As an income and value investor, I'm constantly on the hunt for undervalued stocks that have the potential to grow but also pay a reliable dividend. Real estate investment trusts (REITs) are some of my favorite bargain stocks to buy because they offer exposure to the diverse real estate industries while paying above-average dividend returns.

The bear market, driven by concerns over inflation and higher interest rates, has been hard on REIT shares. That makes right now a great time to load up.

Two bargain REITs I'm picking up in the stock market plunge are Iron Mountain (IRM 2.08%) and Extra Space Storage (EXR 1.02%). Here's a closer look at both and why I'm either adding or starting my position in these stocks today.

1. Iron Mountain

Iron Mountain is a specialty REIT that has been helping its customers store and organize physical records, assets, data, files, and specialty goods like fine art since 1951. It may not be the most exciting business, but it is consistent and has strong demand.

Its expansion in certain global markets, as well as its fine arts business and global data-center space, has allowed it to build new revenue streams and reach new heights in terms of revenue growth. In the first quarter of 2022 revenue reached $1.25 billion, a new quarterly high, and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 13% from a year earlier to $431 million.

Iron Mountain's small but notable footprint of 20 data centers with 176 million megawatts of leasable data-center space is one of the reasons I'm so excited about its future, as I believe demand for data space on the physical and digital level will only continue to grow. After several public REITs and private equity firms went on a shopping spree in 2021, the options in this arena are dwindling. This makes Iron Mountain's move into the digital space all the more appealing.

The company boasts an attractive dividend right now, which is just over 5%, and its shares are trading at a bargain price of 10 times its funds from operations (FFO), a key metric of REIT performance. For comparison, its two main data center peers, Equinix and Digital Realty Trust, are trading at about 26 and 12 times FFO, respectively.

2. Extra Space Storage

Self-storage is another industry that may not deliver on the excitement factor but it sure delivers in terms of profitability and reliability. Self-storage has been the top-performing sector within the REIT industry for the past 25 years, with Extra Space Storage providing a 20.41% annualized return since its initial public offering in 2004.

Right now, the company has interest, ownership, or management interest in more than 2,100 properties located in more than 995 different cities across 41 states, but there's an opportunity for it to grow. The self-storage industry is highly fragmented, with about 42% of institutional quality facilities owned by individual investors. Extra Space targets these existing facilities by acquiring them through joint venture partnerships or purchasing them outright.

Extra Space Storage is also the largest third-party management company for the storage industry in the U.S., with its management division accounting for about half of its property portfolio. Diversified income streams are a major positive, plus the management operation has become one of its main sources for new acquisitions. In 2021, managed properties accounted for 55% of its acquisitions. I love the resiliency of its business model and how it can maintain steady performance even in a down economy. 

Its debt is at its lowest point in more than seven years, with a debt-to-EBITDA of 4.5 times with $65 million of cash and cash equivalents on hand. Recent market volatility has hit the stock rather hard, pushing it down 24% year to date, but the decline has also made its shares much more attractive. Right now, it is trading at about 20 times FFO with a dividend yield of almost 3.6%. This may not seem like a bargain, but self-storage REITs have been trading at upward of 30 times their FFO in recent years, meaning today's price is a notable discount.

I already owned shares of Extra Space Storage and will be using the market plunge to add to my position.