Fortune.com recently reported that the number of renter households in the U.S. grew 1.9% in the second quarter, or three times the number of homeowner households. This is the third consecutive quarter that this has been the case, suggesting that buying rental REITs in the second half of the year could be a smart investment.

“The cost of renting and buying a home has skyrocketed in recent years, but the affordability crisis isn’t quite as severe in the rental market. That’s because America has built a lot of housing to keep up with strong renter demand,” Fortune reported comments from Sheharyar Bokhari, senior economist at Redfin.

According to Fortune, Los Angeles has the highest percentage of renters in the U.S. at 53%, well above the national average of just over a third. That tells me that some of the rental REITs for sale have apartments for rent in the LA area.

Who are these names? Here are my three ideas.

Douglas Emmett (DEGG)

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Douglas Emmett (NYSE:DEI) is a Los Angeles-based real estate investment trust (REIT) that owns 68 Class A office properties with 17.6 million square feet and 14 multifamily properties. The multifamily properties have 4,483 residential units in Los Angeles and Honolulu.

For the three months ended June 30, multifamily revenue was $46.5 million and segment profit was $30.6 million, while office revenue was $199.2 million and segment profit was $132.1 million.

Although the company owns 10 multifamily properties in Los Angeles with approximately 2,000 units, its four properties in Honolulu have 2,487 units, accounting for approximately 20% of total rent.

In Los Angeles, the REIT’s multifamily revenue per unit is $4,592, 73% higher than the average of six comparable multifamily REITs.

Interestingly, the REIT is converting a 25-story, 46,000-square-foot office building in Honolulu into 493 residential units. 98% of the 449 converted units are already leased. The last two floors will be dedicated to Class A office space.

The dividend yield is an attractive 5.04%. Get paid to wait for further conversions by the REIT.

Communities in Avalon Bay (General Terms and Conditions)

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Communities in Avalon Bay (NYSE:General Terms and Conditions) is not based in LA, but has a large presence in Southern California. For the three months ended June 30, the company generated quarterly revenue of $148.7 million in the region, up 22% overall. That translates to NOI (net operating income) of $104.5 million, up year-over-year.

The REIT expects Southern California retail banking revenue to grow 4.5% in 2024, the highest growth rate among the nine geographic regions.

Avalon Bay’s core FFO (funds from operations) per share was $2.77 in the second quarter, up 11 cents from the prior year.

As of July 31, the REIT had sold five residential properties (1,069 apartments) for $514 million. The capitalization rate – defined as net operating income divided by current market value – was 5.1%. One of the residential properties sold was AVA North Hollywood in Los Angeles.

It owns 11,992 apartments in LA, 4,024 in Orange County, and 1,767 in San Diego, for a total of 17,783. It also owns 12,137 apartments in Northern California. It owns 77,413 units nationwide, with an average occupancy rate of 96.0%.

The return is 3.2%.

Housing Equity (EQR)

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Housing equity (NYSE:EQR) is a Chicago-based REIT that owns or invests in 299 properties (284 of which are wholly owned) containing 79,738 residential units.

Of the 77,054 housing units included in housing sales in the second quarter of 2024, LA accounted for 18.3%. Orange County and San Diego contributed another 6,596 units. The region’s total NOI was 27.0%. Washington, DC and San Francisco were the next two highest contributors at 16.7% and 15.9%, respectively.

Like Douglas Emmett, the organization focuses on the affluent renter, whose median household income is $169,000, 59 percent more than the U.S. average. The average age of residents is 32, and the average renter spends a manageable 20.5 percent of their income on rent.

Between 2011 and 2024, the REIT increased its annual dividend by 6%, with the dividend compounded annually. This paid out around 70% of the normalized annual FFO (funds from operations). The current yield is 3.8%.

Currently, only 6.4 percent of debt is invested in floating-rate securities.

With inflation-adjusted monthly homeownership costs never higher, renting makes sense even for the wealthy. Given the lack of supply for all types of residential properties, rents for REITs like EQR will continue to remain healthy.

At the time of publication, Will Ashworth had no position (either directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publishing guidelines.

At the time of publication, the editor in charge did not hold any positions (either directly or indirectly) in the securities mentioned in this article.