Real estate investment trusts (REITs) are among the best tools that income investors have at their disposal. And REIT ETFs help take these tools to another level.
REITs are the most accessible way to invest in real estate, in both terms of cost (you just need the price of a share) and who’s allowed to own them in the first place (they’re not restricted to accredited investors). And they also help deliver the stream of consistent income that traditional physical real estate investors can generally expect.
But much like other parts of the stock market, there’s some risk involved in owning just one or two REITs. That’s where exchange-traded funds (ETFs) come in. A REIT ETF can help you defray that single-ticker risk by spreading your assets across dozens of REITs covering a variety of real estate industries.
Let’s look at some of the best REIT ETFs you can buy to bolster your portfolio income. I’ll start with an introduction to REITs and how they work, introduce you to some of the top REIT funds on the market, then answer a few question about REIT dividends, taxation, and more.
Disclaimer: This article does not constitute individualized investment advice. These funds appear for your consideration and not as personalized investment recommendations. Act at your own discretion.
What Is a REIT?
A real estate investment trust, often referred to as a REIT, is a unique class of investment made up of companies that own (and sometimes operate) real estate-related assets.
Congress created this business structure via the REIT Act, which itself was part of the Cigar Excise Tax Extension of 1960 that President Dwight D. Eisenhower signed into law. Their hope? To make real estate more accessible to everyday investors—after all, we don’t all exactly have the hundreds of thousands or millions of dollars necessary to buy apartment complexes and office buildings.
To help you understand real estate investment trusts a little better, let’s break down the terms that make up the name:
- “Real estate”: REITs must derive at least 75% of their gross income from real estate-related income, and 75% of their assets must be real estate-related assets. And if you wonder why I keep saying “related,” that’s because REITs don’t always have to own physical properties—they can own real-estate related assets such as mortgages, too.
- “Investment trust”: These words are important to understanding REIT ownership. There are certain thresholds that set REITs apart from conventional publicly traded company stocks. For instance, they must have at least 100 shareholders, and they can have no more than 50% ownership resting in the hands of five or fewer investors.
The most important (or at least pertinent) rule you need to know about REITs is that they must pay at least 90% of their taxable income to shareholders in the form of dividends.
Unsurprisingly, this mandate for income results in real estate often being the highest-yielding stock-market sector. Also unsurprisingly, high yields are among REITs’ biggest selling points.
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Equity REITs vs. Mortgage REITs
The REIT universe is sometimes divided into two distinct flavors: equity REITs and mortgage REITs.
While they both deal in real estate, they’re two vastly different businesses and pretty dissimilar investments that can sometimes have very disparate reactions to the same outside forces.
In other words: Investors should know the difference between the two.
Equity REITs
“Equity” is shorthand for a few things, among them “ownership,” typically in a financial asset or company. You’ll frequently hear “equities” used as another term for “stocks,” as a company’s stock represents an ownership stake in that business.
Equity REITs, then, are directly invested in real estate assets. They own or manage properties ranging from office buildings to shopping centers to apartment complexes, leasing that space and generating income from the rents. And publicly traded equity REITs allow you to enjoy that exposure through their shares, which you can purchase through any traditional brokerage account.
Mortgage REITs
Mortgage REITs (or mREITs), on the other hand, don’t traffic in real estate properties—instead, they deal with debt.
Mortgage REITs finance real estate, operating less like a traditional REIT and more like a financial firm. This is done by either originating mortgages, or buying and selling those mortgages and related mortgage-backed securities. The business also commonly involves borrowing heavily to then trade all that mortgage paper at scale. An mREIT’s profits, then, tend to revolve around net interest income (NII): the difference between the interest revenue they generate and the financing costs on all their assets.
This fundamentally makes mortgage REITs riskier than equity REITs. After all, the 2008 financial crisis was caused in large part by financial firms borrowing heavily to invest in the debts of third parties. Particularly in the current interest rate environment, where borrowing is getting steadily more expensive all around, that’s a tough spot to be in.
So, why do people buy mREITs? Well, their yields are regularly three to four times more what you’ll get from the average equity REIT. Granted, these dividends might be at risk of evaporating if things go south … but if they hold up, investors will be richly rewarded for looking beyond the conventional players on Wall Street.
Related: 9 Best Fidelity ETFs You Can Buy [Invest Tactically]
Why Invest in REITs Through ETFs?
The big draw of an exchange-traded fund is that it allows you to diversify your portfolio across a multitude of different investments. You could spend a lot of time researching numerous stocks, then spending however much it costs to buy each stock individually … or you could buy a few dozen, hundreds, or even thousands all at once by owning a single ETF.
So, if you don’t want to take the time to research individual REITs, you can put your money into a REIT ETF and leave it up to the portfolio manager or the tracking index.
