Real estate is in my blood. My first job, when I was 8 years old, was working for my grandfather rehabbing single-family homes and small apartment buildings for his one-man investment company. I remember being paid a dollar an hour and thinking how rich I would be on payday.#-ad_banner-#​

What I didn’t understand at the time was that the work wasn’t about the trivial jobs I learned to hate. It was more about the start of a learning process. He was teaching me the value of hard work and the ability to find opportunities in the most distressed situations. The most important thing I learned is that there are dozens of creative ways to earn profits with real estate.

From the 1960s until about 2007, real estate was truly the golden goose for many Americans, commonly believed to be a can’t-lose investment. Prices seemed to always be climbing higher, and even after short pullbacks, the uptrend resumed quickly. 

Then, in 2007, the bottom fell out of the market. Many investors were forced into bankruptcy as their overleveraged properties plunged in value, and many homeowners lost their homes in the perfect storm of extended leverage meeting plummeting prices. This situation forced most everyone involved in real estate to find even more creative ways to profit or survive.

The good news is, the housing market is on its way back to normality. Residential real estate website Trulia.com has a housing barometer that considers construction starts, existing home sales, and the rates of delinquency and foreclosure. Using this barometer, Trulia estimates that the housing market is 67% back to normal. Last year at this time, the barometer read 42%, so the current figure is a marked improvement.  

Now that things are finally on the upswing in most parts of the country, there is once again tremendous opportunity in the real estate market. While there is no question about the appeal of real estate investment trusts (REITs), some investors enjoy the hands-on investing method of buying and renting out investment properties. In fact, the savviest investors directly own physical properties and take advantage of the dividend-producing power of professionally managed REITs.  

The real estate crisis forced many homeowners into the rental business to generate cash. Some of these homeowners converted basements or other unused areas of their homes into rental units. Others simply rented out their entire homes and downsized into apartments. It is this creative idea of renting out your own home that gave rise to HomeAway (Nasdaq: AWAY).

	Flickr/heatheronhertraveks
	HomeAway currently hosts more than 770,000 paid vacation home listings in 171 countries.

I learned of this company when I read about the astronomical prices creative homeowners were receiving for renting out their homes for Super Bowl weekend. After digging deeper into the HomeAway concept, I discovered that this company not only offers a great service — its stock is a profitable investment.

HomeAway is an online marketplace for the vacation rental business. The company owns a variety of international websites including the popular Asian short-term rental site Travelmob.com. Providing an interface between property owners/managers and travelers looking for vacation rentals, HomeAway currently hosts more than 770,000 paid vacation home listings in 171 countries. The company has grown quickly, becoming the world’s largest in its niche with a market cap of over $3 billion. 

Third-quarter results indicate a strong growth trajectory, with quarterly revenues increasing more than 23% from last year. In addition, adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) grew nearly 20%, and free cash-flow generation rose nearly 17%, to more than $91 million.  

A closer look at the factors driving the third-quarter numbers shows that paid listings increased 7% year over year, and average revenue per subscription rose more than 15%, excluding currency differentials. Perhaps most significantly, visits to the site increased 27%, to 198 million. What these numbers reveal is that HomeAway is clearly in expansion mode, with both the top and bottom lines showing growth.

The strong third-quarter results caused prices to gap up from the $29 area to the mid-$30s. Prices then continued pushing higher, before hitting resistance at $39 prior to consolidating in the upper $30s.  

Risks to Consider: Internet-based companies have a variety of risk factors. HomeAway’s primary risk is from competition creating an easier-to-use, more efficient or simply more economical platform that could dilute HomeAway’s dominance. In addition, the company’s real estate focus makes it highly dependent on the condition of the economy for its continued growth. Always use stop-loss orders and diversify when investing.

Action to Take –> I like this stock on a breakout close above $38. Placing a stop-loss at $33 and a $47 12-month price target makes solid investment sense right now.

P.S. An eccentric Texas woman who dodged the 2008 financial collapse says the market is ripe for a pullback. This is the same analyst who’s produced annual returns of up to 510% and has picked winning investments roughly 85% of the time. To learn how she’s protecting her portfolio today, click here.