Real estate investment trusts (REITs) have been a mixed bag since the Covid-19 pandemic hit. As a result of mass isolation, some subsets real estate industry have suffered more than others. Hotel, resort, and office REITs have seen massive losses, as was expected. However, the best apartment and residential REITs have defied expectations and have been able to stay afloat.
This year’s economic turmoil has led many families to downsize and move into multi-family apartment buildings. Additionally, others in populated urban centers have been driven to rural areas because of the lower cost of living and increased space. While apartment and residential real estate investment trusts haven’t made a full market recovery from the pandemic, they’re likely to improve in the coming months as the vaccine becomes more accessible Take a look at our list of top apartment REITs and residential single-family REITs.
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Best Apartment REITs
Camden Property Trust (NYSE:CPT)
Camden Property Trust invests in multifamily apartment real estate. Founded in 1981, this REIT owns, manages, develops, acquires, and constructs apartment units and apartment buildings. While headquartered in Texas, Camden owns a portfolio of 172 apartment communities with over 58,000 apartment units across the US. As one of the largest publicly traded multifamily apartment REITs, Camden was the first multifamily company to make the list of Fortune’s 100 best companies to work for.
Camden Property Trust saw its highest market performance in January of 2020. The REIT traded at nearly $119 a share in February. The Covid-19 pandemic has had a dramatic impact on the performance of the real estate sector in general.
This REIT has recovered just about half of their previous share value. Their current value is $97 per share. Unlike other types of REITs, Camden is expected to see just below-average growth in the next year. Investors should take advantage of this undervalued REIT now.
AvalonBay Communities, Inc. (NYSE:AVB)
Headquartered in Virginia, AvalonBay Communities is another REIT that focuses on multifamily housing and apartments. AvalonBay is currently the 3rd largest owner of apartments in the United States. The company owns nearly 80,000 apartment units. Their portfolio includes properties in a wide range of cities such a New York City, Washington DC, Seattle, Los Angeles, and San Francisco.
AvalonBay Communities is currently a high dividend yield REIT. However, most of their apartment buildings are in urban areas, which are currently seeing a population exodus. This puts AvalonBay in a precarious situation.
As with Camden Property Trust, AvalonBay hit peak market performance in the earlier part of 2020 Q1, reaching $228 per share. Considering its urban focus, AvalonBay has struggled to return to pre-pandemic market performance. The company now trades at $158 a share. However, there’s still plenty of potential for growth here as cities begin to distribute the vaccine.
Best Residential REITs
Invitation Homes Inc. (NYSE:INVH)
Invitation Homes is the largest owner of single-family properties in the US. Rather than focusing on multifamily apartment buildings, Invitation Homes owns and manages approximately 80,000 single-family homes across 16 cities. Since the single-family home rental industry seems to be overly saturated with ‘mom and pop’ businesses, Invitation Homes hopes to break this mold. The company prides itself on the worry-free process it provides including exceptional customer service and 24/7 emergency maintenance.
Single-family homes have performed much better during the pandemic than multi-family properties. With so many people working from home, there’s less of a need to be in dense urban environments. There are also fewer points of contact with other people in a single family home, so many people view them as being safer.
Once again, Invitation Homes saw peak market performance in February of 2020. Unlike the previous apartment REITs on our list, Invitation has nearly returned to pre-pandemic performance. Now may be a great time to buy to follow the forward momentum of single-family rental housing into the future. Experts project a 17% increase in returns for Invitation in the next 12 months.
American Homes 4 Rent (NYSE:AMH)
American Homes 4 Rent is another single-family home rental REIT. Based in California, American Homes is much more diversified than Invitations Homes, with more than 53,000 homes across 22 states. Additionally, their regional concentration is quite low. The highest concentration of American Homes’ portfolio is in Atlanta, Georgia, where 9.3% of their homes are located. The company went public in 2013 and has seen steady growth through today.
Prior to the pandemic market crash in March, American Homes saw its peak trading price in February 2020. They are the only REIT on our list thus far that has exceeded pre-pandemic market performance since then. As with Invitation Homes, this is all likely part of population shifts toward residential properties. Stock projections suggest above-average growth for the next 12 months. Some experts indicate this stock may be overvalued, however, investors should keep their eyes peeled for a good moment to buy.
Apartment REITs To Buy
Essex Property Trust (NYSE:ESS)
Founded in 1971, Essex Property Trust is an REIT focused on multifamily apartment buildings. Their real estate portfolio is primarily focused on the West Coast of the US and includes a single office building. In addition to their only office building, Essex owns 250 apartment complexes with over 60,500 apartment units. After the acquisition of BRE properties in 2014, the company was officially added to the S&P 500.