But real estate investment trusts’ portfolios typically are made up of dozens if not hundreds of properties or thousands of mortgages. So do you really need that additional layer of diversification?
REITs tend to be focused on specific corners of the market: office buildings, hotels, medical facilities, and so on. Even mortgage REITs tend to specialize in certain segments of real estate assets. If you want that specific exposure, individual REITs are just fine.
But if you want real estate income without your investment being tethered to any one real estate industry, REIT ETFs provide that broad-based access.
The Best REIT ETFs You Can Buy
The following funds are some of the best real estate investment trust ETFs on the market.
I’ve kept screening to a minimum here. All ETFs on this list have a Morningstar Medalist Rating (a forward-looking analytical view of the ETF) of either Bronze, Silver, or Gold, and at least $75 million in assets under management (AUM). I personally love to examine newer funds, but targeting more established ETFs with a certain baseline of assets reduces your risk of purchasing a fund that might eventually close.
Past that, I’m just looking for REITs that come at the sector from different angles. It’s normal to see a sizable amount of overlap in REIT fund holdings—the sector itself only holds a couple hundred stocks across all market capitalizations, after all, and most are going to gravitate toward the largest components. Where the following funds differ is in their strategy and approach.
Best REIT ETF #1: Vanguard Real Estate ETF
- Assets under management: $37.0 billion*
- Dividend yield: 3.6%
- Expense ratio: 0.13%, or $1.30 per year on every $1,000 invested
- Morningstar Medalist rating: Gold
Vanguard Real Estate ETF (VNQ) is the 500-pound gorilla of the U.S. real estate space, boasting well more than three times the assets of the second-largest largest ETF.
Normally, I’d point to Vanguard’s low expenses as the reason. But in this case, it’s the longevity. VNQ’s fees, while low compared to the entire field, are still higher than several of its closest competitors. But the fund has had a long time to build up its asset base—VNQ, which got its start in September 2004, is the ETF share class of Vanguard’s Real Estate Index Fund, which has been around since May 1996.
Vanguard’s REIT ETF tracks the MSCI US Investable Market Real Estate 25/50 Index, which invests in the real estate stocks from a pretty wide stock selection universe, then weights them by market capitalization. That means the bigger the company, the more assets are allocated to the stock—and the greater influence that stock has over the portfolio’s performance. So while VNQ does hold a sprawling portfolio of 160 REITs, it’s not evenly balanced. Consider that the top three holdings—healthcare and senior housing landlord Welltower (WELL), logistics property owner Prologis (PLD), and datacenter REIT (EQIX)—effectively account for 20% of the ETF’s performance.
Past that, you’re getting exposure to retail and residential real estate, hotels, offices, and other property types. You’re also getting a good mix of different-sized REITs; large caps only make up 30% of the portfolio, while mid-caps are the largest cohort at 45%, and smalls make up the remaining 25%.
“Vanguard Real Estate Index’s accurate representation of the US real estate segment and its low fee are an attractive combination,” Morningstar Associate Analyst Brian Paoli says about the fund’s Gold Medalist rating. That, as well as a typically high yield compared to many broad-based real estate funds, makes VNQ one of the best REIT ETFs you can buy right now.
* Vanguard fund assets are spread across multiple share classes, including mutual funds and ETFs alike. Assets listed for each fund in this story are for the ETF share class only.
Want to learn more about VNQ? Check out the Vanguard provider site.
Related: 14 Best Investing Research & Stock Analysis Websites [2026]
Best REIT ETF #2: Schwab U.S. REIT ETF
- Assets under management: $9.9 billion
- Dividend yield: 2.8%
- Expense ratio: 0.07%, or 70¢ per year on every $1,000 invested
- Morningstar Medalist rating: Gold
Vanguard might be known as the fund world’s low-cost leader, but Schwab ETFs are no slouch—in fact, their expenses occasionally undercut Vanguard’s, as is the case with our next fund.
The Schwab U.S. REIT ETF (SCHH) is the second-largest REIT ETF by assets and the cheapest of any qualifying fund, at just 7 basis points annually. (A basis point is one one-hundredth of a percentage point). It tracks a similarly broad index of REITs with only a couple minimum guardrails: a minimum float-adjusted market capitalization of $200 million (float is the number of shares available to the public) and a median daily value traded (MDVT) of at least $5 million over the prior three months.*
The index also has “caps” to fight overconcentration. No individual security can make up more than 10% of assets at rebalancing, while the combined weight of all holdings weighing 4.5% or more can’t exceed 22.5%. SCHH is also checked daily to prevent overconcentration between rebalancings.
