6 Apartment REITs to Watch in 2023

Apartment REITs offer investors consistent, high-paying dividends and can help diversify your portfolio while providing liquidity for assets and the potential for long-term increases. Explore whether this strategy might be right for your money by taking a look at these outstanding options for 2023.

What are Apartment REITs?

Companies that own or manage income-producing property can open a real estate investment trust (REIT). These trusts then exchange on the stock market and offer investors dividends. Historically, investing in real estate was reserved for hedge funds and those with large portfolios who could afford land or large investments in real estate projects.

REITs have made it possible for the average investor to become a stockholder in these companies and earn the returns real estate can offer without the challenges associated with purchasing or managing property.

Based on data from 2022, 150 million Americans own REIT stocks. Some of those owners have chosen to invest in REITs using their 401(k) plans or other retirement accounts. 

What Are the Average Returns on Apartment REITs?

As the housing market has faced shortages of 3.8 million homes and difficulties in building enough new structures to meet growing demand, apartments have become a leading real estate investment strategy. 

In 2021, Hoya Capital Real Estate found that apartment REITs delivered an average annual return of 17% over the previous five years. During that same period, broad-based REITs averaged an 11% annual rate of return.

6 Apartment REITs to Watch in 2023

As you evaluate whether these investments fit in with your portfolio and strategy, take a look at these best apartment REITs to watch in 2023.

1. Camden Property Trust (NYSE: CPT) 

This trust holds Class A and B apartments, which are highly competitive properties. The REIT reported a 96% occupancy rate in 2022. The average unit monthly rent is $1,881, an increase of 12.5% over 2021 rental fees.

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 $11.31 billion market cap and an average annual return of 8%, 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 $17.9 billion and has provided an average annual rate of return of 12%.

3. Equity Residential (NYSE: EQR)

With annual revenue of more than $653 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 3.5%. It has a market cap of $25.7 billion and an average annual return of 6.7%.

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 tenant can move in when they want and stay for any amount of time.

ESS offers a dividend yield of 3.33% with a market cap of $15.75 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 3.32%.

The average rate of return when reinvesting dividends is 6.3%. 

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 2.57%.

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. One factor to consider is 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. 

Start Investing in Apartment REITs While They Are Paying High Dividends

With time, the housing shortage could lessen, changing the real estate market. Now can be a great time to take advantage of the current real estate market and invest in it strategically. Evaluate your current portfolio to ensure diversity and get investing.

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