Apartment REITs are still cheap.

Some investors are going to yell: “I won’t buy anything related to apartments until all of the issues impacting apartments are gone.”

Wonderful. That’s how investors can pay a much higher price. It is the fear over the current issues that drove apartment REIT prices lower.

Don’t worry, I won’t just say the REITs are cheap without math. We’re not your typical analyst:

Source: Knowyourmeme.com

Rather than just saying it is cheap, we want to show you. This is a sector we’ve been emphasizing lately for subscribers of The REIT Forum. We want to share part of our latest housing REIT Update.

Let’s run through the apartment REITs:

Company Name Ticker Div Yield AFFO or Core Yield
NexPoint Residential Trust Inc NXRT 2.85% 5.10%
Mid-America Apartment Communities Inc MAA 3.26% 4.55%
Camden Property Trust CPT 3.45% 4.31%
Essex Property Trust Inc ESS 3.98% 5.53%
Independence Realty Trust Inc IRT 4.06% 5.89%
AvalonBay Communities Inc AVB 4.06% 5.12%
UDR, Inc. UDR 4.14% 5.30%
Equity Residential EQR 4.41% 5.32%
AIMCO AIV 4.50% 5.34%
Clipper Realty CLPR 5.79% 8.28%
Bluerock Residential Growth REIT BRG 7.87% 6.83%
Preferred Apartment Communities Inc. APTS 12.50% 7.10%

We need to highlight that APTS is not like the other apartment REITs. It invests a material amount of the portfolio in properties which are clearly not apartments. We intend to have a longer article coming up on that in the future, but it isn’t ready yet. We want to focus on things that impact the entire sector. The yields are much higher than normal for the sector:

Source: The REIT Forum

Market-Implied Cap Rates

One way to evaluate equity REITs is to use the market-implied cap rate. This can be a useful tool for evaluating if prices might be reaching absurd levels. For reference,