I'm Donny. I'm a world traveler, investor, entrepreneur, and online marketing aficionado who has a big appetite to compete and disrupt big markets. I thrive on being able to create things that impact change, difficult challenges, and being able to add value in negative situations.
Real estate investment trusts (REITs) are companies that operate or finance commercial, for-profit real estate. While there are many types of REITs, apartment REITs invest in or own multifamily properties.
If you want to invest in real estate, but can’t afford (or don’t want to manage) a rental property, here are the best apartment REITs to invest in for 2023.
Top 10 Best Residential REITs
- Camden Property Trust – Best apartment REIT
- Air Communities – Best multifamily REIT
- AvalonBay Communities, Inc. – Best apartment home REIT
- Blackstone Real Estate Income Trust – Best commercial real estate
- Mid-America Apartment Communities – Best apartment REIT stock
- Equity Residential – Best residential REIT
- Invitation Homes – Best rental property REIT
- UNDR, Inc. – Best luxury apartment REIT
- Aimco – Best multifamily REIT stock
- American Homes 4 Rent – Best single-family REIT
RealtyMogul gives investors access to commercial institutional-quality real estate opportunities with the potential to generate income.
Methodology
When looking for apartment REITs to invest in, you should focus on those with high growth opportunities, appropriate dividend yields and resilient stock price history.
Two key aspects determine whether a stock has high growth opportunities: the real estate markets that a company is operating in, and the number of apartment buildings or properties they have invested in.
When considering a dividend stock, you want a company with fairly high dividends (meaning they pay investors more). However, extremely high dividends suggest that a company is distributing too much profit and not reinvesting to grow the company.
You should also consider stock price history when looking at apartment REITs. Real estate investments took a hit in early 2020 at the start of the pandemic.
How much a company dipped in stock price during this period can indicate resiliency. Considering these criteria, these ten apartment REITs are good choices for 2023.
Camden Property Trust (CPT) – Best Apartment REIT
Camden Property Trust (NYSE: CPT) has properties throughout the sunbelt in the United States, including Texas, Georgia, southern California, Tennessee and Florida.
It owns and operates 171 properties with more than 58,000 apartment units. Camden Property Trust is one of the largest traded REITs in the United States.
The company’s head is CEO Richard Campo, who has held this role since 1993. Camden Property Trust operates primarily by buying older properties and renovating units, allowing the company to charge higher rents.
Annual Dividend Yield: 3.44%
Why we chose Camden Property Trust: Camden Property Trust has been operating since 1981, led by a highly experienced team that knows how to drive profits and increase returns to investors.
Air Communities (AIRC) – Best Multifamily REIT
Air Communities (NYSE: AIRC) has a highly diverse portfolio of properties that pads your risk if one market were to enter a downturn.
AIRC’s portfolio includes more than 26,000 apartment homes in 84 communities across 15 states, including California, Colorado, Tennessee and New York.
Because Air Communities focuses on high-quality apartments with high tenant retention, their portfolio contains more than 50% class A properties, with the rest being class B properties.
Air Communities was founded in December 2020 by CEO Terry Considine, who has been a real estate investor for more than 45 years. He still runs the company today.
Annual Dividend Yield: 4.97%
Why we chose Air Communities: Air Communities has a high yield and broad portfolio. Its focus on retaining renters while increasing rental rates makes it especially resilient during downturns.
AvalonBay Communities, Inc. (AVB) – Best Apartment Home REIT
AvalonBay Communities Incorporated (NYSE: AVB) is a Virginia-based REIT that operates multifamily communities in New York, New Jersey and Boston, though it also owns properties in Seattle, California and Florida.
AvalonBay’s growth strategy is to target the fastest-growing markets in the United States, with multiple “levels” of apartments that allow the company to tap into every market.
Many of AvalonBay’s properties are mixed-use, such as apartments with retail spaces on the first floor.
Annual Dividend Yield: 3.93%
Why we chose AvalonBay: AvalonBay owns many properties in established markets, including New York and New Jersey, that are unlikely to experience significant downturns.
It also invests in properties in growing markets, creating the perfect opportunity for profit growth.
Blackstone Real Estate Income Trust (BREIT) – Best Commercial Real Estate
Blackstone Real Estate Income Trust (BREIT) is a private REIT that operates in multiple kinds of commercial real estate, not just rental housing.
It is primarily based in the south and west of the United States, which are faster-growing markets. BREIT operates differently than the other stocks on this list.
