When it comes to residential real estate investment trusts (REITs), most investors focus on the big names like Avalon Bay or Equity Residential. But smaller, under-the-radar REITs like Invitation Homes (INVH -1.04%) often outperform and outshine the bigger names.

That's certainly the case lately for Invitation Homes, which specializes in owning and leasing single-family rental properties. The company saw explosive growth in 2021 and appears to be well-positioned for another strong year. Here's a closer look at the company today and why this up-and-coming REIT should be on your radar.

People in front yard of single family home playing with ball on grass.

Image source: Getty Images.

Single-family rentals in sunshine states

At the start of 2022, Invitation Homes had ownership or interest in over 80,000 single-family rental properties across the Sun Belt of the United States -- an ideal business model for today's pandemic times. Remote work has opened the door to new possibilities for living arrangements, pushing a record number of families to relocate to the southern part of the United States.

Additionally, tenant preferences have shifted to wanting larger, more private spaces, such as single-family homes. These demands, when combined, have created the perfect storm for Invitation Homes to explode over the past year.

In 2021, its net operating income (NOI) grew 9.4% for the full year. Revenues jumped 9.5% thanks to a record rental-rate growth of 8.8% in just a single year. Its funds from operations (FFO), which is commonly used to indicate a REIT's profitability, were up 16.2%. The REIT has collected 98% of all rents, and occupancy is holding strong at 98.1%. In 2021, the company added 4,802 homes to its portfolio by purchasing homes outright but also through strategic joint ventures.

The company used this explosive growth to improve its financial circumstances by lowering its debt ratios. As of year-end 2021, its net debt is now 6.2 times its earnings before interest, taxes, depreciation, and amortization (EBITDA), a stark improvement from just a year ago when it was 7.3 times EBITDA. It also has $1.6 million in cash and equivalents with no debt maturities due until 2024. This puts it in a more favorable position for continued expansion.

Person looking somber in front of stock charts on a computer screen.

Image source: Getty Images.

Today's market volatility is investors' gain

Demand for single-family rental housing isn't slowing. If anything, it's accelerating as families continue to face increasing home prices. Since it's still a relatively smaller company with a market cap of just $23 billion, there is a lot of room for it to grow over the next few years. Given its collection rate, rental-rate growth, and occupancy, there is a lot of wiggle room in the event of a pullback in the economy or housing markets. 

Today's market volatility has pushed Invitation Homes' share price down close to 15% year to date despite its incredible performance in the fourth quarter of 2021. Its price today is roughly 28 times its FFO, meaning the company is still a bit richly valued. Yet, that is similar to its competitors' valuations, and it offers exposure to a high-demand, high-growth market that not many other residential REITs can.

I've been bullish on this company for quite some time, and its deflated share values were the perfect time to jump in. While it's still trending downward, I believe in the company's business model and that this under-the-radar real estate stock will again soar in the near future.