Inflation is out of control. So it’s no surprise that real estate is also in the red.
According to the founder and CEO of real estate investment firm CARROLL, Patrick Carroll, his company has increased rents by up to 30% in the past year.
Of course, the cost also increases.
“As our costs go up — interest costs, renovation costs, our employee costs,” Carroll tells Fox Business. “We need to drive these increases through rent increases.”
Due to rising property prices, renting has become the only option for many people.
“We see a supply-demand imbalance,” he adds. “And now they have a shortage of buyers because of mortgage rates. So, again, all of this was a perfect storm for the multi-family business.”
While it’s hard to say whether rent increases are sustainable, Carroll says his company’s occupancies are at an all-time high.
If you’re looking to tap into the multifamily real estate business, here are three real estate investment trusts that specialize in the field. Wall Street is also bullish on this trio.
Camden Property Trust (CPT)
Camden Property Trust owns, manages, develops and acquires apartment communities. It has investments in 171 properties containing 58,425 apartment units throughout the US
The company also has 5 properties under development. Upon completion of these, its number of apartment units would reach 60,267.
In the second quarter, Camden posted a strong occupancy rate of 96.9%, in line with last year’s period.
The REIT was also earning more rent from each unit. In the second quarter, new lease and renewal rates were, on average, 15.3% above lease rates that expired when they were signed.
Camden Property pays a quarterly dividend of 94 cents per share, which translates to an annual yield of 2.7%.
Baird analyst Wesley Golladay has an “outperform” rating on Camden and a price target of $153 — about 9% above where the stock sits today.
Mid America Apartment Communities (MAA)
Mid-America Apartment Communities is a REIT with a portfolio diversified primarily in the high growth sunshine regions of the US
As of June 30, the company had investments in 101,229 apartment units in 16 states and the District of Columbia.
In the second quarter, Middle America same-store portfolio revenue increased 13.7% year-over-year. Meanwhile, same-store portfolio net operating income rose 17.1% from a year ago.
For the full year 2022, management expects the REIT’s portfolio of owned stores to achieve effective rent growth of 12.75% to 13.75% and net operating income growth of 14.0% to 16.0%.
Mid-America’s board of directors recently approved a 15% increase in the company’s quarterly dividend rate to $1.25 per share. At the current share price, this translates to an annualized yield of 2.7%.
Jefferies analyst Jonathan Petersen sees potential in this multifamily REIT. He has a “buy” rating on the stock and a price target of $201 — about 10% above current levels.
Equity Residential (EQR)
Equity Residential is another big player in the multifamily real estate business: the company has a market capitalization of about $29 billion and has a portfolio of 310 properties consisting of 80,227 apartment units.
The portfolio is also geographically diversified. Equity Residential has an established presence in Boston, New York, DC, Seattle and San Francisco — and is expanding into metros such as Denver, Atlanta, Dallas and Austin.
Like the other two REITs, Equity Residential is making more money in this inflationary environment.
Equity Residential’s same-store revenue rose 13.6% year-over-year in the second quarter, according to its latest earnings report. The company attributed the growth to high occupancy rates and “continued growth in pricing power.”
The REIT has a quarterly dividend yield of 62.5 cents per share, giving the stock an annual yield of 3.2%.
Mizuho analyst Handel St. Juste, has a “buy” rating at Equity Residential and a $79 price target. Considering the REIT has rallied quite a bit recently and is trading at $77 per share right now, it’s quickly approaching that goal.
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This article provides information only and should not be construed as advice. Provided without warranty of any kind.