BREIT is private, meaning you will need an invitation to buy in. You also will be unable to sell your stocks on the market — if you want to back out, they will need to be re-purchased by Blackstone.
BREIT has been operating since 2017 and has $70 billion in net asset value. It has a vacancy rate of only 5%, suggesting high demand for its properties.
Annual Dividend Yield: 4.4%
Why we chose BREIT: BREIT has a very high dividend yield, resulting in a large cash flow. It is highly diversified, with increased investments in key growth markets.
Mid-America Apartment Communities (MAA) – Best Apartment REIT Stock
Mid-America Apartment Communities (NYSE: MAA) has apartments primarily out of the southern and mid-Atlantic regions of the United States, including the cities of Atlanta, Washington DC, Las Vegas, and many others.
MAA grows by acquiring, managing and developing properties to increase rents. It owns more than 100,000 units in 16 states.
H. Eric Bolton Jr. has been at the helm of MAA since 2001, when he became CEO of the REIT. He is also a chairman and plays a key role at the company.
Bolton has a lot of experience in real estate and serves as an EastGroup Properties director in addition to his functions at Mid-America Apartment Communities.
Annual Dividend Yield: 3.30%
Why we chose Mid-America Apartment Communities: This REIT has a diversified portfolio run by highly experienced leadership.
Equity Residential – Best Residential REIT
Equity Residential (NYSE: EQR) has properties around the United States, including established buildings in Washington, DC, San Francisco, and the Dallas, Fort Worth, area.
This REIT focuses on the luxury apartment sector. CEO Mark J. Parallel, who has experience running many successful REIT companies, currently runs Equity Residential.
This REIT follows a sustainable revenue growth model that focuses on attracting long-term, wealthy renters.
Annual Dividend Yield: 4.15%
Why we chose Equity Residential: This REIT has an annual dividend that has historically landed right in the sweet spot between payout and reinvestment.
Invitation Homes, Inc. (INVH) – Best Rental Property REIT
Invitation Homes (NYSE: INVH) owns properties around the United States, including Minneapolis, Houston, Jacksonville, Denver and Seattle.
While most REITs focus on multifamily properties, Invitation Homes owns more than 80,000 single-family residences that it rents out. Invitation Homes was founded in 2012 and has been run by Dallas Tanner ever since.
The REIT focuses on obtaining homes in desirable neighborhoods, rather than up-and-coming areas, which means there is less room for growth, but more consistency.
It also caters to pet- and child-friendly lifestyles, which helps with renter retention.
Annual Dividend Yield: 2.96%
Why we chose Invitation Homes: This REIT is highly consistent, even if its dividend payments are low. It is highly resilient and will probably outperform other REITs during downturns.
UNDR, Inc. (UDR) – Best Luxury Apartment REIT
UDR (NYSE: UDR) operates luxury apartment properties on the East and West Coasts. Thomas Toomey, a highly experienced CEO who has been running the company since 2001, is currently in charge of UDR.
UDR buys and maintains properties in growing and established markets across the country, which means that the company has reliable sources of base income and room to grow.
Annual Dividend Yield: 4.01%
Why we chose UDR: UDR has a high annual yield and multiple properties in resilient locations.
Aimco (AIV) – Best Multifamily REIT Stock
Amico (NYSE: AIV) has halted dividend payments as the stock and investments have fallen. While this may seem alarming to investors, it’s the perfect time to get in on this stock, as it may rebound in the coming year.
The company has had a strong balance sheet and has set itself up for success in the future, despite the current low stock value.
Annual Dividend Yield: None
Why we chose Aimco: Aimco is currently struggling, which means there is room for rapid and extreme growth.
American Homes 4 Rent (AMH) – Best Single-Family REIT
American Homes 4 Rent (NYSE: AMH) is a Maryland-based company that works primarily in single-family home rentals.
It has homes across the United States, including many high-growth markets, such as Nashville and Portland. It focuses on obtaining modern, refinished properties in solid school districts.
Annual Dividend Yield: 2.39%
Why we chose AMH: The low dividend indicates high levels of reinvestment, suggesting large long-term growth opportunities.
5 Residential REIT Honorable Mentions
- Essex Property Trust, Inc. (NYSE: ESS): 4.21% annual dividend yield. This stock has a broad portfolio and is a strong investment, but the high stock price leaves little room for growth.
- Independence Realty Trust (NYSE: IRT): 3.36% annual dividend yield. IRT has a strong portfolio and has been resilient during market downturns, but it doesn’t have many properties in growing markets.
