Inflation has gotten out of hand. So it’s no surprise that real estate is also red hot.
According to Patrick Carroll, founder and CEO of real estate investment firm CARROLL, his firm has increased rents by up to 30% in the past year.
Of course the costs will also go up.
“So when our costs go up — our interest costs, our renovation costs, our employee costs,” Carroll tells TBEN Business. “We have to push those increases through rent increases.”
Due to rising real estate prices, renting has become the only option for many people.
“We see an imbalance between supply and demand,” he adds. “And now they have a shortage of buyers because of the mortgage interest. So again, this was sort of a perfect storm for the lake family business.”
While it’s hard to say whether rent increases are sustainable, Carroll says his company’s occupancy rate is always high.
If you want to take advantage of the multi-family real estate, here are three real estate mutual funds that specialize in the segment. Wall Street also sees upside in this trio.
Do not miss it
Camden Property Trust (CPT)
Camden Property Trust owns, manages, develops and acquires multi-family apartments. It has investments in 171 properties with 58,425 apartment units in the US
The company also has 5 properties under development. Upon completion, the number of apartments would be 60,267.
Camden posted a strong occupancy rate of 96.9% in the second quarter, in line with the same period last year.
The REIT also earned more rent from each unit. In the second quarter, rates for new leases and lease renewals at signing were on average 15.3% above expiring leases.
Camden Property pays quarterly dividends of 94 cents per share, representing an annual return of 2.7%.
Baird analyst Wesley Golladay has an “outperform” rating for Camden and a price target of $153 – about 9% above where the stock is today.
Central America Apartment Communities (MAA)
Mid-America Apartment Communities is a REIT with a portfolio diversified primarily across the fast-growing solar belt regions of the US
As of June 30, the company had investments in 101,229 apartments in 16 states and the District of Columbia.
In the second quarter, same store portfolio sales in Central America grew 13.7% year-over-year. Meanwhile, net operating income from the same store’s portfolio rose 17.1% from a year ago.
For the full year 2022, management expects the REIT’s same-store portfolio to deliver effective rental 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 into an annual return of 2.7%.
Jefferies analyst Jonathan Petersen sees potential in this multifamily REIT. He has a “buy” rating for the stock and a price target of $201 – about 10% above current levels.
Home equity (EQR)
Equity Residential is another major player in the multifamily real estate sector: the company has a market capitalization of approximately $29 billion and has a portfolio of 310 properties, consisting of 80,227 apartments.
The portfolio is also geographically diversified. Equity Residential has an established presence in Boston, New York, DC, Seattle and San Francisco – expanding in metro areas such as Denver, Atlanta, Dallas and Austin.
Like the other two REITs, Equity Residential makes more money in this inflationary environment.
According to the latest earnings report, same-store Equity Residential revenue grew 13.6% year-over-year in the second quarter. The company attributed the growth to strong capacity utilization and “continued growth in pricing power”.
The REIT has a quarterly dividend rate of 62.5 cents per share, which gives the stock an annual return of 3.2%.
Mizuho analyst Haendel St. Juste has a “buy” rating on Equity Residential and a price target of $79. Given that the REIT has been up quite a bit lately and is currently trading at $77 a share, it’s fast approaching that goal.
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This article provides information only and should not be construed as advice. It comes without any kind of warranty.