by Fred Fuld III
Let’s say that you want to invest in real estate. You don’t want to buy single family residences, because prices are too high and you don’t want to deal with leaky toilets and other management issues. Even if you have a property manager, you still have to deal with rental problems indirectly.
You might want to consider Real Estate Investment Trusts, most commonly referred to as REITs (pronounced “reets”). However, there are many different kinds of REITS, such as hotel REITs and industrial REITs. REITs pass through most of the rental income to investors, avoiding taxation at the corporate level.
Many investors are staying away from office building REITs, since so many people are working from home now and companies don’t need as much office space.
Other REITs that some investors are avoiding are retail REITs, as many retail shops have closed up and more and more people are buying online instead of through brick and mortar locations.
So investors have been looking at residential REITs which own apartment buildings. If people can’t afford to buy a home, they have to live somewhere, and apartments are usually the best option.
The largest REIT by market capitalization is Equity Residential (EQR) with a market cap of $29.568 billion. The company has a price to earnings ratio of 45 and pays a yield of 2.27%.
Running a very, very close second is AvalonBay Communities (AVB) at a market cap of $29.537 billion. It has a P/E ratio of 37 and has a dividend rate of 2.96%.
Invitation Homes (INVH) is in the business of leasing single-family homes. It sports a market cap of $21.2 billion and a P/E ratio of 105. It pay a yield of 1.7%.
Essex Property Trust (ESS) has a $19.5 billion market cap. It trades at 43 times earnings and the yield is 2.69%.
You might want to check and see if your portfolio has a home for a residential REIT.
Disclosure: Author didn’t own any of the above at the time the article was written.