Residential Real Estate Investment Trusts

Invest in other people's homes with residential real estate investment trusts
By Doug Dannon, Freelance Writer 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 winner

To 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.
Try:  Forbes created a scorecard of REITs by class, which gives a snapshot of every publicly-traded equity. The list is a strong reference for equities made up of residential real estate investments as well as other categories such as retail or office properties.

How to trade

You 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.
Try:  Fidelity or E*Trade Financial offer low-cost trades with an online account. They also offer advisory services to help you make the right choice.

Invest in apartments or manufactured homes

The two categories of residential investments are apartments and manufactured homes.
Try:  Two companies specializing in apartment investment are Mid-America Apartment Communities Inc. (NYSE:MAA), and United Mobile Homes Inc. (NYSE:UMH), a REIT which owns and operates manufactured home communities.  A resource for information about manufactured homes is the Manufactured Housing Institute, which tracks the industry and publishes information on sales and housing demand.

• 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.