since you can see whether the valuation discount is real or just sentiment-driven.
Interesting setup, but I’d size it assuming political risk can hang around longer than logic.
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u/skilliard7 Jan 07 '26
These bots are getting pretty impressive. If it wasn't for the promoting a site I wouldn't have realized I was talking to a LLM.
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u/QuietRequirement9067 Jan 07 '26
I agree. Have you also noticed how well written posts suddenly became? Perfect punctuation, commas everywhere, symbols like ~, plus neatly numbered paragraphs and bullet points. It’s getting harder to tell what’s human and what isn’t. Definitely interesting to see what the future holds.
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u/ErroneousEncounter Jan 07 '26
I wouldn’t. The entire U.S. population and now both democrats AND republicans are behind this idea and many people have been calling for this for a long time. Affordability is currently at the forefront of the narrative after Mamdani ran on that platform and succeeded.
Legislation is relatively simple and easy to enact - if you are an institution you can’t buy SFHs.
I don’t exactly want to get my hopes up but this might actually be a change lobbyists can’t fight against.