Best Apartment REITs

Apartment REITs offer exposure to residential real estate through professionally managed portfolios of rental properties. By investing in them, investors can benefit from the steady rental income generated by these properties as well as potential appreciation in property values over time.

Apartment REITs also offer liquidity and flexibility, as investors can easily buy and sell shares on the stock exchange, unlike physical real estate properties that require time and effort to transact. Continue reading to learn about the six best apartment REITs to invest in.

What are Apartment REITs?

Apartment real estate investment trusts (REITs) are a type of real estate investment focused on residential properties, specifically multi-family apartment buildings. These REITs pool capital from individual investors to purchase, manage, operate, and sometimes develop a portfolio of apartment complexes.

By investing in apartment REITs, individuals can gain exposure to the real estate market without having to directly own and manage properties themselves. These REITs tend to provide consistent returns due to the ongoing demand for housing, especially in urban areas. Investors can also benefit from rental rate increases during periods of high demand.

What are the Average Returns on Apartment REITs?

The average returns on apartment REITs can vary depending on market conditions and other factors. Historically, these REITs have offered competitive returns compared to other real estate investment options.

Data from NARIET shows that, as of September 2024, residential REITs' year-to-date returns stood at 17.74%, while the total return for 2023 was 7.66%

6 Best Apartment REITs

As you evaluate whether these investments fit in with your portfolio and strategy, take a look at these apartment REITs.

1. Camden Property Trust (NYSE: CPT)

The trust holds many properties that are mixed-use where the first floor features retail or office space. That way, those living there can enjoy having shops and restaurants close by for optimal convenience, which can increase the likelihood that they’ll stay tenants and the units will have high occupancy rates.

With a $12.86 billion market cap and a dividend yield of 3.42%, it’s a solid investment option.

2. Mid-America Apartment Communities Inc. (NYSE: MAA)

You’ll find a diverse real estate portfolio of nearly 300 properties as you evaluate Mid-America Apartment Communities. That means strong positioning for long-term growth. The company doesn’t just build new apartments, it’s also purchasing and remodeling units designed for middle-income residents.

The market cap is $18.27 billion and has provided an a dividend yield of 3.76%.

3. Equity Residential (NYSE: EQR)

With an annual revenue of more than $734 million, Equity Residential offers a sound investment. Its primary focus is high-end apartments in major cities, including New York City, Boston, Washington, D.C. and Los Angeles.

Across its 305 properties, it owns more than 78,000 units. Its dividend yield is 3.56% and has a market cap of $28.76 billion.

4. Essex Property Trust Inc. (NYSE: ESS)

To invest in multifamily properties along the West Coast, consider Essex Property Trust. It acquires and manages properties along the West Coast and has a solid history of strong dividends.

The West Coast is a desirable area for real estate. Essex makes its properties especially attractive to renters by offering flexible leases where the tenants can move in when they want and stay for any amount of time.

ESS offers a dividend yield of 3.27% with a market cap of $19.26 billion.

5. AvalonBay Communities Inc. (NYSE: AVB)

AvalonBay acquires and redevelops multifamily properties in desirable U.S. markets. The REIT has been offering consistent dividend returns, making it an attractive investment. Its current dividend yield is 2.96% and has a market cap of $32.75 billion.

6. NexPoint Residential Trust Inc. (NYSE: NXRT)

With 14,500 multifamily properties, NexPoint Residential could offer strong returns on your investment. Its properties are mostly focused in the southeastern part of the U.S. One reason why NexPoint apartments are attractive to tenants is because they offer lifestyle amenities to attract lower- or middle-income renters.

The REIT has been growing over the last several years, offering a stable, reliable investment. The dividend yield is 4.17%.

Where to Invest in Apartment REITs

Ready to start investing in the largest apartment REITs? Review these places to get started.

Why You Should Invest in Apartment REITs

After reviewing the apartment REITs list, you might be wondering what makes them so great. Here’s why you should consider adding these to your investment strategy.

1. Dividend Yield

Apartment REITs often distribute a significant portion of their taxable income as dividends to shareholders. These dividends tend to hold steady even when other market conditions suffer.

The dividend yield is calculated by dividing the annual dividend per share by the stock price. Those with higher dividend yields may attract income-seeking investors who prioritize regular cash flow.

2. Capital Appreciation

Given the strategic investment that real estate has been for decades, these trusts also offer appreciation over time thanks to increases in rental and occupancy rates. Positive market conditions and effective property management can contribute to capital appreciation.

Investors should be aware that many factors can influence capital appreciation. These include the overall real estate market, supply and demand dynamics and economic conditions.

3. Total Return

To calculate your total return, you’ll need to add up dividend income and capital appreciation. Generally, these investments experience 6% or more in total annual returns when the investor reinvests dividends.

Total returns on an investment fluctuate from year to year. Evaluating the total return on investment over the duration that you hold the investment is wise.

Investing in Apartment REITs

Apartment REITs provide investors with exposure to the residential housing market without the direct responsibilities of property ownership. While they can deliver solid returns, especially during times of strong housing demand, investors should be mindful of economic downturns, regulatory changes, and market fluctuations. Overall, apartment REITs can be a valuable addition to a diversified portfolio, particularly for those seeking income and long-term growth potential.

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