- Elme Communities (NYSE: ELME): 3.64% annual dividend yield. ELME has good room for growth, but does not have a broad portfolio. It only spans four states, all of which are on the East Coast.
- American Campus Communities (NYSE ACC): College housing is a reliable sector, but this stock does not pay dividends.
- Bluerock Total Income + Real Estate Fund: Bluerock has a highly diverse portfolio with properties in every region of the United States. However, this stock doesn’t pay a dividend, which makes it poor for cash flow.
RealtyMogul gives investors access to commercial institutional-quality real estate opportunities with the potential to generate income.
What Are Multifamily REITs?
Multifamily REITs exclusively or primarily invest in multifamily properties instead of commercial real estate.
Multifamily REITs comprise three kinds of properties:
- Apartments: A suite of residences in one or multiple buildings
- Duplexes: A home with two apartments inside
- Townhomes: Multiple multistory dwellings in the same development that have shared walls
Benefits of Residential REITs
Residential REITs are the only REITs that are not related to selling, making, storing or shipping goods. Because of this, they are beneficial in several unique ways.
Competitive returns – Though there are no guarantees for the future, residential REITs have historically had higher returns than other REITs.
Hedge against inflation – Mortgage rates and rent prices tend to increase at the same rate as inflation. This provides you with some protection against inflation, which sometimes causes other stocks to fall.
Passive cash flow – Unlike other property investments, traded REITs are incredibly passive. You don’t need to source tenants, maintain properties or even take a mortgage.
Portfolio diversification – If your portfolio mostly comprises retail stock, it’s essential to diversify in case of a downturn.
While many experts are concerned about a recession with the rising inflation rates, they believe there will not be a mortgage crisis any time soon.
Dividend income – REITs are a type of dividend stock, meaning that as long as the company is turning a profit, you will make money from dividends before you sell the stock.
Risks of Investing in Residential REITs
For the same reasons they have so many unique benefits, residential REITs have some potential risks you should be aware of before investing.
Highly illiquid investments – Some REITs on this list are liquid investments and can be traded with relative ease, such as Camden Property Trust, and Air Communities.
Others, such as BREIT, are illiquid. This makes it difficult for you to back out during an economic downturn.
Housing market crash – In the case of a housing market crash, your dividends will probably drop. You may also have difficulty selling your REIT stock if the market crashes.
Unlike retail stocks, there isn’t a consistent flow of buyers for real estate stocks.
Lack of tenants – As housing prices begin to fall (and are predicted to continue to decline), many renters wanting to buy homes may leave the rental market.
This may mean vacancies and reduced dividend rates.
Oversupply – The year 2022 was a record year for building new apartments, as more than 400,000 apartment buildings were completed, meaning there may be more new apartments than new renters.
How to Buy Multifamily REITs
The processes for investing in private REITs and publicly traded REITs are different.
To invest in publicly traded REITs:
- Choose a platform to invest in, such as Fidelity, Ameritrade, Robinhood, or another brokerage.
- Provide your broker with the necessary information. Usually, this will include your name, address, and tax information.
- Purchase the stocks you want to invest in. Your dividends will automatically be paid into your account. You can either re-invest them or keep them.
To invest in non-traded REITs:
- Choose the non-traded REIT that you want to buy into.
- Talk to a stockbroker who can help you get started, or check the REIT’s website to see whether public sign-up is available.
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Summary
Every investment comes with potential risks and benefits, but REITs and property stocks tend to be more stable than other stocks.
However, they are harder to sell. When considering which REITs to invest in during a volatile market, you should look at historical trends to understand how they may fare.
The best REITs are those with high but not too-high dividend yields. Following these criteria, we found the best ten REITs to invest in for 2023, along with a few bonus picks.
Apartment REIT FAQs
Here are the answers to some common questions about apartment REITs.
Are apartment REITs a good investment?
Apartment REITs are a good investment, as housing is a relatively stable investment that provides you with cash flow in the form of dividends.
Is it better to invest in a residential REIT or rental property?
Whether it is better to invest in a residential REIT or rental property depends on whether you want passive or active income.
Rental properties are often far more work than simple stock investments.
What is the typical dividend yield for a residential REIT?
The average REIT dividend yield is about 4.3%.
RealtyMogul gives investors access to commercial institutional-quality real estate opportunities with the potential to generate income.
I'm Donny. I'm a world traveler, investor, entrepreneur, and online marketing aficionado who has a big appetite to compete and disrupt big markets. I thrive on being able to create things that impact change, difficult challenges, and being able to add value in negative situations.
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