Essex has now reached a market cap of $15.09 billion. However, the company has struggled to make up for the losses they saw as a result of the pandemic, as multi-family apartment buildings have struggled the most.
Luckily, their return on equity is quite high. Their strong financial profile will likely carry them to the other side of the COVID-19 market downturn. Experts expect above-average growth for Essex over the next 12 months. Grab it while it’s cheap!
Cheap Apartment REITs
UDR Inc. (NYSE:UDR)
Previously known as United Dominion Realty, UDR Inc is another apartment REIT. Headquartered in Colorado, UDR is the 20th largest apartment owner in the US and 29th largest apartment property manager. UDR apartment REIT was officially added to the S&P 500 in 2016. The company has currently reached a market cap of $11.06 billion. UDR’s selection of properties spans 26 of some of the largest cities in the US including New York and San Francisco.
UDR Inc is another apartment REIT that has struggled to return from its peak price in February of 2020. In February, UDR reached its peak trading price of $50 a share. That said, the company is trading today at a price of nearly $38 a share. Currently undervalued, UDR may be a great cheap buy for investors seeking an opportunity to still take advantage of regional diversification.
Equity Residential (NYSE:EQR)
Headquartered in Chicago, Equity Residential is the 2nd largest owner of apartment buildings in the US. Additionally, the company is the 10th largest apartment property manager in the US. Between investments in Southern California, San Francisco, Washington, Washington DC, New York, Boston, Seattle, and Denver, Equity Residential owns or invests in over 309 properties. Their portfolio includes over 80,000 apartment units. The company’s holdings in many of the largest cities in the US tend to be very profitable normally, but have struggled during the pandemic.
Equity Residential is the first REIT on our list that has maintained their market performance since the initial downturn in the beginning of 2020. The company’s lack of properties outside densely populated urban centers is likely the reason for this. With a market cap of $21.55 billion, Equity Residential will likely make a full recovery. Investors may need to be patient to see a full recovery for this REIT. Analyst projections currently suggest positive, yet below-average returns for the next 12 months.
High Yield Apartment REITs
Mid-America Apartment Communities (NYSE:MAA)
Mid-America Apartment Communities is the largest owner of multifamily residential buildings in the US. They are also the 7th largest property manager for multifamily residential buildings. This REIT owns north of 300 complexes, constituting over 100,000 units. Additionally, Mid-America Apartment Communities owns four office buildings, which is an interesting point of diversification. Investors seeking high dividend yields should look no further than Mid-America, considering this is one of the highest dividend yield multifamily housing REITs on the market.
With its current dividend yield coming in at 3.29%, Mid-America Apartment Communities has done better than others in terms of recovering from the pandemic. They’ve recovered nearly half of the market performance they lost in March. Experts predict Mid-America to see positive but below-average returns in the coming year. This could be a good buy currently for investors seeking to hold.
Bluerock Residential Growth REIT Inc. (NYSEAMERICAN:BRG)
Bluerock may currently be one of the highest dividend-yielding apartment REITs on the market. Like the other REITs on our list, Bluerock invests in institutional quality multifamily housing. The company’s rental property acquisitions account for over 35 million square feet. Additionally, Bluerock’s acquisitions have amounted to over $10 billion in value. Bluerock has a current market cap of $284.5 market, making them one of the smaller REITs on our list.
Of the apartment REITs on our list, Bluerock has the highest dividend yield at 5.45%. Uniquely, Bluerock is the first multifamily rental housing REIT that has recovered from complete loss of market performance as a result of Covid-19. The company has performed relatively consistently on the market since going public. Their relatively small market cap in combination with their rebound performance and high yields makes this an REIT to keep your eye on for sure. Some experts think this stock could be overvalued. However, this could be a wonderful investment for those looking for high yielding REITs.
Should You Buy Apartment REITs
Right now, multi-family housing properties are dramatically underperforming the market in general. This trend is a direct result of people moving to single-family properties to avoid being in close proximity with other people. While COVID-19 has changed the world as we know it, urban centers will still be hot spots in the years to come. Buying into some of these industry REITs while they have record low market prices could lead to incredible returns for investors willing to wait until the COVID vaccine leads to societal change.
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Apartment REITs: Final Thoughts
Different sectors of the real estate industry have performed differently over the last year. Companies have struggled as a result of societal shifts in travel and the desire to be isolated. These changes won’t be present forever. The question becomes: when will they change? Those investors willing to take the risk and wait out the downturn could see significant returns. Don’t miss out on the opportunity!