Senior Living REITs: Why and How to Invest

Real estate investment trusts (REITs) offer investors dividends and strong historical returns. Senior living REITs are a type of health REIT that focuses on the booming business of retirement housing. Around 10,000 baby boomers are turning 65 every day. By 2030, 1 out of 5 U.S. residents will be of retirement age. Senior living REITs aim to create profitable cash flow for investors while looking at future trends. 

Best Senior Living REITs Right Now

What are Senior Living REITs?

Senior housing REITs own and operate properties catering to the housing needs of seniors. These REITs invest in senior housing options, including independent living communities, assisted living facilities, memory care centers and skilled nursing facilities. 

Senior living REITs are part of the broader healthcare industry and fall under the category of healthcare REITs. The healthcare industry in the U.S. is on track to surpass $6 trillion by 2028. One of the major drivers of that growth is the aging baby boomer generation. The increasing senior population and its demand for comfortable, humane senior living solutions are driving rapid growth. 

Top 5 Senior Living REITs to Invest In

Healthcare, assisted living REITs and senior living REITs show strong returns and growth potential. Here are five top performers to consider.

1. CareTrust REIT Inc. (NASDAQ: CTRE)

CareTrust owns 205 senior housing and healthcare properties, including assisted living facilities, senior living facilities and campuses for skilled nursing and assisted living facilities. CareTrust focuses primarily on net lease properties, which provide it with a stable income. At a 5.5% dividend yield, it offers steady returns. With a market cap of $2.01 billion, it's positioned to take advantage of continued growth in this sector. 

2. Community Healthcare Trust (NYSE: CHCT)

Community Healthcare Trust owns healthcare facilities diversified across industry segments, geography and tenants. A significant portion of its portfolio includes acute inpatient behavioral facilities, inpatient rehab facilities and long-term acute care hospitals. 

While this is a specific subsector of senior housing, its returns put it on the list, with annualized total returns of over 18% during the past five years. A 4.97% annual dividend yield also offers a strong showing. With a steady stream of acquisitions, a conservative balance sheet and a $945 million market cap, it's positioned to continue growth. 

3. Welltower Inc. (NASDAQ: WELL)

Welltower operates senior housing, medical office buildings and skilled nursing facilities. With a 3% dividend yield, it isn't the highest income option on the list. At a market cap of over $39 billion and a year-to-date value increase of over 18%, it offers stable dividends and growth potential. Since senior housing occupancy and pricing are experiencing significant growth, it could remain a stable long-term pick

4. Ventas Inc. (NASDAQ: VTR)

Ventas is a Chicago-based owner of medical real estate that includes nursing homes, senior living communities and research space and medical offices. The company saw a 9% profit increase in 2022 and a market cap of over $19 billion, poised for growth. 

Year to date, Ventas has seen a 5.6% increase in share value, although share values have decreased over the last one- and five-year reporting periods. With 3.7% dividend payments, Ventras can make sense for long-term investment opportunities. 

5. Healthpeak Properties Inc. (NYSE: PEAK)

Healthpeak Properties Inc. invests in continuing care retirement communities, which take residents from apartment living into nursing care as they age, as well as outpatient medical buildings like doctor's offices and same-day surgery clinics near big hospitals. 

While stock prices have decreased over the past one-year and five-year reporting periods, it's seen 5.2% growth in the past month, with signs of recovery. Healthpeak Properties has a market cap of $11.61 billion and a 5.2% dividend yield, making it the second-highest dividend option on the list. 

Where to Invest in Senior Living REITs

Consider purchasing senior living REITs through a brokerage account. Here are several ways to purchase senior living REITs.

Why You Should Consider Investing in Senior Housing REITs

If you're considering seniors housing REITs, they offer a lot of advantages from growing demographic trends to diversification. 

Growing Demographic Trend

The senior population is increasing globally because of longer life expectancies and aging baby boomers. This demographic shift is expected to drive higher demand for senior housing and care services, potentially leading to increased occupancy rates and rental income for senior housing REITs. In the U.S., 1 in 5 people will be seniors by 2030, and by 2034, seniors will outnumber children for the first time in U.S. Census history. 

Stable and Predictable Income

Senior housing REITs often have long-term lease agreements with their tenants, providing a steady stream of rental income. Additionally, many senior housing properties benefit from the healthcare component, as some services are covered by government programs or private insurance, adding to the stability of the income stream. REITs must distribute 90% of taxable earnings as dividends, leading to regular dividend payments.

Investment Portfolio Diversification

Investing in senior housing REITs allows you to diversify your investment portfolio. By including this specialized real estate sector, you can reduce risk by spreading your investments across different real estate classes and expanding to other asset classes and industries. 

Professional Management

Senior housing REITs are typically managed by experienced professionals who specialize in senior housing operations. This expertise can help ensure effective property management, optimal tenant care and property value preservation. Professional REIT management can also increase returns and ensure the best decisions for long-term capital appreciation. 

Potential for Capital Appreciation

If the senior housing market continues to grow, there is the potential for property values to appreciate over time. As demand increases, well-managed senior housing REITs may experience capital gains, offering potential returns beyond rental income.

REIT Investment Strategies 

Whether you're considering REITs for retirement income or to capitalize on market growth, senior living REITs offer significant growth potential. While the pandemic saw contractions across this industry, the tide has turned. The demographic projections for the next decade mean choosing well-managed seniors housing REITs with diversified property portfolios could offer strong dividends and long-term growth. Consider also investing in healthcare REITs, residential REITs or the best REIT stocks right now.

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