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I've demonstrated over the last two days (see here and here) that the stage is set for a multi-year recovery in real estate. The problem is, the obvious (and overcrowded) plays don't hold the most profit potential anymore.

Individual homebuilding stocks - like PulteGroup (PHM), KB Home (KBH) and Lennar Corp. (LEN) - have experienced meteoric rises over the last 18 months.

Homebuilding exchange-traded funds, which hold a basket of stocks, have enjoyed triple-digit price increases, too. The two most popular real estate ETFs, the SPDR Homebuilders ETF (XHB) and the iShares Dow Jones Home Construction ETF (ITB), are up 110% and 150%, respectively, from the August 2011 lows.

As Pat O'Hare Chief Market Analyst at Briefing.com said, "We saw a flood of money coming into those stocks [and funds] on the premises that we are going to see a multi-year recovery."

The run-up isn't limited to homebuilding stocks and ETFs, either. Many REITs are also enjoying solid upticks. As Charles Lieberman of Advisors Capital Management recently told Barron's, "The popular parts of the REIT space… have been bid up by investors desperate for yield, and they no longer look attractive."

That's to be expected, though, isn't it? I mean, the obvious beneficiaries of a recovery always get bid up first. However, the fact that homebuilding "stocks have made big moves and aren't cheap anymore," as O'Hare cautions, doesn't mean the recovery is finished. Far from it. We simply need to adjust the way we go about profiting from it.

The Hunt for the Next Big Real Estate Play Ends Here

Let me be clear, I'm not recommending selling out of any of the investments mentioned above. After all, it's common for stock prices to go much higher than anyone rationally predicts. What I'm recommending, instead, is trimming up your stops on the most prominent housing plays.

More importantly, I'm recommending that you put new money to work in the sector by doing some extra research. That way, you can find investments that haven't even come close to rising "too far, too fast," as pundits (including mainstream ones at The Wall Street Journal) warn.

Now, if you find that you're allergic to extra work, you're in luck. I've compiled a short list of such companies for you to consider below. These companies run the gamut from construction material manufacturers to title insurance providers. I even uncovered a Canadian company - with meaningful exposure to the U.S. real estate market - for our subscribers north of the border.

(click to enlarge)

As you can see, all of the companies are cheaper than the major homebuilding ETFs based on at least two valuation metrics - if not all three. And except for one, they haven't risen nearly as fast, either.

One more thing - none of the stocks above are currently holdings in either of the two major real estate ETFs. So there's no chance that everyday investors will somehow stumble upon them by simply pulling up the most recent holdings in each fund. It'll take them some time to get a clue.

By the time they figure it out, though, we'll (hopefully) be sitting on some handsome profits.

Time will tell, of course. So rest assured, I'll check back in on the group in about six months to see how each company is performing. (Yes, I believe in holding myself accountable.)

Bottom line: Pointing to the rapid rise of homebuilding stocks as proof that the real estate recovery has run out of steam is a myopic and costly assessment. Many more real estate profits lie ahead. To uncover them, all we need to do is take the time to find lesser-known companies with meaningful leverage to the recovery. If other investors are too lazy to do the same, that's their problem, not ours.

Source: 5 Surprising Real Estate Investments