Best Multifamily REITs for Investing Your Money
If you are thinking of investing in multifamily REITs, you must be thinking like Warren Buffett. The legendary investor believes REITs are a much better investment option than owning physical rental properties.
While you cannot always take Mr. Buffett’s or anyone’s advice at face value, the strong performance of the multifamily market makes multifamily REITs worth considering.
- The U.S. multifamily rental market grew 56% last year, breaking all previous records.
- The average rent went up 15%, hitting an all-time high
- In a survey conducted by Hoya Capital, all ten REITs that provided the data reported double-digit rent increases
Table of contents
- What are Multifamily REITs?
- Why Invest in Multifamily REITs?
- What Factors to Consider for Investing in Apartment REITs?
- Top 10 Multifamily REITs for Investing
- Equity Residential (NYSE: EQR)
- AvalonBay Communities (NYSE: AVB)
- UDR Inc. (NYSE: UDR)
- Mid-America Apartment Communities (NYSE: MAA)
- Essex Property Trust (NYSE: ESS)
- Camden Property Trust (NYSE: CPT)
- Washington Real Estate Investment Trust (NYSE: WRE)
- Apartment Investment and Management Co (NYSE: AIV)
- Preferred Apartment Communities, Inc. (NYSE: APTS)
- Bluerock Residential Growth REIT, Inc. (NYSE: BRG)
- Which Multifamily REITs Should I Buy?
- NOI and Real Estate Valuation
- Commercial to Multifamily Residential Conversion
- What Rising Inflation Means for Multifamily Portfolios
What are Multifamily REITs?
Simply put, a multifamily REIT or Real Estate Investment Trust is a company that leases apartment housing space and rents out residential properties, then paying out the collected rent as dividends to REIT stockholders.
REITs can be publicly or privately owned. Public REITs are registered with the SEC and you can buy and sell their shares on the stock exchange just like regular stocks The law requires REITs to distribute at least 90 percent of their taxable income as dividends.
For more information on the types, numbers, and investment benefits of REITs, please refer to REIT FAQs.
Why Invest in Multifamily REITs?
Historically, REITs have delivered competitive returns. Residential REITs are less prone to market shocks than other asset classes and reduce the overall volatility of a portfolio. Their valuations are more realistic. They provide an effective hedge against inflation and outperform stocks during times of crises.
What Factors to Consider for Investing in Apartment REITs?
Sophisticated investors use machine learning and big data tools to analyze the historical performance of REITs and uncover the factors that help predict their future performance. Some of the financial documents that we can analyze include:
- Balance Sheet: The balance sheet is the first document to look at when assessing a company’s financial standing and stability. Some of the key ratios to consider include Liquidity Ratio, Debt Ratio, Debt/EBITDA.
- Growth Rate: Revenue growth rate is crucial because nobody wants to invest in companies that are stagnating or declining. The key areas to assess include TCFO (total cash from operations), FFO (funds from operations), and Dividends.
- Dividend Safety: Investors could face a sort of double jeopardy if a REIT slashes its dividends. They lose their income and could make a negative gain as other investors sell off and the REIT price crashes. It’s important to consider Dividend Yield, Dividend Growth, and Dividend Safety based on several years of historical data.
- Exposure to High Growth Areas: The Sun Belt and suburbs are leading the market in apartment rents and demand for rental properties. Ideally, you should prefer to invest in a company that has a larger part of its portfolio concentrated in these areas, compared to another company with more exposure to densely populated metropolitan areas. Sunbelt properties are leading the market with an average 21 percent new lease growth.
Top 10 Multifamily REITs for Investing
More than 225 REITs have registered with the SEC. Just 15 REITs own about half a million multifamily residential units. Here, we’ll look at some of the most prominent multifamily REITs and try to see which ones are more best for investing.
Equity Residential (NYSE: EQR)
Headquartered at Chicago, Illinois, Equity Residential is the fifth largest owner of apartments and the fourteenth largest apartment property manager in the United States. The publicly traded real estate investment trust towned 310 properties with 80,407 apartment units as of December 31, 2021. The Company’s portfolio is spread across San Francisco and Southern California in the Southwest and New York City and Boston in the Northeast as well as Washington DC, Denver, Dallas, Atlanta and Austin. Equity Residential has the highest paid up capital among all REITs and is a member of the S&P 500.
Is Equity Residential REIT a Good Investment?
EQR might be a good stock to invest if you want to earn secure long term returns. Out of 15 analysts, 2 recommend EQR as a Strong Buy, 3 recommend it as a Buy, 9 recommend it as a Hold, none recommend EQR as a sell, and 1 recommends EQR as a Strong Sell. The share price touched $90 in December 2021 and is currently trading around $73.
- APTS Market Cap: $28.59B
- 5 Year Monthly Beta: 0.82
- PE Ratio (TTM): 21.19
- EPS (TTM): 3.46
- Current Price: $73.31
- 1 Year Target Est: $82.90
Visit Yahoo! Finance for more on Equity Residential (EQR)
AvalonBay Communities (NYSE: AVB)
AvalonBay Communities Inc. is an equity REIT that develops, rebuilds, acquires, and manages apartment properties in some of the best U.S. residential markets. It owns some 80,000 apartment units and is the third largest REIT in the U.S. Major portions of the Company’s portfolio are located in Northern and Southern California, New York and New Jersey, giving it significant exposure to the high-growth Sun Belt.
