Top apartment REITs, residential REITs investment opportunities updated on 2023.

Apartment REITs has one of the highest average annual returns of all real estate investments. Learn all about the possibilities and details of apartment REITs.

last updated Friday, May 19, 2023
#apartment reits #best apartment reits 2022

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John Burson

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CONTENTS

Apartment REITs are investment vehicles that offer investors a convenient, relatively safe, and low-cost way of reaping the benefits of owning residential property without taking out a loan. Fortunately, you can invest in apartment REITs in several ways. Along with vital details and tips, this article will highlight the different apartment REIT investment options, both private and public.

Why are apartment REIT investments a good opportunity?

With an average annual return of 10.6%, apartment real estate assets outperform commercial real estate on average by over one percentage point. REITs have an average yearly return of 11.8%. So, when you invest in residential apartment REITs, you opt for a powerful combination of potentially strong returns with a low capital commitment.

The types of Apartment REITs

Apartment or residential REITs invest primarily in residential properties and mortgages tied to residential properties. Because residential properties are sometimes multifamily or apartments, residential REITs are also called multifamily REIT and apartment REITs.

Before choosing, based on your investment criteria, the best apartment REIT stocks, you should carefully understand what type of operation the REIT invests in: These are the various investment methods.

• Buy to rent. Buy apartments and then rent them to people (this is the most common type of multifamily REIT).
• Invest in a mortgage. Buy the mortgage on an apartment paid by people owning it and living in it (residential mortgage REITs).
• Invest in development. Buy a mortgage or a loan to develop an apartment or multifamily property that is not occupied yet (called commercial residential REITs).

Why Investing in apartment REITs is better than purchasing the property directly

Direct Property Purchasing Profile

• Involvement: High
• Diversification: Low
• Experience required: High
• The minimum investment required: is $100 thousand or more
• Risk: High
• Liquidity: Low

The most intuitive way of investing in apartment real estate is to purchase property and manage it yourself or partner with friends, family, or colleagues. This methodology, coupled with leveraging by asking for a bank loan to buy the property, is heavily promoted by social media influencers as a get-rich-quick scheme. But unlike apartment REIT investments, direct purchasing requires a substantial capital commitment and accepting sole responsibility for considerable risks.

Several variations of this model are part of the BRRRR process. The main steps of this process are:

• Buy a discounted property undervalued due to repairable problems, such as structure damage, poor landscaping, vacancies, or cosmetic issues. Usually, people will get a hard money loan to finance the purchase.
• Renovate the property by repairing it or modernizing it.
• Rent the property
• Refinance by obtaining a longer-term mortgage, usually leveraging even more.
• Repeat the process.

Risks:

Although this seems simple in practice, direct purchase real estate investing carries enormous risks, and we do not recommend it for the following reasons:

• Buying, renovating, and managing properties requires extensive experience, which you may not have. Real estate is a competitive market, and people much more experienced than you are looking for the same opportunities. You must manage contractors, sign complicated paperwork, ask for loans, find tenants, etc. At every step, mistakes can cost you thousands.
• It also requires a lot of time on your part unless your partner is going to manage the properties.
• By not diversifying, you are putting all your eggs in one basket. You are committing too much capital and maybe even your net worth into one investment. If that investment goes wrong, you could face challenging financial times.
• Leverage is extremely risky. We cannot stress this enough. Even seasoned investment managers implode because they take excessive leverage. When you take out a loan, minor inconveniences can make you lose all your investment.
• You may face foreclosure if you are counting on rental income to pay the mortgage and your property is temporarily vacant. The same can happen if rates increase so much that mortgage costs are higher than rental income.
• If you have to repay your hard money loan by a specific date, even if you haven't finished renovations or cannot secure a mortgage loan.
• Hard money loans usually carry personal guarantees and recourse covenants, meaning the lender can also go after your other assets.

For these reasons, we do not recommend investing in real estate directly unless you have enough experience in direct purchase real estate investing or you have partnered with relevant experience.

Investing in apartment real estate private equity REITs

Private equity REITs profile:

• Involvement: Low
• Diversification: High
• Experience required: Normal
• The minimum investment required: varies between $1 thousand and $25 thousand.
• Risk: Middle
• Liquidity: Constrained

Benefits

There are several advantages to investing in real estate private equity funds compared with purchasing a property directly. For example, private funds:

• Must register with the SEC (unless available to accredited investors only), providing enormous protection. The fund must report its results periodically, and its financial statements will be subject to audit.
• Usually manage hundreds of millions, if not billions, in assets. They offer significant diversification through the purchase of several properties in different geographies.
• They are generally organized as Real Estate Investment Trusts (REITs). REIT regulation requires distributing at least 90% of yearly income to shareholders. And they usually provide a recurrent dividend payment.
• Have a track history from which managerial ability can be analyzed. Some funds have been in operation for decades. Fund managers are generally well-prepared professionals with significant real estate investing experience.