The resulting portfolio isn’t as wide as VNQ, at 120 stocks, though it has a similar market cap makeup (25% large, 45% mid, 30% small) and many of the same top holdings. And despite its caps, Welltower and Prologis eat up a higher share of assets than they do in Vanguard’s fund. Schwab U.S. REIT ETF also allocates significant portions of its portfolio to EQIX, mall giant Simon Property Group (SPG) and telecommunications infrastructure REIT American Tower (AMT).
Paoli calls this Gold-rated ETF a “well-constructed US real estate fund.” It doesn’t provide the same breadth as VNQ, nor the same level of yield. But if fees are your primary concern, it’s difficult to find better REIT ETFs than Schwab’s SCHH.
* These are the criteria for including new components. Stocks are only removed if they fall under $100 million market cap for two consecutive quarters or a three-month MDVT of below $2.5 million.
Want to learn more about SCHH? Check out the Schwab provider site.
Related: 10 Best Index Funds You Can Buy Now
Best REIT ETF #3: Invesco S&P 500 Equal Weight Real Estate ETF
- Assets under management: $99.0 million
- Dividend yield: 2.7%
- Expense ratio: 0.40%, or $4.00 per year on every $1,000 invested
- Morningstar Medalist rating: Bronze
If you’re not familiar with State Street’s “Select Sector” ETFs, they’re among the most well-known sector funds in existence, simply holding the S&P 500 companies within a given sector and weighting them by market cap. They’re simple and fairly inexpensive, though like with the funds above, they put more assets into the larger companies and less into the smaller ones—great for stability, but it limits the potential for emerging small caps to influence the fund.
That’s where the Invesco S&P 500 Equal Weight Real Estate ETF (RSPR) comes in.
Remember: Many REIT funds, like VNQ and SCHH, distribute their assets based on the size of the company, which results in larger stocks having a greater influence over the fund’s performance. That’s not necessarily a bad thing. Larger companies tend to be more stable. Sometimes, those weighting systems result in still-modest allocations of 1% or 2% for even the largest stocks. And sometimes, the stocks in a sector can perform in lockstep to the point where not even perfectly even weight distribution would make a difference.
But the real estate sector is itself exposed to many different parts of the economy. And at least in the S&P 500, there is a high weighting concentration among the index’s biggest stocks.
Invesco’s RSPR gets around that by holding the same 31 REITs that you’ll find in the State Street Real Estate Select Sector SPDR ETF (XLRE), but equally weighting them at each rebalancing. That way, every REIT has the same chance to shine. You’re still getting exposure to Welltower, Prologis and Equinix, but you’re getting roughly the same exposure to Host Hotels & Resorts (HST), information management landlord Iron Mountain (IRM), home leasing REIT Invitation Homes (INVH), and others. Their weights will change over time as their stocks rise and fall, but every quarter, the fund will rebalance, resetting all their weights to the same level playing field.
Practically speaking, this has resulted in a lower yield than many REIT funds and somewhat mixed performance. RSPR has actually greatly outdone both its category average and Morningstar performance index over the trailing 10 years, but it has lagged across nearer-term time frames.
Invesco S&P 500 Equal Weight Real Estate ETF still deserves a spot among the market’s best REIT ETFs, but the decision to buy largely hinges on whether you want even exposure or want to let the sector’s biggest dogs do the most barking.
Want to learn more about RSPR? Check out the Invesco provider site.
Related: 6 Ways to Invest in Apartment Buildings [w/Minimal Effort!]
Best REIT ETF #4: JPMorgan BetaBuilders MSCI US REIT ETF
- Assets under management: $1.2 billion
- Dividend yield: 2.8%
- Expense ratio: 0.11%, or $1.10 per year on every $1,000 invested
- Morningstar Medalist rating: Bronze
The JPMorgan BetaBuilders MSCI US REIT ETF (BBRE) offers a little more access to smaller REITs than Vanguard’s VNQ, and at a slightly lower cost.
The Bronze-rated BBRE tracks a custom, adjusted market cap-weighted index that emphasizes mid- and small-cap U.S. real estate equities. The 105-component fund allocates only a quarter of its assets to large-cap REITs; the biggest chunk (40%) belongs to mid-caps, and a sizable 35% is in smalls.
The large-cap exposure still comes in big chunks; Welltower and Prologis each enjoy weights of around 10% right now. Top holdings can occasionally look different from other cap-weighted funds, but right now they’re largely similar, holding many of the aformentioned REITs as well as single-unit property specialist Realty Income (O) and self-storage giant Public Storage (PSA).
So you’re not getting a terribly differentiated portfolio, and the extra exposure to smaller stocks tamps down yield a little. But BBRE has it where it counts: Its performance over the trailing three- and five-year periods sits within the top 20% of category funds, easily putting it among the market’s best REIT ETFs to buy.
Want to learn more about BBRE? Check out the JPMorgan provider site.
Do you want to get serious about saving and planning for retirement? Sign up for Retire With Riley, Young and the Invested’s free retirement planning newsletter.