Is AVB REIT a Good Investment?
AvalonBay Communities has been around since 1994. It has shown strong growth throughout its history, barring the 2008 crunch times and the recent coronavirus crises. According to an analysis of last three years’ data by SeekingAlpha, AvalonBay Communities (AVB) has a healthy balance sheet but negative FFO and TCFO growth. The stock’s price touched an all-time high of USD 244.23 on Jan 1, 2022. It is currently trading around 196, so it might be a good time to buy.
- AVB Market Cap: $27.719B
- 5 Year Monthly Beta: 0.93
- PE Ratio (TTM): 24.66
- EPS (TTM): 8.04
- Current Price: $198.25
- 1 Year Target Est: $225.33
Visit Yahoo Finance for more info on the AVB REIT.
UDR Inc. (NYSE: UDR)
Colorado, Maryland based UDR Inc., previously United Dominion Realty, is an S&P 500 Company that owns interest in some 149 apartment communities housing 48,283 units. United Dominion Realty was founded 50 years ago and listed as a public company in 1978.UDR’s portfolio mostly consists of luxury apartment communities, located along the Southwestern SunBelt area in San Diego, LA, Southern California, Seattle, and Washington as well as in high growth East Coast areas of Boston, New York, Philadelphia, Washington DC, Tampa, Orlando, Dallas and Colorado. UDR is the 19th largest owner of apartment units in the U.S.
Is UDR REIT a Good Investment?
UDR is a well established company with According to UDR’s annual report, the UDR stock delivered a net return of 0.48 per share in 2021. The Company expects a net income per share of $0.22 to 0.30 per share for the year 2022. UDR is a Strong Buy based on the recommendations of 16 analysts.
- UDR Market Cap: $24.282B
- 5 Year Monthly Beta: 0.74
- PE Ratio (TTM): 90.53
- EPS (TTM): 0.51
- Current Price: $46.17
- 1 Year Target Est: $52.70
Visit Yahoo! Finance to view more data on UDR
Mid-America Apartment Communities (NYSE: MAA)
A Memphis based REIT that invests in apartments in the Southeastern and Southwestern United States, The REIT owned 100,490 apartment units as of December 31, 2020, which makes it the largest owner of apartments in the United States. The Company was founded in 1977 and reorganized as a REIT in 1993. The stock’s price declined during 2020 but appreciated more than $100 per share during 2021.
Is Mid-America Apartment Communities (MMA) REIT a Good Investment?
Mid-America Apartment Communities boasts a strong balance sheet and FFO Growth but has a negative TCFO Growth rate over the past three years. MMA stock price rose to around $230 on December 31, 2021 and is currently trading at around $174, with a bullish sentiment. This might be a good time to buy.
- MMA Market Cap: $20.09B
- 5 Year Monthly Beta: 0.71
- PE Ratio (TTM): 33.82
- EPS (TTM): 5.16
- Current Price: $174.05
- 1 Year Target Est: $199.78
Visit Google Finance for more info on Mid-America Apartment Communities.
Essex Property Trust (NYSE: ESS)
Essex Property Trust is an S&P 500 company that invests in apartments along the West Coast. Major parts of the Essex portfolio are concentrated in Northern and Southern California and in the Seattle Metro area. The REIT has delivered a 16.2% compounded return to investors from its IPO in 1994 through December 31, 2021. The Company is included in Newsweek’s list of America’s Most Responsible Companies where it ranks 2nd among apartment REITs, just behind AvalonBay Communities.
Is Essex Property Trust a Good Investment?
As per Yahoo! Finance, ESS has a market cap of 18.514B, a PE Ratio of 45.33 and EPS of 6.04. The current share price is $273.81, down from a high of 359.31 on Apr 21, 2022. The one-year target estimate is $303.80. The current consensus rating on the ESS stock is a Hold.
- ESS Market Cap: $18.514B
- 5 Year Monthly Beta: 0.77
- PE Ratio (TTM): 25.33
- EPS (TTM): 6.04
- Current Price: $273.81
- 1 Year Target Est: $303.80
Find more info on Essex Property Trust on Yahoo! Finance
Camden Property Trust (NYSE: CPT)
Houston, Texas based Camden Property Trust owns, manages, develops, redevelops, acquires, and constructs multifamily apartment communities. The REIT owns interest in 58,588 apartment units located in 171 apartment communities spread across Houston, Atlanta, Austin, Charlotte, Dallas/Fort Worth, Denver, LA/Orange County, Nashville, Orlando, Phoenix, San Diego, Southeast Florida, Tampa, and Washington DC. Camden Property Trust is ranked 26 in Fortune’s list of 100 best companies to work for in 2022.
Is Camden Properties Trust a Good Investment?
