Residential REITs specialize in various types of residential properties including multi- and single-family homes, apartment buildings, manufactured homes and student housing. Most residential REITs will focus on one of these building types, but can also subdivide their specialization into geographical markets and other distinguishing factors.
The portfolios of these REITs differ widely, ranging from urban apartment complexes to suburban housing units. Due to the continued need for housing in metropolitan areas (where most residential REITs focus their investments), these stocks provided stable income over a long period of time.
The additional risk factor that comes from residential REITs is the occasionally lower credit of their tenants, as they often rent out to regular families instead of massive corporate clients. But, this risk is typically mitigated by the unusually large number of tenants’ residential REITs service, giving them additional “security by diversification” when compared to other investment trusts.
There are 18 residential REITs trading on major US stock exchanges. The following each specialize in different types of properties: Bluerock Residential Growth REIT (AMEX: BRG) focuses on apartments, Front Yard Residential Corporation (NYSE: RESI) rents out single-family homes, and Sun Communities, Inc. (NYSE: SUI) features manufactured homes.