Inflation is out of control. So it’s no surprise that real estate is red hot as well.
According to real estate investing company CARROLL founder and CEO Patrick Carroll, his company has raised rents up to 30% over the past year.
Of course, costs are going up as well.
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“So as our costs go up — our costs of interest, our costs of renovations, our cost of our employees,” Carroll tells Fox Business. “We need to push those increases along through rent increase.”
Because of rising property prices, renting has become the only option for a lot of people.
“We are seeing a supply-demand imbalance,” he adds. “And now they have a lack of buyers because of mortgage rates. So, again, this has all kind of been a perfect storm for the multifamily business.”
While it’s hard to say whether rent increases are sustainable, Carroll says that his company’s occupancies are at all-time high.
If you want to tap into the multifamily real estate business, here are three real estate investment trusts that specialize in the segment. Wall Street also sees upside in this trio.
Camden Property Trust (CPT)
Camden Property Trust owns, manages, develops and acquires multifamily apartment communities. It has investments in 170 properties containing 58,055 apartment units across the U.S.
The company also has 5 properties under development. Upon completion of those, its apartment unit count would reach 59,828.
In Q1, Camden posted a strong occupancy rate of 97.1%, compared to 95.9% in the year-ago period.
The REIT was also earning more rent from each unit. In Q1, new lease and renewal lease rates were, on average, 15.8% above expiring lease rates when signed.
Camden Property pays quarterly dividends of 94 cents per share, translating to an annual yield of 2.8%.
Baird analyst Wesley Golladay has an ‘outperform’ rating on Camden and a price target of $153 — roughly 15% above where the stock sits today.
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Mid-America Apartment Communities (MAA)
Mid-America Apartment Communities is a REIT with a portfolio diversified mainly across the high-growth sunbelt regions of the U.S.
As of Mar. 31, the company had investments in 101,959 apartment units across 15 states and the District of Columbia.
In Q1, Mid-America’s same-store portfolio revenue grew 12.2% year over year. Meanwhile, its same-store portfolio net operating income rose 16.9% from a year ago.
For full-year 2022, management expects the REIT’s same-store portfolio to achieve effective rent growth of 11.0% to 13.0% and net operating income growth of 12.5% to 14.5%.
Mid-America’s board of directors recently approved a 15% increase to the company’s quarterly dividend rate to $1.25 per share. At the current share price, that translates to an annual yield of 3.0%.
Jefferies analyst Jonathan Petersen sees potential in this multifamily REIT. He has a ‘buy’ rating on the stock and a price target of $201 — around 18% above the current levels.
Equity Residential (EQR)
Equity Residential is another big player in the multifamily real estate business: the company commands a market cap of around $27 billion and has a portfolio of 311 properties consisting of 80,581 apartment units.
The portfolio is geographically diversified, too. Equity Residential has an established presence in Boston, New York, D.C., Seattle, and San Francisco — and is expanding in metros like Denver, Atlanta, Dallas, and Austin.
Just like the other two REITs, Equity Residential is making more money in this inflationary environment.
According to the latest earnings report, Equity Residential’s same-store revenue increased 7.8% year over year in Q1. The company attributed the growth to strong occupancy rates and “significant growth in pricing power.”
The REIT has a quarterly dividend rate of 62.5 cents per share, giving the stock an annual yield of 3.5%.
Dividends might not be the only thing shareholders can look forward to. Mizuho analyst Haendel St. Juste has a ‘buy’ rating on Equity Residential and a price target of $79. Considering that the REIT trades at $71.65 per share at the moment, his price target implies a potential upside of 10%.
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Jing is an investment reporter for Moneywise. He is an avid advocate of investing for passive income. Despite the ups and downs he’s been through with the markets, Jing believes that you can generate a steadily increasing income stream by investing in high quality companies.