In the last few years, the federal government and the SEC allowed retail investors to access private equity real estate funds previously allowed only to accredited investors (an accredited investor has a net worth above $1 million or a yearly gross income above $200 thousand).

After these regulatory changes, several platforms started offering retail investors private equity real estate funds. These platforms may or may not manage the funds themselves. Sometimes they only filter the funds from other managers (sponsors) and offer them to the public. Still, they have to follow all SEC rules.

Most private equity managers or platforms only offer funds for a limited time until each fund has reached total funding. Therefore, the investment opportunities provided by each manager/platform change over time.

Risks

Private equity funds may leverage more than comparable public equity funds. They take on debt to increase their returns, but debt increases both returns and risks. When things go south, heavily leveraged funds will suffer more. For example, for a fund leveraged ten times (10x) the equity, a 10% negative return can lead to bankruptcy.
Also, private funds have redemption mechanisms that allow investors to recover their money if needed, but these may be restricted. For example, in many funds, investors can only ask for redemptions once every quarter or once every year. These redemptions may be limited to $50 thousand per request, and the fund may decide not to redeem the investor's shares if liquidity conditions are not ideal.

Investment platforms feature private equity REITs

Fundrise

• Minimum initial investment: $1,000
• Commissions: 1% yearly
• Leverage: Up to 85% of assets (5.6x)
• Returns: 8.7% net total compounded.
• Years in operation: 7

Fundrise is a platform that offers its own managed funds. This allows them to charge relatively low commissions for private equity funds generally. In addition, investment is pretty straightforward, all done through a website.

The platform allows users to choose between as many as ten funds, changing over time. When we checked their offerings, they had two apartment real estate funds: one more balanced income, the other more growth-oriented.

Their platform allows investors to watch every single project for each fund, and funds pay a monthly dividend. However, the only criticism of Fundrise is that their funds can take too much leverage (up to 85% debt financed), which increases risk severely.

Blackstone

• Minimum initial investment: $2,500 (plus suitability standards like $250k net worth or $70k yearly income)
• Commissions: 3.5% on sales (upfront), 2.1% on servicing yearly, 12.5% on total returns
• Leverage: Up to 60% of assets (1.5x)
• Returns: 11% net and cumulative since its inception in 2017
• Years in operation: 7

This gigantic asset manager offers its private REIT. As you can see, their fees are much higher than those of Fundrise, and their returns are also much higher, particularly compared with the leverage they use. Blackstone Fund does not fully invest in residential properties because it allocates as much as 50% of its assets to different forms of commercial real estate.

One of the most significant advantages of the fund is that it is gigantic. For example, they own 290,000 housing units alone. However, Blackstone REIT also has a liquidity problem. For this reason, it started limiting withdrawals in December 2022.

Bluerock Residential Blackstone

Another currently mentioned name is Bluerock Residential, particularly Bluerock Residential Growth REIT. Since Blackstone Real Estate recently acquired Bluerock Residential Growth REIT, it won't be unusual to find a Blackstone/Bluerock Residential REIT listing shortly.

Today, Bluerock still manages private and public funds and REITs. For example, the Bluerock Total Income Plus Real Estate Fund is a fund of funds that invests in other real estate funds like Blackstone or those managed by Ares, Bain Capital, and Brookfield. However, this fund is not a residential real estate fund because it invests in other real estate assets.

The company also manages a public REIT, the Bluerock Homes Trust (BHM), that invests in single-family rental homes. Single-family houses are not the same as multifamily or apartment properties, but they share several characteristics. As a result, we also include BHM's information in the list of best residential REITs below.

Paperfee can bridge the information gap in private fund REIT investments

Information scarcity is one of the primary disadvantages of private funds compared to public funds. The cause of this scarcity is the lack of analysis of information, not the lack of data availability. Plus, private funds are only available for a limited time. Consequently, it makes separating the wheat from the chaff difficult.

Fortunately, PaperFree solves this information problem with private fund REITs. We scout hundreds of private offerings from private fund managers and sponsors. Then we evaluate them before presenting the best private fund REITs to you. On top of that, we provide you with the information you need to make your own informed decisions.

If you want more information, please feel free to reach out!

Investing in public apartment REITs

Public apartment REIT profile:

• Involvement: Low
• Diversification: High
• Experience required: Normal
• The minimum investment required: no minimum required
• Risk: Middle
• Liquidity: High (at a cost)

Benefits

At least 20 public REITs operate in the residential real estate space. For most investors, public residential REITs have these attractive characteristics:

• She regularly published financial information to the SEC, like private funds offered to non-accredited investors.
• Like private REITs, they must regularly distribute 90% of distributable income.
• They range in size from relatively small ($100 million market cap) to gigantic ($25 billion), leverage from low leverage (0.7x) to middle leverage (3x), and geographic diversification. Public REITs are the largest REITs
• A lot of research on them is freely available on the web.

