Invitation Homes Inc ($INVH) Q4 2025 Earnings Call

Good morning, everyone, and thanks for joining us today. I want to start by thanking our residents for the trust they place in us. That trust is central to our business and we work every day to earn it through strong service, clear communication, and a better resident experience. This morning, I'd like to spend a few minutes on three areas. First, housing affordability. Second, our recent acquisition of Resiuilt Homes, which gives us in-house development capability. And third, our long-term objectives as we head further into 2026. Let me begin with housing affordability. An issue that continues to draw significant attention and represents a significant challenge for many Americans. Renting provides an attractive alternative for many households. Which is why since 1965 about one-third of all Americans have rented their home. Yet with only 10% of multifamily apartments offering three beds or more, there is a clear gap in family-oriented rental options. This is where we're proud to lead. Providing homes for growing families seeking value, services, and convenience in the neighborhoods they care about. As a result of this focus, we have a clear view of the needs of our customer base, including many first responders, healthcare workers, teachers, veterans, and other vital community members. We're committed to providing them with well-maintained, high-quality homes. And that commitment matters even more today as higher home prices, elevated interest rates, and large upfront costs have put buying a home out of reach for many households. According to data from John Burns, residents in our market save nearly $12,000 a year on average by renting their homes, helping families manage their budgets, build savings, and access schools and neighborhoods that might otherwise be out of reach. And for residents ready to take the next step, we help them prepare for it. Historically, more than 20% of our move-outs have been residents who purchase their own home. One way we support that journey is by offering a free company-funded credit building program that reports positive rent payments to the credit bureaus. This allows our residents to build credit from the rent they already pay with us. A benefit most smaller landlords don't or can't offer. We have more than 160,000 residents today currently enrolled with residents having seen an average credit score increase of 50 points. This strengthens their financial foundation, lowers borrowing costs, and improves their ability to qualify for a mortgage when the time is right. Of course, housing affordability is fundamentally a supply issue, which brings me to my second point. One of the most constructive ways we can help is by adding more homes to the markets we serve. While our homebuilder partnerships have supported that effort for years, our acquisition of Resiuilt expands it even further and improves our control over cost, product quality, and delivery pace. Resiu is already delivering homes at a pace of over 1,000 homes per year in its fee build business. We expect to grow on that foundation over time to add even more high-quality homes for Americans where demand remains strong. And that leads me to the third topic I outlined this morning, which is our long-term objectives. We laid these out at our November investor day, and they continue to guide how we're going to operate in the future. They include first delivering attractive same store NOI growth. Second, allocating capital thoughtfully across accretive growth opportunities and share repurchases. Third, using our scale and technology to drive efficiencies and elevate the resident experience. And fourth, maintaining a strong balance sheet. Looking back over the past year, we made meaningful progress on each of these priorities. We continue to strengthen our platform and improve the resident experience. We took an important step toward expanding future housing options with the Resiu acquisition. As we move further into 2026, we are reaffirming these objectives with a focus on controlling what we can control. That discipline will continue to guide our decisions as we work to deliver value for residents and shareholders while expanding housing choice and flexibility in our communities. At the center of our work is a commitment to the people we serve and the people who make our progress possible. To our residents, associates, and shareholders. Thank you for your continued trust and partnership. Now, before we turn the call over to Tim to discuss our operating results, I've asked Scott Eisen to share a few more details on the Resuilt acquisition.

Hi Eric, this is Dallas. Thanks for your question. We're certainly all over it as you'd expect. And I just at a high level say that we've been encouraged by the discussions with policy makers on both sides of the aisle through this process. Obviously the EO, well the tweet I should say and then the EO was something that I think the industry really expected. That being said we have a sensitivity and an appreciative nature of the focus being on this issue around affordability. I believe through the trade association also the work that we've been doing with the companies in the NRC I believe we've been able to highlight appropriately where SFR and more importantly professionally operated single family rental lives in this broader ecosystem. That being said I think it's a little too early to speculate on what we do or don't want to see. In some regards, I think the industry is hoping for clarity. I think we like the idea of having some clarity of what you're able to do versus maybe what you're not able to do. It certainly feels like BTR and the production of new product is something that feels pretty favorable based on the conversations we've been having. So, we view that as a positive. We're excited about that and what it means for both the way we work with our current builder partners and also what we can do now with our own platform in Resiu. During these conversations, the focus has certainly just been on affordability, path to home ownership and to create sort of lanes for folks that want to transition into home ownership over time. And as you guys are well aware, we've been hyper-focused on that latter point really for a couple years now and making sure that we have positive credit reporting. We have currently about 160,000 residents enrolled in positive credit reporting. We've seen credit scores go up by 50 basis points. So I think all these facts have also been very helpful as we've been talking with policy makers around how SFR can fit into the broader ecosystem and I think the important part here is that we want to meet customers where they are and there's certainly a number of customers we see it in our business day in and day out that transition from rental to home ownership. I think in the last quarter is around 16 or 17%, traditionally it's been between 20 and 25%. We do that as normal. But with the differential in costs being about $1,000 a month cheaper to rent than to own, not including the down payment burden and then the other things that go into home ownership, we know we offer a pretty attractive value to customers. And they continue to tell us that both in our surveys and as we work for ways to refine and improve our processes. So, I think that's all I can say from a legislative perspective. We're certainly engaged. We're having great discussions and I feel like it's been candidly pretty collaborative.

