The single-largest investment most people make is in real estate, with the investment in the home they live in. But what about investing in the home someone else lives in? A good way to play the market is with apartment investments and other residential investments through residential real estate investment trusts.
There are two types of residential real estate investment trusts, called residential REIT for short; equities made up of apartment investments and equities made up of manufactured home investments. The National Association of Real Estate Investment Trusts lists 15 equities associated with apartments and four associated with manufactured homes. Both company types raise money then acquire or develop properties. From there, they collect rent from residents and manage the properties to make a profit.
There are 4 key indicators used to examine residential REITs:
1. The price at which shares trade.
2. Dividend yield.
3. Funds From Operations (FFO).
4. Monthly, 1-year, 3-year and 5-year returns.
Pick a winnerTo pick the right residential real estate investments, REITs or other investments, investors must do their homework. Investments rise and fall with the overall stock market, so share price isn't the only factor to consider. The track record and management of a REIT should also be strongly considered. Look at the returns the investment has generated over one year, three years and five years.
How to tradeYou can acquire residential real estate investing companies through several avenues, including investment advisers and online brokerages. Some residential real estate investing companies trade on the New York Stock Exchange. Investors purchase shares as they would with stock in any other company or fund.
Invest in apartments or manufactured homesThe two categories of residential investments are apartments and manufactured homes.
- Keep a close eye on your investment to make sure it is generating dividends or growing enough to justify keeping it. Check on your investment every day to monitor the stock price and keep up-to-speed on any significant news events which could change the value of your investment.
- Buy in the right cycle, the residential investment market varies during different times of year.