A real estate investment trust, or REIT, allows investors to acquire a portion of the profits of real estate investments without purchasing, managing or funding physical properties. REITs are popular among investors for their ability to diversify their portfolios due to their low correlation between stocks and bond performance.
REIT investors should consider dividend yields carefully as dividends are an important factor in REIT returns. However, investing in individual REITs rather than the only factor in choosing REITs requires a lot of research to make wise choices.
For investors who don’t want to put all the time in, but want an attractive REIT return, REIT Exchange-Traded Fund (ETF) can provide a solution. REIT ETFs allow you to get exposed to sectors along with diversification, reducing the risk of a single REIT eroding performance.
Below are some of the most popular REIT ETFs on the market.
Best REITETFs of 2025: List of Top Real Estate Funds
Before investing in a REIT ETF, consider considering the fund’s prospectus to understand its investment strategy and holdings.
(As of May 27, 2025, the return data from MorningStar is the yield from Yahoo Finance.)
Vanguard Real EstateETF (VNQ)
The Vanguard Real Estate ETF is undoubtedly the most popular REIT ETF. The fund tracks metrics of companies involved in the ownership and operation of real estate properties across the United States.
- 5 Year Returns (Annual): 6.7%
- Dividend Yield: 4.1%
- Cost Ratio: 0.13%
ISHARES US Real EstateETF (IYR)
This fund is one of the oldest REIT ETFs in existence. Similar to the Vanguard Fund above, the fund tracks the index of US companies directly or indirectly involved in the real estate sector.
- 5 Year Returns (Annual): 6.6%
- Dividend Yield: 2.6%
- Cost Ratio: 0.39%
Real Estate Select Sector SPDR Fund (XLRE)
This ETF represents real estate, one of the core sectors that make up the S&P 500 index. The fund invests in large real estate companies operating in the US.
- 5 Year Returns (Annual): 7.3%
- Dividend Yield: 3.4%
- Cost Ratio: 0.08%
iShares GlobalReitETF (REET)
The fund tracks global indexes of real estate companies operating in emerging and developed markets, including the US.
- 5 Year Returns (Annual): 6.6%
- Dividend Yield: 3.6%
- Cost Ratio: 0.14%
jpmorgan betabuilders msci us reit etf (bbre)
The ETF tracks the index of small and medium-sized businesses and intermediate companies, primarily commercial and specialized real estate across the United States.
- 5 Year Returns (Annual): 8.6%
- Dividend Yield: 3.2%
- Cost Ratio: 0.11%
What is REIT?
REIT invests in a variety of real estate properties, including residential apartments, office buildings, hospitals, data centers, hotels, retail stores and more. While some REITs specialize in certain market areas such as mortgage financing, others diversify investments across the real estate market. The risk profile of a REIT depends on the assets you hold.
To qualify as a REIT, the company must follow certain requirements. One of these provisions is that the Company must distribute at least 90% of its taxable income with dividends to shareholders.
Most REITs fall into three categories: equity, mortgage and hybrid. While a stock REIT owns the actual real estate or land directly, a mortgage REIT owns a real estate mortgage probably through mortgage-supported security. Hybrid REITs own a combination of these two types.
Advantages and disadvantages of investing in REIT ETFS
REIT ETF Pros
- Attractive total revenue. According to industry organization Narrate, the average annual return for the past 20 years up to September 2024 was 8.2%.
- Attractive passive income. REIT ETFs provide dividend investors with a reliable flow of passive income without the hassle of owning or managing real estate.
- Very liquid. Publicly available REIT ETFs are very liquid so you can regain your principal whenever the market is open. This is something that cannot be achieved easily through physical real estate.
- Lower correlation with other assets. REITs act as a portfolio diversification tool. This is because it has a low correlation with other asset classes, such as stocks.
Disadvantages of REIT ETF
- Volatility. Like other stock-type investments, REIT ETFs can be volatile and susceptible to rapid losses. This is a characteristic that is not noticeable in physical real estate.
- Look at the capital market. REITs need to return 90% of their taxable income to investors, so there is little capital available to accommodate investment opportunities. They need to regularly access debt and stock markets to expand, and if those markets charge high fees, the sector may not grow.
- Dividends are taxed as normal income. Dividends from REITs are usually taxed as regular income. This means that you could be taxed at a much higher rate than the eligible dividend.
How to Invest in REIT ETFs
A solid dividend strategy becomes a key component of every investor’s portfolio. And if dividends are reinvested, the returns could be even higher.
Here are four steps to consider when selecting a REIT ETF:
1. Determine your financial goals
The type of investment you choose will depend on what you are trying to achieve. For example, those looking to retire should take a more conservative approach to investing. Therefore, always let your financial goals drive your decisions.
2. REIT REIT Fund
When choosing a REIT ETF, pay attention to factors such as dividend history, dividend yield, fund performance, expense ratio, top holdings, and managed assets. Investors can find this information on the fund’s prospectus and on the website.
3. An overview of the asset mix
Before you invest, invent what you own and how you want to allocate your assets. The key is to continue to diversify. REIT funds can form a critical portion of your entire portfolio.
4. Check your investment strategy regularly
By reviewing your investments regularly, you can take charge of your finances and make the necessary adjustments. Take advantage of free resources from brokers, such as meeting financial planners, and always ask questions. Ultimately, there’s nothing like handoff investment.
Like any investment, REIT ETFs are susceptible to losses. However, the magnitude of the potential loss is associated with the level of risk contained in the portfolio. Thus, funds that invest heavily in potentially risky assets, such as highly leveraged real estate companies, have a very different risk profile than funds that invest in established, proven names.
Where can I buy REIT ETFs?
You can buy REIT ETFs from the best brokers for ETF investments, such as Fidelity Investments and Vanguard.
– Bank Rate Brian Baker and James Royal I contributed to updating this story.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. Furthermore, investors recommend that past investment products performance is not a guarantee of future price increases.