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Apartment Rents Are Surging. Here Are 3 Surprising Beneficiaries



  • Rents are rising the fastest in over 30 years at the moment.
  • You can profit from this by buying undervalued apartment REITs.
  • We highlight 3 of them that are overlooked by most investors.
  • Looking for a portfolio of ideas like this one? Members of High Yield Landlord get exclusive access to our model portfolio. Learn More »

Luxury Apartment Complex From Above

Art Wager/E+ via Getty Images

Not Enough Housing

Census Bureau data from the 2020 Decennial Census shows that in the decade from 2010 to 2020, 12.3 million new households were formed. In the same time period, only 7 million new homes were

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This article was written by

Jussi Askola profile picture

Jussi Askola is a former private equity real estate investor with experience working for a +$250 million investment firm in Dallas, Texas; and performing property acquisition in Germany. Today, he is the author of "High Yield Landlord” - the #1 ranked real estate service on Seeking Alpha. Join us for a 2-week free trial and get access to all my highest conviction investment ideas. Click here to learn more! 

Jussi is also the President of Leonberg Capital - a value-oriented investment boutique specializing in mispriced real estate securities often trading at high discounts to NAV and excessive yields. In addition to having passed all CFA exams, Jussi holds a BSc in Real Estate Finance from University Nürtingen-Geislingen (Germany) and a BSc in Property Management from University of South Wales (UK). He has authored award-winning academic papers on REIT investing, been featured on numerous financial media outlets, has over 50,000 followers on SeekingAlpha, and built relationships with many top REIT executives.

DISCLAIMER: Jussi Askola is not a Registered Investment Advisor or Financial Planner. The information in his articles and his comments on SeekingAlpha.com or elsewhere is provided for information purposes only. Do your own research or seek the advice of a qualified professional. You are responsible for your own investment decisions. High Yield Landlord is managed by Leonberg Capital.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of AVB; CPT; BSRTF; ACC either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Relevant disclosure to presented performance: past performance is no indication of future results. Our portfolio may not be perfectly comparable to the relevant index. It is more concentrated, includes international REITs, and may at times invest in companies that are not typically included in REIT indexes. The performance of our portfolio is underrepresented because it is affected by withholding taxes on all dividends. This is not the only account that I own, but it is the first account that I created for the sole purpose of building track record and it is now over 3 years old, which is probably just enough to assess results. The performance is money-weighted.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (44)

Vandooman profile picture
Keep in mind that huge inflation of rents often lead to rent controls.
TooEasy profile picture
They caused massive legal and illegal immigration for 30 years, put horrendous costs on developers and builders, restricted building and now with massive inflation on the poor and middle class these gouging scum in the banks and on Wall Street are going burn when the revolution they want so bad comes- deservedly so.
Jussi Askola profile picture
@TooEasy I don't quite get your comment. Also, note that legal immigration is very positive for the country.
When you increase taxes...people with options are incentivized to move to a lower tax areas...and warm weather doesn't hurt. This isn't complicated. Why are democrats unwilling (or unable?) to incorporate basic human motivation into the calculation?
I'm personally not a republican, but can't figure out why basic human motivation is constantly ignored by one party. It's...weird.
Jussi Askola profile picture
@rbrown8016 Yes, I don't expect this migration trend to end anytime soon.
@Jussi Askola How come you don't have a position in AHH?
Jussi Askola profile picture
@Jandei It is high on our watchlist. We favor other names at this time. Feel free to join us for a 2-week free trial to access all our Top Picks: seekingalpha.com/...
bbob68 profile picture
Your headline is certainly on point. BSRTF looks interesting but it surely has been surging these past 6 months or so. Would you jump in here or look for a pull back
Jussi Askola profile picture
@bbob68 Thank you for your question. Foruntealty, we invested in BSRTF at a lot lower level, but even then, I think that it remains reasonably attractive at the current price. We prefer a few other options though. Feel free to join us for a 2-week free trial to access all our Top Picks: seekingalpha.com/...

