4 favorite apartment REITs
Trouble in the housing sector has led to a boom in rentals, benefiting some investment trusts.
The housing market may still be down for the count, but if there's one pocket of absolute strength, it has to be apartment-based real-estate investment trusts.
In the wake of the housing bubble, the rate of home ownership has taken the biggest tumble in 70 years. The end result has been a bona fide boom in apartment rentals.
Apartment vacancy rates have been steadily declining since hitting a peak of 8% in 2009. These days, vacancy rates have dropped all the way back to 5.6%, the lowest level since 2006. And that sudden decline has given landlords all the leeway they need to hike up the rent.
According to Reis, a commercial real estate outfit, effective rents have since increased in 75 of 82 markets, with rents climbing to an average of $991 a month from $967 a year earlier. And apartment owners can expect a continued flux of tenants to create even higher returns.
So how can individual investors take advantage of this bullish trend? The easiest way is through REITs that specialize in apartments -- or with mutual funds that own mostly apartment REITs.
Founded in 1978, AvalonBay Communities (AVB) is the second largest publicly-traded U.S. apartment owner with over 45,000 apartments in 10 states. The company pays a 2.70% dividend.
San Francisco-based BRE Properties (BRE) owns 75 properties in the West comprising 21,318 units. The company pays a 3.00% dividend.
With properties in the Mid-Atlantic, Home Properties (HME) has over 38,000 properties and pays a 4.20% dividend.
Equity Residential (EQR) owns or has investments in more than 450 properties in 17 states and the District of Columbia. EQR pays a 2.30% dividend.
All of these companies have consistently outperformed the S&P 500 over the course of the last two years.
And the best part for investors is that they can win both ways in this sector: first with price appreciation; second with a nice dividend. That's a winning combination.
Copyright © 2014 Microsoft. All rights reserved.
After enjoying a smooth rise in stock prices since May, investors are about to be hit with another bout of volatility.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.