Thanks for the question Austin. I want to echo what John said in his prepared remarks. I mean we see real value there in terms of where the shares are currently trading. We are clear about that at NIT at the end of the year. Now we certainly have limited windows where you can sort of operate and then at the end of the day and I think you guys know this about us from a capital allocation perspective we also want to be moderate. We know that we have opportunities on the horizon both with external growth and some of the opportunities that we'll look at over the coming year but I think for us it'll be about when the opportunities are available to us as John said with always thinking about where our current cost of capital is and highest best use on a risk-adjusted basis for economic returns that make sense for our shareholders. So you can certainly argue that if the shares continue to trade in this range that on a risk adjusted basis it can make sense to continue to be active there.

Jamie, thanks for the question. This is Dallas and I'll also let Scott add anything he wants to add to this. I think at a high level we feel really comfortable about the capability we just brought in house. Jay is a seasoned operator in the space. We've known them for over a decade. We've been impressed with the work they've done. They've built out a really remarkable platform in terms of both capability and scale. Scott talked about the 20 plus existing projects they have ongoing, which by the way we didn't underwrite this initially but has led to a lot of great synergies with our lending efforts in terms of opportunity sets and things we're getting an opportunity to look at on that perspective. I don't know that you necessarily have to go out and acquire other platforms to try and grow your development business. I think we've got the capability in house. It's just a question around which markets do we want to be in and why. And we have a ton of experience prior to the Resi acquisition of understanding sort of what our costs are in particular parts of the country as we build with partners and the like. And so I think for us we feel pretty confident that we don't really need to do much outside of manage the mature organization we just brought on and find ways to sort of blend and extend in the right parts of the country over time and over distance. The nice thing about this is this is really accretive in terms of how we think about it. They have a cash flow positive business that does great work in the marketplace with multiple parties. And we can start to look at opportunities as Scott mentioned in his earlier remarks that are already sort of in front of us and we can also sit on the sidelines if we want to until we decide that a particular opportunity makes sense. Scott, anything you want to add to that?

Thanks, great question. As far as the home builder dialogue, it continues very strong. We have great relationships with both the national builders and the regional builders. But given our cost of capital, we have been less aggressive in terms of committing to future transactions with the builders mainly as a signal because of our cost of capital. I will tell you we continue to receive substantial opportunities, in particular the end of month tapes from the builders. For the first two months of this year we've received a lot of deal flow from them. So, there's still opportunities out there. But we're trying to be a little less aggressive and obviously listening to the signal in terms of our cost of capital and the balancing act between acquisitions and share repurchases. That being said, I think our relationship continues to be strong. We obviously purchased more than 2,000 homes last year from the home builders. We continue to have a daily dialogue. We're very selective. We are looking at opportunities for our joint venture partners. But again given our cost of capital right now I think we've just been less aggressive in terms of acquiring from that pipeline.

Jason, thanks for the question. This is Dallas. As I mentioned earlier, we're only seeing about somewhere between 16 and 17% of our moveouts say that the reason they're doing so is because of home ownership opportunity. Now, that being said, and we're not mortgage experts, we clearly follow it. There's plenty of supply on the market for sale today. There certainly feels like there's a massive spread between where homes are selling, where a home can be financed at, and you're certainly right in highlighting that builders have had an opportunity to buy down rate, which has helped candidly probably keep home prices somewhat stable over the last couple of years. That being said, on a seasonally adjusted rate, we're still seeing somewhere, I think, just less than four million total transactions in a given year. That's really low. Most economists would tell you that we should probably see somewhere between five and a half million transactions. The amount of inventory in the MLS is almost 2x this year of what it was last year. So all of these fundamentals sort of suggest a couple of things to us as we look at the macros. One, there is just a cost to ownership that is pretty egregious at the moment when you consider all things being loaded in. We pick on mortgage quite a bit, but I think we need to be honest about property tax and insurance. John just talked about it. Property tax has been egregious in most states over the last four or five years as it's caught up with the inflationary pressures put on housing prices. And then on the insurance side of the equation, it's been equally as tough, I think, as people think about that fully loaded cost. So that probably has something to do with it. And then the fourth multiplier here is at what price can you finance this? And so you're right in the highlight that the builders have an advantage in terms of how they're buying down rate. But it feels like with the 30-year being around six or low sixes, it's got some room to go probably to peak enough curiosity. But let's see how the spring and summer play out.

We want to thank everyone for their participation today and we look forward to seeing everyone at the upcoming investor conference. Talk soon.