Have a great day!
bbob68 profile picture
@Jussi Askola Nice move.
Any thoughts on Tricon Residential filing for US exchange and switching to US denominated dividend?
Jussi Askola profile picture
@Raven27936 I don't have a strong opinion on it at this time.
07 Oct. 2021
Along with storage apts. are my preferred asset class in the REIT space. Have owned MAA forever. Bought in when I moved overseas and needed a corporate apt. in the city where my firm was located. So well run I took the money from selling my rental properties and put there. Have not looked back. One look at your graph and you know I am happy.
Jussi Askola profile picture
@PGY Thank you for sharing! MAA is very well managed, but near fair value I would say.
StrattonOakmont profile picture
You forgot to mention me as a beneficiary ;)
Redframes profile picture
How can one tell when a REIT is over leveraged? AHH has over $1 billion in debt and just $162 million in FCF. What other metric should one consider when evaluating leverage for REITS?
@Redframes Loan To Value (LTV) is a key metric, basically comparable to the value of your mortgage to the value of your house. Unfortunately the Value (NAV) for REITs is often not publicly available, yet various REIT services offer it. Debt/EV is a substitute, yet only works if the valuation is near NAV
@johanvdwerf agree. Also debt/ebitda - which I think most investors have migrated to after the GFC when the “v” dropped overnight and it was all about coverage.
@team4325 Another easy metric you could back into is a rough version of debt yield. EBITDA/Total debt outstanding. I haven't looked, but would guess their debt yield is north of 15% which would suggest an LTV somewhere under 50% given the constitution of their portfolio.
Darp Research profile picture
When read this:

As of August 2021, the areas of the country experiencing the fastest rent growth are:

·Boise, Idaho
·Central California
·Phoenix, Arizona
·Southern and Central Florida
·Las Vegas, Nevada
·Raleigh and Fayetteville, North Carolina
·Spokane, Washington
·Norfolk, Virginia

It backed up what have observed and talked about, although may be taboo to point out, as is a "the emperor has no clothes" thing. It is political, everyone of those cities is in high demand because of politics. Everyone I know that has moved in the last 2 years has moved for political reasons.

They are fleeing Democrat areas even if they are Democrats, but both sides are fleeing Democrat controlled areas. Sister, Bay Area to CA Central Valley, 2 generations of long term CA residents moved to Idaho, Topanga (Malibu) to Portugal, another Topangan looking to move to NV or Idaho, a Super Democrat moved from CA Bay Area to Raleigh after visiting she said people politics here are fouled up but they are so much nicer people and things are so much better run here (hmm), and on and on. Florida is being flooded with political refuges, not from other failed countries, from failed USA states.

Some of these people realize and say it is politics, others have not figured it out, but that is it.

My hometown of San Francisco has biggest drop in rents so says this article. I left that area 15 years ago because of politics. The people left over there tell me how horrible it has become in last the 5 years and most want to leave and many have. In a poll 50% of people in CA say they would leave if they could.

NYC is depopulating due to politics, it was growing and robust just years ago before the political climate changed.

And teh opposite side of rental demand spectrum is the opposite side of politics:

Only in a handful of cities do rent rates remain below pre-pandemic levels. These cities include San Francisco, Oakland, San Jose, Fremont, Minneapolis, Seattle, Jersey City, and Washington DC. 100% of those are heavily Crat. Just a coincidence?

To understand migration patterns and rental demand in an unbiased and objective manner as an investor you need to pay attention to one of the biggest factors if not the biggest factor, people fleeing failed cities and States that failed due to politics.

One if not the most non-Crat cities in America is Coeur d’Alene ID, I looked for commercial property there last week and was shocked at the prices. Called a friend there and he said prices have gone up 100% in the last year there! (he got in 1 year ago). He says it is politics, people from CA and west coast WA fleeing to CDE because they hate how politicians are destroying their home towns. He said it takes a year to get crew to even start work on a new building.

This should be talked more about. And if you are a real estate investor you have to pay attention to this.

@Darp Research I’d say they are fleeing because of economics caused by the stupid and harmful policies of the democrats. But the result is the same. Unfortunately many of those who flee bring their democrat political views with them. So they vote for the same policies which ultimately caused them to flee the blue states. This has happened for example in New Hampshire with ex Massachusetts voters and is now happening in places like Austin Texas, which is becoming as liberal as San Francisco.

Unfortunately no one teaches economics in high school anymore.
Darp Research profile picture
@ccking3 Yes you are right. It is huge concern in Idaho and has been for years, they fear that a lot. When NYers fled NY for CA they brought their politics with them and Idaho fears same thing. Right now think Florida is not in danger as people there are so happy compared to in NY the State might be changing minds of people, instead of opposite.

I left that out as in near term will not change the rental demand patterns.

@Darp Research simply absurd, your premise is baseless not to mention biased....stick to facts brother and don't fall for the con job of us vs them...dem vs reps, we are all citizens and move for a myriad of reasons. Get a grip!
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