According to Zack’s proprietary data, Camden Property is expected to outperform the market in the next few months. The Company increased its earnings 4.3% in 2021 as the FFO went up 10% year-on-year. Average new rents increased 15.2%. The share price declined to as low as $71.04 in March 2020 and rallied to an all-time high $178.68 on December 31, 2021. Camden (CPT) stock might be a great pick because it has shown strong growth in the past. The REIT also emerges as a winner in a data-backed analysis conducted by Philip Eric Jones of Hoya Capital Income Builder.
- CPT Market Cap: $14.47B
- 5 Year Monthly Beta: 0.79
- PE Ratio (TTM): 39.84
- EPS (TTM): 3.41
- Current Price: $135.84
- 1 Year Target Est: $163.58
Visit Google Finance for more info on Camden Property Trust.
Washington Real Estate Investment Trust (NYSE: WRE)
Washington Real Estate Investment Trust (WashREIT) owns and operates real estate assets in the DC area and Southeastern United States. The REIT has been around since 1984 and owns uniquely positioned assets in the DC Metro area. It has a small portfolio of 45 properties including 3.7 million square feet of commercial space and 6,843 multifamily apartment units. The REIT might be a good investment for companies and individuals looking to acquire stakes in a highly competitive market, though it might not be as lucrative for value investors.
- WashREIT market cap: $ 1.867B
- 5-year monthly beta: 0.89
- PE Ratio (TTM): 192.43
- EPS (TTM): 0.11
- Current Price: $21.36
- 1 Year Target Est: $24
Visit Yahoo! Finance for more info on Washington REIT.
Apartment Investment and Management Co (NYSE: AIV)
AIMCO is a premier real estate investment company with $3.4B in assets under management and development. The Company has been around for 30 years and has its footprint in 8 key real estate markets in the United States; including the Northeast, South Florida, Denver, Northern and Southern California, and Boulder metropolitan areas. Primarily a multifamily investor, the Company focuses on creating value for investors, teammates and the communities in which it operates. The Company was recognized as 2022 Healthiest Employer by The Denver and South Florida Business Journals.
Is AIMCO REIT (AIV) a Good Investment
Apartment Investment and Management Co’s stock plummeted 86% in December 2020 and was earlier dropped from the S&P 500 index. The expert recommendation on AIMCO is a Hold.
- AIV Market Cap: $1.151B
- 5 Year Monthly Beta: N/A
- PE Ratio (TTM): N/A
- EPS (TTM): -0.13
- Current Price: $7.54
- 1 Year Target Est:N/A
Visit Yahoo! Finance for more info on AIV REIT
Preferred Apartment Communities, Inc. (NYSE: APTS)
Headquartered in Atlanta, Georgia, APTS is a relatively newer REIT founded in 2011. The Company owns and operates 44 Class A multifamily communities aggregating approximately 12,000 apartment units. It also operates 54 grocery-anchored retail assets. The Company’s properties are situated across 13 states including Florida, Texas, Georgia, North Carolina and Tennessee. At the time of writing, PAC is set to be acquired by Blackstone Real Estate Income Trust for $5.8 billion.
Is PAC (APTS) a Good Investment?
Based on total returns, Preferred Apartment Communities (PAC) is the second best-performing REIT stock this year according to nerdwallet. Zacks expects an in-line return from the APTS shares in the coming months. APTS currently has a Zacks Rank of 2, which indicates it is a Buy.
- APTS Market Cap: $1.624B
- 5 Year Monthly Beta: 0.98
- PE Ratio (TTM): N/A
- EPS (TTM): -2.48
- Current Price: $25.00
- 1 Year Target Est: $18.00
Visit Yahoo! Finance for more info on APTS REIT.
Bluerock Residential Growth REIT, Inc. (NYSE: BRG)
Bluerock Residential Growth REIT, Inc. is a New York based Company with a market cap of USD 783.63 million as of today. The REIT invests in highly amenitized live-work-play apartment communities. Its portfolio of institutional-quality suburban properties is spread across demographically attractive growth markets in Florida, Texas, Colorado, Arizona, Nevada, and Georgia, among other states.
Is Bluerock Residential Growth REIT a Good Investment?
BRG was the best performing REIT stock as of July 2022. The company generated a total return of 160.9 percent, narrowly outperforming Preferred Apartment Communities (NYSE: APTS). Its current share price of 26.29 makes it lucrative for value investors seeking to outperform the market in the long term.
- BRG Market Cap: $937.784M
- 5 Year Monthly Beta: 0.94
- PE Ratio (TTM): N/A
- EPS (TTM): -1,36
- Current Price: $26.16
- 1 Year Target Est: $28.28
Refer to Yahoo Finance for more info on Bluerock Residential Growth REIT.
Which Multifamily REITs Should I Buy?
Your investment decision would depend on your investment strategy. Are you looking for safety and low risk, or high dividends in the short or long term? Are you a value investor, momentum investor or growth investor? How is the rest of your portfolio balanced?
We hope that the above comparison in tandem with your own research and guidance from your advisors, will help you make the right decision.
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