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Here's A Unique Play on the Housing Recovery

Tickers in this article: BAC BX CLNY SBY TWO

NEW YORK ( TheStreet) -- Homebuilder and bank stocks have already run up significantly on the back of rising home prices, but there may be yet another way of playing the housing recovery.

Analysts at KBW recommend buying Silver Bay Realty Trust (SBY) , a newly organized REIT (real estate investment trusts) that is exclusively focused on the business of buying single-family homes and converting them into rentals.

In a report Tuesday, the analysts detail the opportunity in the single-family rental space, an "emerging asset class," which they expect will experience robust growth in the next 12-24 months.

A large inventory of foreclosed homes(Real Estate Owned or REO) and increasing demand for rental units has made it possible for institutional investors to make large-scale investments in the REO-to-rental business, traditionally a mainstay of individual investors known as flippers.

Institutional investors are able to buy foreclosed homes in bulk at a discount, refurbish them and then rent it out for a yield of 5% to 7%, which is attractive in a near-zero interest rate environment.

With leverage and home price appreciation returns could be as high as 20%, according to KBW.

The analysts expect credit to be available over time, with securitization of the rental properties being a potential catalyst for the sector. Citigroup(C) , Bank of America (BAC) and Wells Fargo (WFC) have already begun lending to investors, according to the report.

Entrants in this space include private equity groups such as Blackstone(BX) , Och-Ziff Capital Management (OZM) , Oaktree Capital (OAK) as well as public REITs including Colony Financial (CLNY) , Silver Bay Realty Trust (SBY) and Altisource Residential (RESI) .

The latter two are the only public companies exclusively focused in this space, though KBW predicts there will be more single-family REITS going public in the future.

Silver Bay was formed in June 2012 and went public in December 2012. Silver Bay is externally managed by PRCM Real Estate Advisers, a joint venture between Pine River, the manager of TWO Harbors, and Provident.

Since June, the company has been acquiring 300-400 properties or $40-$50 million worth of homes a month, according to the report. Following its IPO, Silver Bay acquired 3,100 homes from TWO Harbors and Provident. KBW forecast the company's portfolio will grow to 8090 homes of $981 million by 2013 and 9590 homes of $1.2 billion by 2015.

Silver Bay is also structured as an umbrella partnership REIT (UPREIT), which will provide the opportunity to roll-up smaller players with existing portfolios, the analysts note, which could provide more growth than projected.

Buying into Silver Bay might offer some exposure to rising housing markets.

Of the company's portfolio through September 30, 2012, Phoenix accounted for approximately 31%, Tampa and Orlando 27%, and Atlanta 17% for a combined 75%. Based on data from Case-Shiller, home prices are up a weighted average of approximately 10% for the year in the company's markets, according to the report.