Risks

However, some caveats come with public residential REITS investments. Public REITs are subject to market downturns or turmoil, like most real estate investments. Panic selling and a turbulent economy can depress these investments until they don't reflect their NAV per share.

Public apartment REIT Capital Arrangement

Public residential apartment REITS allow you to invest in small steps, such as adding a small amount to the investment every month. On the other hand, private funds REITs usually have investment windows and expect a one-time lump sum commitment, although some may also accept monthly investments.

List of the best apartment REITs 2023, focusing on - investing in residential properties.

Below is a list of the best residential REITs to vest in residential properties, with some of their financial and operating data.
Returns calculated for February 2023.

Name	Ticker	Market Cap ($b)	Leverage	Dividend Yield	1-year return	5-year return	10-year return	Share price	P/E ratio*
AIMCo.	AIV	1.15	1.2	0	13.3	38.7	105.4	7.6	4.2
American Homes 4 Rent	AMH	12	0.7	2	-10	81	-	34.4	58
Apartment Income REIT	AIRC	5.8	1.8	3.5	-25	-	-	38	6.5
Armour Residential REIT Inc	ARR	1.1	0	21%	-18	-55	-59	5.8	71
AvalonBay Communities	AVB	25	0.7	3.5	-25	32	92	180	21
Bluerock Homes Trust	BHM	0.1	1.3	-	-	-	-	19.8	-
BSR	HOM.U	0.56	0.7	3.5	-13	-	-	15	1.7
Camden Property	CPT	13.3	0.7	3	-24	70	160	122	20.5
Centerspace	CSR	1	1.4	4.2	-21	57	27	70	-
Clipper	CLPR	0.11	60	5.5	-19	7.7	-	7	60
Ellington Residential Mortgage REIT	EARN	0.1	0	11.50%	-10	30	-	8	33
Elme Communities	ELME	1.6	0.4	3.6	-15	-20	3.3	19	-
Equity Lifestyle Properties	ELS	13.5	2.4	2.3	-5.2	92	411	72.6	48
Equity Residential	EQR	25	0.7	3.9	-26	32	87	65	21.3
Essex Property Trust	ESS	15	1.1	3.8	-29	21	102	230	42
Independence Realty	IRT	4.3	0.7	2.8	-17	174	-	19	32
Invitation Homes	INVH	20	0.7	2	-20	68	-	33	57
Mid-America Apartment Communities	MAA	20	0.7	2.9	-17	120	273	172	31
Next Point Residential Trust	NXRT	1.3	3	3	-34	3	140	51	50
Sun Communities	SUI	20	0.8	2.2	-15	106	412	159	78
UDR	UDR	14	1.4	3.5	-21	45	156	43	87
UMH Properties	UMH	1	2.5	3.3	-19	82	214	18	-

tags: #top apartment reits
*P/E ratio definition. Price to earnings ratio is a way to value a company by comparing the price of a stock to its earnings. 
P/E=(Share price)/(Earnings per share)
tags:  list of residential REITs, best apartment REITs 2022(23)

Apartment REITs by market cap

Name	Ticker	Market Cap ($b)
AvalonBay Communities	AVB	25
Equity Residential	EQR	25
Sun Communities	SUI	20
Mid-America Apartment Communities	MAA	20
Invitation Homes	INVH	20
Essex Property Trust	ESS	15
UDR	UDR	14
Equity Lifestyle Properties	ELS	13.5
Camden Property	CPT	13.3
American Homes 4 Rent	AMH	12
Apartment Income REIT	AIRC	5.8
Independence Realty	IRT	4.3
Elme Communities	ELME	1.6
Next Point Residential Trust	NXRT	1.3
AIMCo.	AIV	1.15
Armour Residential REIT Inc	ARR	1.1
UMH Properties	UMH	1
Centerspace	CSR	1
BSR	HOM.U	0.56
Clipper	CLPR	0.11
Ellington Residential Mortgage REIT	EARN	0.1
Bluerock Homes Trust	BHM	0.1

The largest residential REITs of 2023

The following is a list of residential REITs with the most significant residential property holdings.

Size	Name	Ticker
XXL	AvalonBay Communities	AVB
XXL	Equity Residential	EQR
XXL	Invitation Homes	INVH
XXL	Mid-America Apartment Communities	MAA
XXL	Sun Communities	SUI

Sun Communities, mobile home REIT

Sun Communities (SUI) owns, operates, and develops manufactured housing and recreational vehicle communities throughout the United States and Canada.

