The $21 trillion U.S. residential housing market is generating significant investment opportunities. And investors looking to tap into this lucrative market should check out real estate investment trusts that focus on investing in residential mortgage-related assets.
In the mortgage REIT space, there are many investments worth considering: Annaly Capital Management (NLY) , American Capital Agency (AGNC) , Starwood Property Trust (STWD) , Blackstone Mortgage Trust (BXMT) and Invesco Mortgage Capital (IVR) included.
However, there's one REIT that stands above the others because of its proven expertise in delivering striking financial results, its growing dividends, and its capacity to target assets that produce steady long-term cash flows: New Residential Investment (NRZ) .
Offering investors an incredible 11%-plus yield with growing dividends, this REIT is an attractive moneymaking opportunity.
New Residential Investment aims to "drive strong risk-adjusted returns" mainly through three investment routes.
First, it buys excess mortgage servicing rights. Typically, REITs buy MSRs and get the right to collect monthly mortgage payments. But by buying an excess MSR, New Residential amasses cash flows monthly from the MSR without assuming any servicing duties.
The second type of investment is a servicer advance, which is a reimbursable cash payment made by a servicer upon certain conditions. Generally, servicer advances are repaid from amounts received with respect to the related mortgage loan. Since these instruments are first in line to be repaid, they have high credit quality.