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.
This stock had been performing very well prior to the pandemic, but saw a massive drop in share price in March 2020. However, they have made a very impressive comeback. This REIT now trades for over $113 per share, after hitting a low point of $71.40 per share last year.
Like many other REITs, Camden Property Trust has an excellent dividend yield of 2.92%. This makes it a strong choice for income investors.
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 all-time highs 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 approximately $187 per share. However, there’s still plenty of potential for growth here as cities continue 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.
As with many other REITs, Invitation Homes peaked in February of 2020 before struggling during the pandemic. However, their stock price has fully recovered from the market crash. This is likely because single-family rentals are doing much better than multi-family properties. 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 Homes throughout 2021.
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.
American Homes 4 Rent hasn’t struggled as much over the last year as some of the other REITs on our list. Their stock is actually trading for a higher price now than it was before the pandemic. As with Invitation Homes, this is all likely part of population shifts toward residential properties. 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 a 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 $18.62 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.
The stock seems to finally be on the upswing after months of trading sideways last year. They also have kept a 2.92 percent dividend yield.
Independence Realty Trust (NYSE: IRT)
Independence Realty Trust is based in Philadelphia, Pennsylvania, but owns multi-family properties throughout the United States. Most of their properties are in growing markets in the southeastern United States, like Atlanta, Raleigh, and Tampa.
Instead of focusing on newer properties, IRT has balanced their portfolio with a number of older properties that they can renovate. They’ve also focused on acquiring properties with a very stable tenant base, which has helped them survive the tough market conditions of the last year.
Another factor that makes IRT so appealing is their dividend yield, which currently sits at 3.03 percent. Like many other REITs, it’s a solid choice for income investors.
While this stock struggled throughout the beginning of the pandemic, their share price has consistently improved over the last few months. Shares recently hit a 12 month high.
Cheap Apartment REITs
Apartment Investment & Management Co. (NYSE: AIV)
This is one of the largest apartment-focused REITs in the country. They have a very diverse portfolio of properties spanning 17 states and Washington, DC.
What helps this REIT stay financially successful is their diverse portfolio. They have properties in both urban and suburban areas, so they cater to a broad variety of renters.
Like many others in the real estate industry, this stock has struggled financially as a result of the COVID-19 pandemic. However, their most recent earnings report seems to indicate that things are improving. While they still posted losses, their year-over-year revenue increased,
This REIT’s occupancy numbers and rent collection statistics are also starting to improve. Their stock remains priced at around $6 per share, but recent growth indicates it may not stay that way for long.
Equity Residential (NYSE: EQR)
Headquartered in Chicago, Equity Residential is the second-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’s stock price is slowly starting to recover from the challenges of last year. Investors are starting to feel more bullish about urban rental properties now that COVID-19 restrictions are starting to let up. In addition to the recent improvement in their stock price, this company has also maintained their dividend yield of 3.34 percent.
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.
This stock currently has a dividend yield of 2.76 percent. Their stock price has consistently improved over the last several months. This company’s mix of residential and commercial properties makes it an interesting choice for REIT investors.
American Campus Communities (NYSE: ACC)
American Campus Communities is a a unique apartment REIT that focuses on student housing. They have a large portfolio of dorm-style apartments throughout the US.
This stock struggled last year as universities held classes online and many students moved back in with their parents. However, universities are finally starting to reopen as students can get vaccinated for COVID-19.
Despite this year’s economic challenges, this REIT does have a very strong business model. Universities have a new influx of students every year that need housing, which helps keep their occupancy rates high.
This REIT appears to have fully rebounded from the March 2020 stock market crash. They also have a very strong dividend yield of 4.32 percent.
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!