Investors who are choosing the best apartment REITs, or REIT stocks, for their portfolios have to look at some “technicals” as well as gazing into their own crystal ball to figure out which of these real estate financial products are going to work best for their long term strategy. Real estate investment trusts, or REITs, have to dispense a lot of their income through dividends, according to the laws guiding the setup of these corporate entities. As a result, they offer unique opportunities for investors who don’t want to manage properties on their own, but instead, take a “piecemeal” approach by becoming a shareholder of a property management company.
To pick apartment REITs, investors should look at whether the REIT is a “true management company” investing in apartments, or a kind of hybrid REIT that also invests in mortgages and mortgage backed securities. Many investors who want apartment REITs will want REIT stocks that derive their income through actually managing properties. For an even closer look, investors can inspect the REIT prospectus for more information on how the REIT leadership works toward apartment and other rental property acquisitions.
Some of the technical elements involved in REIT buying involve weighing projected yields against costs. Costs for REITs often come in the form of fees or an “expense ratio” that signals what an investor needs to pay to “get into” an REIT stock or fund. Other technicals include access to the REIT, how it is traded, and whether there are other options, like an REIT index, that helps to curb volatility and manage risk, rather than just single REIT stocks that can sink or swim with the leadership. With single REITs, many investors want to know more about who’s “running the ship” in order to accurately assess future potential for the stock or fund.
To get the best apartment REITs, investors should also have a finger on the pulse of the rental economy. For example, in times when home prices or lending situations are downsizing the incentives for homeownership, apartment REITs may be scooping up discount rental properties that can pay off big as the rental market grows. These kinds of ideas and balanced research are critical to finding the apartment REITs with the best chance of either short-term or long-term gains.