Best REIT ETF #5: Dimensional Global Real Estate ETF
- Assets under management: $3.5 billion
- Dividend yield: 3.9%
- Expense ratio: 0.22%, or $2.20 per year on every $1,000 invested
- Morningstar Medalist rating: Silver
The final REIT ETF on this list, Dimensional Global Real Estate ETF (DFGR), broadens your real estate horizons to the rest of the world.
When it comes to geography, you’ll want to know two distinct terms: “international” and “global.” “International” means other countries but not the U.S., while “global” means other countries and the U.S. So Dimensional Global Real Estate ETF is specifically telling us that it owns both international and domestic REITs.
Unlike the other funds I’ve mentioned, Dimensional’s offering is actively managed. A four-member team has built a massive portfolio of roughly 440 holdings, split roughly 75/25 between the U.S. and the rest of the world. Practically speaking, that means you’re getting a lot of what you’ve already gotten above: Welltower, Prologis, and the like. But you’re also investing in Australia’s Goodman Group, U.K. logistics REIT Segro, Hong Kong-based Link REIT, and other overseas names.
Because DFGR doesn’t splash much cash around outside of America, there are no massive weights in any one country. But top international exposure right now belongs to Australia (6%), Japan (5%), and the U.K. (3%).
This young fund launched in late 2022, so there’s not much of a track record, but it has topped its Morningstar category average over the trailing one- and three-year periods.
DFGR provides some geographic diversification compared to most REIT funds you’ll come across, it offers a high yield of nearly 4%, and being actively managed means the fund doesn’t have to blindly hold whatever an index commands. And you get all this for a reasonable 22 basis points in fees. That’s good enough to merit inclusion among our top REIT ETFs to buy.
Want to learn more about DFGR? Check out the Dimensional Funds provider site.
Related: Real Estate Syndication: What It Means and How to Invest
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Frequently Asked Questions (FAQs)
How do REIT dividends work?
Real estate investment trusts pay dividends just like other companies—typically every quarter, though a few REITs are monthly dividend stocks.
The biggest difference between REIT dividends and other stocks’ dividends is that they’re “non-qualified.”
Whether a stock is “qualified” or “non-qualified” is determined by the IRS tax code. I won’t going deeply into the minutiae because it won’t be all that helpful. Instead, as a general guide, just know that most “traditional” stocks (the Apples and Coca-Colas of the world) pay qualified dividends, while most REITs pay non-qualified dividends.
Why does this matter?
Qualified dividends are taxed at the lower long-term capital gains tax rate (so, 0%, 15%, or 20%, plus the 3.8% net investment income tax, where applicable).
Non-qualified dividends don’t meet the IRS standards for qualification and are taxed at the higher short-term capital gains tax rate (aka your regular income tax rate).
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How do REIT ETFs pay investors?
When you own a REIT exchange-traded fund, you own parts of shares of various REITs with different payout schedules. However, you don’t get paid when those stocks pay out—you get paid based on the ETF’s payout schedule.
REIT ETFs pay their investors the same way as REITs do, with deposits appearing on your brokerage statement on a regular cycle. And they typically pay every quarter.
How else can you buy real estate?
Typically, if you want to own stock in a real estate company, you have to invest through the public markets. But equity crowdfunding makes it possible for everyday investors to secure a stake in privately held real estate businesses.
Real estate crowdfunding sites typically allow for small investments (read just hundreds or even tens of dollars) in a wide range of businesses. The platform is usually paid through either a monthly fee or by collecting a percentage of the funds raised for the business. And generally speaking, these platforms provide high ease of use compared to many other types of real estate investments.
Equity crowdfunding pick: EquityMultiple
- Available: Sign up here
Some real estate crowdfunding platforms only allow you to invest in property portfolios. However, some platforms, such as EquityMultiple, also allow you to invest in individual properties—in this case, commercial real estate (CRE).
EquityMultiple carries a minimum $5,000 initial investment and is limited to accredited investors. However, those investors have access to individual commercial real estate deals, funds, and even diversified short-term notes.
For those interested in learning more about EquityMultiple, consider signing up for an account and going through their qualification process.
- EquityMultiple is a commercial real estate platform for accredited investors, providing investment opportunities in real estate funds, individual properties, and savings alternatives.
- EquityMultiple has a team boasting decades of real estate transaction experience. Their due diligence process whittles down a large selection of properties, accepting only 5% as target investments that they use to build a variety of portfolios that suit numerous investing objectives.
- The company has made $379 million in distributions since its founding.
- Makes commercial real estate Investments accessible
- Intuitive website design
- High net total returns and distributions paid to investors
- Only available to accredited investors
- High investment minimum to begin
- Fee structure varies by investment, complex at times
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