Owning a single rental property is great. But what if you could get most of the advantages of real estate investing by simply choosing the best real estate stocks for your portfolio?
There are many advantages to owning real estate stocks over real property, especially when it comes to eliminating the hassle of hands-on management. But there are a lot of real estate stocks to choose from, too. So, how can you even begin to pick among them?
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Five best real estate stocks in 2024
Here are some real estate stocks to watch for the long term:
| Name | Ticker | Market Cap | Description |
|---|---|---|---|
| Mid-America Apartment Communities | (NYSE:MAA) | $18.364 billion | Class A and Class B apartment REIT |
| UMH Properties | (NYSE:UMH) | $1.411 billion | Manufactured home community REIT |
| Farmland Partners | (NYSE:FPI) | $507.526 million | Farmland REIT |
| Lennar | (NYSE:LEN) | $46.209 billion | Homebuilder |
| LGI Homes | (NASDAQ:LGIH) | $2.332 billion | Homebuilder specializing in entry-level homes |
1. Mid-America Apartment Communities
Mid-America Apartment Communities is a real estate investment trust (REIT) that owns and operates over 100,000 Class A and Class B apartment units in 16 states and 296 apartment communities, mostly across the Sun Belt. It has shown significant steady growth in funds from operations during the past five years and held more than $11 billion in assets with just $5 billion in liabilities as of Q2 2024, largely unchanged from 2023 annual reporting..
Perhaps the most remarkable thing about Mid-America Apartment Communities, however, is its commitment to redevelopment and adding value to units it already holds rather than selling off aging ones. During 2023, the company renovated 6,858 apartments, increasing the average rental rate of each unit by 7.1% when compared to similar but non-renovated units. In the first six months of 2024, the company renovated 2,796 units, increasing the average rents on those by 7.6%.
Its practices are a solid way to conserve a limited supply of apartments and are low-cost methods for increasing per-unit value without constantly buying and selling real estate — a costly venture on its own. After all, the more spent, the lower the return REIT investors receive each year. Responsible conservatorship is also evident in the company’s dividend, which has not fallen since it was first offered in 1994.
2. UMH Properties
UMH Properties is a REIT that has been in the manufactured home business since 1968 and publicly traded since 1985. It holds approximately 10,000 individual manufactured rental homes in 135 communities. The company added a net 871 units in the year ending Dec. 31, 2023, and has an additional 2,100 vacant acres ready to develop into approximately 8,500 homesites.
UMH also sells manufactured homes to occupants. It sold 341 in the year ending Dec. 31, 2023, and is receiving rents for the lots on which the units sit (and those sold in previous years).
At the end of 2023, UMH held $1.4 billion in assets, with $496 million in mortgage debt and results were similar in Q2 2024. Although this is a significant debt-to-asset ratio, much of it is due to ongoing investment and expansion. UMH offers affordable site rent and overall rent for single-family housing, which is likely to remain in high demand as the cost of stick-built single-family residential homes continues to remain out of reach for many.
3. Farmland Partners
Unlike housing REITs that many investors are familiar with, farmland REITs hold and lease farmland for various kinds of crops and other uses. Farmland Partners holds 132,800 acres in the U.S., with more than 300 tenants and 26 crop types, enabling it to handle most adverse weather conditions that can result in poor crop yields.
Approximately 70% of the farms in its portfolio grow commodity products, including corn, soybeans, wheat, rice, and cotton. The remaining 30% are specialty crop farms that include almonds, citrus, blueberries, and vegetables. Unlike other farmland REITs, Farmland Partners also leases to solar and wind farms. Its renewable energy leases include 15 operational renewable energy projects.
As of December 2023, Farmland Partners reported approximately $1 billion in assets and about $391 million in total liabilities, with no vacancies across its entire portfolio. Q2 2024 had similar results. Insider shares top 10%, indicating that even those with their fingers on the buttons have a lot of faith in its future.
4. Lennar
Lennar is one of the largest builders of single-family homes in the U.S. It reported revenues of $34.2 billion in 2023 after delivering more than 73,000 homes during the calendar year. It also kicked 2024 off solidly with $8.7 billion in revenues in the three months ending May 31, 2024 and expects to deliver 80,000 homes in 2024.
Although building homes is its primary focus, Lennar also offers Federal Housing Administration (FHA) and U.S. Department of Veterans Affairs (VA) home loans to its homebuyers through its subsidiary Lennar Mortgage. It also offers title insurance and closing services in 18 states.
Homebuilders are still experiencing an increase in demand due to a lack of existing home inventory, but it has tempered since prices and interest rates have plateaued. At the end of 2023, Lennar had a backlog of $6.6 billion worth of homes (14,892 units), which will figure into its 2024 earnings.
In a bid to increase production speed and decrease production costs, Lennar partnered with ICON Home to develop a prototype subdivision using 3D-printed structural elements. This development, called Wolf Ranch, is nearing completion in Georgetown, Texas.
Due to its willingness to experiment, Lennar has generally carried decent debt-to-asset ratios. In 2023, it had $39.2 billion in assets versus $12.5 billion in liabilities. This ratio has dropped some as of May 31, 2024, with Lennar holding $38.67 billion in assets and $11.66 billion in liabilities.
5. LGI Homes
LGI Homes is a growing mid-sized builder that focuses its effort and marketing on first-time homebuyers. For the year ending Dec. 31, 2023, the average price of a home produced and sold by LGI was $350,510. That’s a significant discount from the median existing-home price of $423,200 in the fourth quarter of 2023, according to the Federal Reserve Bank of St. Louis. Although the average sales price grew to $364,047 in Q2 2024, that’s still far below the national median existing-home price of $412,300 in Q2 2024.
Pricing alone gives LGI a distinct advantage in its market, but that’s not the whole story behind the company. Even though contract cancellation rates crept up in 2023, often due to rising interest rates, LGI still finished the year with $3.4 billion in assets and $1.5 billion in liabilities. That ratio rose slightly as of Q2 2024, with $3.7 billion in assets and $1.78 billion in liabilities.
Between December 2013 and December 2023, LGI grew from eight markets in four states to 36 markets in 21 states — and it continues to build steam. Management holds large stakes in the company, with 12.9% of shares staying within the operation.
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The bottom line
There are plenty of ways to invest in real estate besides owning physical real estate assets. For many investors, real estate stocks can make all the best parts of owning real estate much more accessible and far less expensive. Whether you’re interested in investing in apartment REITs or the builders who construct owner-occupied neighborhoods, there are lots of offerings on the table.
When evaluating real estate stocks, remember that many of the same rules apply as they would for any kind of stock. Look for companies with great offerings, whether it’s leasable real estate or purchasable housing stock.
Make sure they aren’t carrying a high level of debt that could become a serious liability in a downturn. The better they are at managing their money, the better off you’ll be. And, if the management team happens to own a big chunk of the company, that’s pretty solid evidence they’re invested in making their company succeed by tying their own futures to that success.
