Legendary investor Sam Zell gained his reputation as the "Grave Dancer" in the 1970s. He spent the second half of that decade buying up distressed properties across the country. In his aptly titled article on the period, "The Grave Dancer," Zell describes how the opportunity came about.

Zell's peak grave dancing days, directly preceding the stagflationary downturn in the late '70s, are reminiscent of today. Zell talks about how the easy money periods in the late '60s, and the advent of real estate investment trusts (REITs) that funneled money into property, sewed the seeds of a crisis starting in 1973. This time around, the money was just as easy and there are even more vehicles for investing in real estate and new construction.

It's unlikely that Zell will be running around the country scooping up properties this time around, but he does still chair three REITs: Equity Residential (EQR 0.10%), Equity Lifestyle Properties (ELS -0.04%), and Equity Commonwealth (EQC 0.05%). The three REITs are all positioned differently for a potential recession. Let's go over each and how you should invest.

Equity Residential

Equity Residential is a residential REIT that owns 311 properties with 80,581 units. The communities are strategically chosen in 12 different markets, and the REIT has been proactive about moving out of coastal area like California and into Tier 2 cities, like Denver, where many Americans migrated after the start of the pandemic. In the process, the REIT is selling older properties and exchanging them for newer ones.

Equity Residential is the growth option. It is actively pursuing new investments and ways to finance them creatively even as interest rates rise. It has a strong dividend, with a yield just over 3.4%, and that dividend has grown more than 6% annually since 2011.

The migration strategy will likely drive future growth for the REIT in a recovery, but Equity Residential could thrive in a down market as well. As interest rates rise and people find it harder and harder to afford buying new housing, some of them will turn to multifamily housing to wait for the market to cool or for a long-term stay.

Equity Lifestyle Properties

Another option for people priced out of the single-family housing market is mobile homes. Mobile homes are the spiritual ancestor of the trendier tiny houses and are, surprisingly, one of the most reliable real estate assets to own. Equity Lifestyle Properties is investing in niche properties, like mobile home communities, and doing it in an interesting way.

In addition to mobile, or manufactured, homes, Equity Lifestyle owns RV resort parks, campgrounds, and marinas. It owns a total of 446 properties in 35 states and 89% of its revenue is annually recurring.

The interesting part is where it owns the properties: 110 properties have direct lake, river, or ocean frontage and another 120 are within 10 miles of a coast. The REIT's strategy is to buy the highest-quality property close to vacation and retirement destinations. In fact, most of its properties are 55-plus communities or have an age restriction. As the baby boomer retirement trend picks up, Equity Lifestyle will be the best-in-breed REIT ready to reap the benefits.

Equity Commonwealth

Equity Commonwealth is currently the black box. It has a market cap of $3.12 billion, cash of $2.72 billion, and ownership of just four office properties. It is effectively a SPAC.

Zell wants to use the one-time office property REIT as a vehicle to own industrial property. The case for investing in industrial property is easy: E-commerce is a hyper-growth industry, and all the stuff people buy online needs to be stored somewhere. Since Zell took over in 2014, the REIT has unloaded over $7 billion of office real estate, and it unsuccessfully attempted to acquire an industrial REIT last year. The question for investors is whether Equity Commonwealth will be able to move into the industry.

At this point, I view Equity Commonwealth as a recession investment. If the real estate market falls, like it did in the '70s, this REIT immediately becomes Zell's best vehicle for scooping up properties again. The REIT would have access to around $5 billion with its current balance sheet, and even more if it is able to sell the remaining office properties.