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That’s one added expense that lodging WHAT YOU NEED TO KNOW
REITs have to factor in. And many of them ABOUT RESIDENTIAL REITS
bring in an asset manager on top of that As mentioned in Chapter 1, there are three
to oversee the initial expense, creating kinds of residential REITs: apartment,
another profitability consideration to take manufactured housing (i.e., prefabricated
into account. and mobile homes), and single-family
home. They each have the same purpose in
This is all on top of the fact that hotel providing housing opportunities outside
demand of any kind comes and goes with of traditional ownership, but since they
economic output, making them extremely operate within different markets, they do
volatile holdings as REITs go. During deserve their own analyses.
economic booms or in anticipation of such Let’s start with apartment REITs.
excess, their share prices can shoot up.
During harder times, they’ll plummet. In the past, apartment REITs were limited
exclusively to traditional apartment
On the plus-side, they’re as little tied buildings for families, young professionals,
to interest rates as a REIT can be. But retirees, and the like. But the designation
the bigger-picture scope shows a lot of has expanded to include student housing
potential volatility you’d better know you apartment complexes as well.
have the stomach for before you buy in.
In any case, we’re right back to categorizing
properties as Class- A, B, or C, with the
former encompassing newer buildings in
prime locations. The older the property, the
fewer amenities, and the less desirable the
location, the further down the alphabet the
apartment will naturally fall.
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