Sun Communities provides affordable housing options for retirees, working-class families, and other individuals seeking affordable housing alternatives. The company's portfolio includes over 500 properties with over 180,000 sites, making it one of North America's largest manufactured housing community owners and operators.

In addition to manufactured housing communities, Sun Communities also owns and operates other properties, such as RV resorts and marinas. The company generates revenue primarily from rental income.

Mid America Apartment Communities, the Southern REIT

Mid America Apartment Communities (MAA) owns and operates apartment communities in the Southeastern and Southwestern United States. The company's portfolio includes over 100,000 apartment units, making it one of the largest multifamily REITs in the United States.

The company generates revenue primarily from rental income and property management fees. Mid America Apartment Communities is focused on high-quality properties in urban and suburban markets with strong economic fundamentals. The company has a diversified portfolio of properties, including garden-style apartments, mid-rise and high-rise buildings, and mixed-use communities.

Invitation Homes, a high-quality single-family rental apartment REIT

Invitation Homes (INVH) focuses on owning and operating single-family homes for rent in the United States. The company's portfolio includes more than 80,000 homes in 16 markets nationwide.

Invitation Homes aim to provide high-quality rental homes to residents seeking alternative homeownership while offering flexibility and convenience. The company's portfolio includes homes of various sizes and configurations, from studios to four-bedroom houses, in suburban and urban locations.

AvalonBay Communities, the high-end metropolitan apartment REIT

AvalonBay Communities (AVB) develops, owns, and operates apartment communities in major metropolitan areas in the United States. The company's portfolio includes over 80,000 apartment homes in 11 states and the District of Columbia, making it one of the largest apartment REITs in the United States.

AvalonBay Communities is known for developing and managing high-quality apartment communities in desirable neighborhoods near employment centers, transportation hubs, and entertainment and retail districts. The company's portfolio includes a variety of property types, such as high-rise and mid-rise buildings, garden-style apartments, and mixed-use communities.

Equity Residential, apartment community REIT on the east coast and west coast.

Equity Residential (EQR) focuses on acquiring, developing, and managing multifamily residential properties in the United States' urban and high-density suburban areas. The company's portfolio includes over 300 apartment communities comprising more than 77,000 apartment units.

Equity Residential's portfolio primarily focuses on high-density urban areas, particularly coastal markets such as Boston, New York, San Francisco, and Southern California. The company's apartment communities offer a variety of amenities, including fitness centers, business centers, and outdoor spaces.

The Best Real Estate ETFs by Barbara Friedberg /  March 2023

A few exchange-traded funds own shares of REITs. Investing in such ETFs is simple and passive to expose your portfolio in real estate. Barbara picked the best real estate ETFs.here

Name	Type	Ticker
Vanguard Real Estate ETF	ETF	VNQ
VanEck Mortgage REIT Income ETF	ETF	MORT
Goldman Sachs Future Real Estate and Infrastructure Equity ETF	ETF	GREI
Xtrackers International Real Estate ETF	ETF	HAUZ
Invesco Active U.S. Real Estate ETF	ETF	PSR
iShares Residential and Multisector Real Estate ETF	ETF	REZ
Vanguard Global ex-U.S. Real Estate ETF	ETF	VNQI

Paragraph source and Contributor: Forbes Advisor, Barabara Friedberg

Apartment REIT ETFs for Vannila or Passive Real Estate Investing

Fewer ETFs have been exposed to a specific type of real estate - apartments. Below is a limited number of Multifamily REIT ETFs, with sizeable allocation in the residential sector.

REZ iShares Residential and Multisector Real Estate ETF.  
REZ index comprises U.S. residential, healthcare, and self-storage real estate equities.

Why invest in REZ? (from fund marketing materials)
Exposure to the U.S. residential real estate sector. Targeted access to a subset of domestic real estate stocks and real estate investment trusts, which invest in real estate directly and trade like stocks. Use it to diversify your portfolio and express a view on a specific U.S. real estate sector.

RESI Kelly Residential & Apartment Real Estate REIT ETF.
Residential & Apartment Real Estate Index seeks to provide total return by tracking a passively managed, concentrated portfolio of companies in the residential & apartment ("multifamily") management and operational services industries.

Why Invest in RESI? 
(from fund marketing materials)
Housing is short on supply and high on demand amid a historic and lingering housing shortage resulting from a decade of under-building. The RESI ETF could stand to benefit as the positive effects from the post-pandemic "housing boom" are reverberating across U.S. rental markets, with rents increasing at high rates.

What to do next?

Before you commit any money to any investment, ensure you're making the best decision by doing a thorough research and seeking help from reputable and established real estate investment professionals. Paperfree fits these criteria and can be your platform for strategic and prudent investing in the best apartment REIT stocks.

Contact us today. Estimate time to invest online: 7 minutes to get started 
 
 

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