Lower vacancies and higher rents mean more income, and REITs, which are required to pay out 90% of t

3 ETFs to Play the Rental Rebound Susan J. Aluise, Aviation, Auto Transportation Writer Buying and managing income property can be a pain. But there's a much simpler way to cash in on this boom: ETFs that invest in residential rental REITs.
Terrified of foreclosures and sluggish job growth, mortgage-issuing banks and consumers have put aside at least for now the American Dream of homeownership in favor of finding a good rental. That means that residential rental housing is fast becoming an enticing investment opportunity.
But purchasing an income property outright can be a dicey proposition and if you don't savor the propect of being woken up in the middle of the night to unclog a drain or change a fuse, owning and managing a rental property is probably not for you.
The current market makes a strong case for rental growth. The collapse garment district los angeles in housing prices during the three years of the Great Recession garment district los angeles wiped out nearly garment district los angeles 39% of U.S. households' net worth, according to a Federal garment district los angeles Reserve study released last week . But people still have to live somewhere  and that usually means multifamily apartments or rented homes.
Freddie Mac, which released its June 2012 Economic and Housing Market Outlook on Wednesday, found that 1.5 million additional households garment district los angeles have moved into rentals over the past year a 4% increase in a single year. Rents rose 2% to 4% over the same period.
Lower vacancies and higher rents mean more income, and REITs, which are required to pay out 90% of their annual earnings to investors, are particularly attractive. The cash flow tends to be more stable than in some other investments because of the steady flow of rent payments. They also can offer better-than-average dividends.
Notable REITs in the residential space include apartment complex builders and owners such as Essex Property Trust (NYSE: ESS ), AvalonBay Communities (NYSE: garment district los angeles AVB ), Equity Residential (NYSE: garment district los angeles EQR ), UDR (NYSE: UDR ), Camden Property Trust (NYSE: CPT ) and BRE Properties (NYSE: BRE ).
Of course, REIT investing is no sure thing, as we discovered during the recent financial crisis. REIT ETFs are a good play, though, because they offer exposure to the sector and diversification. Some REIT ETFs are narrowly garment district los angeles focused on the residential rental niche while others have a broader scope.
iShares garment district los angeles FTSE NAREIT Residential Plus Capped Index Fund (NYSE: REZ ). If you're looking for an ETF that's the closest thing to a residential rental REIT pure play, REZ fits the bill. REZ tracks the index above, and its top holdings include apartment complex REITs such as Equity Residential, AvalonBay, Essex Property, Camden Trust, UDR and BRE Properties. It also includes the health-care property REIT Ventas (NYSE: VTR ) and shares in self-storage giant Public Storage (NYSE: PSA ).
With $187 million in assets, REZ is the smallest of the REIT ETFs listed here. Trading around $47, it s more than 30% above its 52-week low last October. Its current dividend yield of 3.7% is the highest of these three funds. So is its expense ratio at 0.48 but that still isn't too bad.
It has a three-year return of more than 33% and a year-to-date garment district los angeles return of more than 8%. If you believe residential rentals will be the sweetest spot in REIT investments this year, this ETF is a good match.
SPDR Dow Jones REIT ETF (NYSE: RWR ). For more diversification, look to RWR, which tracks the broader Dow Jones U.S. Select REIT index. In addition to rental residential garment district los angeles REITs such as Equity Residential and AvalonBay, the ETF also invests in health care with HCP (NYSE: HCP ) and Health Care REIT (NYSE: garment district los angeles HCN ). Its largest holding is in shopping mall giant Simon Property Group (NYSE: SPG ).
With about $1.9 billion in assets, RWR is trading around $71, up 36% since its 52-week low last October. It has a current dividend yield of 2.9% and an expense ratio of 0.26. It has a three-year garment district los angeles return of 32% and a year-to-date return of 12%.
Vanguard REIT ETF (NYSE: VNQ ). If you want maximum garment district los angeles diversification and minimum fees, consider VNQ, which invests in more than 100 different U.S. REITs. This ETF has some of the usual holdings, such as AVB and EQR, with SPG leading the pack at about 10% of its holdings. But it also includes Prologis (NYSE: PLD ) a global owner, operator and developer of industrial real estate, and Host Hotels Resorts (NYSE: HST ).
With more than $12 billion in assets, VNQ is trading around $64.50 37% above its 52-week low last October. It has a current dividend yield of 3.3% and a dirt-cheap expense ratio of 0.12. Its three-year return is over 32%, and its year-to-date return is 12%.
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