Where and How To Buy REITs

You can buy REITs through a brokerage account, just like stocks

Most individual investors buy REITs through an online brokerage — the same place you would buy a stock or an ETF. You open an account, deposit money, search for the REIT by its ticker symbol, and place an order. The transaction settles in two business days, and the REIT shares appear in your account. No special permission or account type is required; a standard taxable brokerage account works fine, though a retirement account like an IRA also works and may offer tax advantages.

The main brokerages that offer REIT trading include Fidelity, Charles Schwab, E*TRADE, Interactive Brokers, and Webull. Smaller brokerages and robo-advisors like Betterment and Wealthfront also offer REIT access. Most charge no commission to buy or sell, though some may charge a small fee for certain types of orders or accounts. Check your brokerage's fee schedule before you open an account.

Key Takeaways

• Individual REITs trade on stock exchanges under ticker symbols and can be bought through any online brokerage with no special account type required.
• REIT ETFs and mutual funds let you own dozens of REITs in a single purchase, spreading your money across different property types and managers.
• Most brokerages charge no commission to buy or sell REITs, but some charge fees for certain account types or order methods.
• REITs held in a taxable account generate taxable income each year, while REITs in a retirement account defer taxes until withdrawal.

Buying individual REITs on a stock exchange

When you buy an individual REIT, you are buying shares of a specific company that owns and operates real estate. The REIT trades on a major exchange — usually the New York Stock Exchange or NASDAQ — under a ticker symbol like "PLD" (Prologis, which owns industrial warehouses) or "O" (Realty Income, which owns retail properties). You search for the ticker in your brokerage, see the current price, and place a buy order just as you would for any stock.

Individual REITs range widely in size, focus, and risk. Some own apartment buildings, others own shopping centers, office parks, data centers, or hospitals. Some are large and stable; others are smaller and more volatile. Before you buy, read the REIT's annual report or fact sheet to understand what properties it owns, where they are located, and how much debt it carries. This information is available on the REIT's investor relations website or through your brokerage's research tools.

The advantage of buying individual REITs is control: you choose exactly which properties and managers you want to own. The disadvantage is concentration risk — if you own only one or two REITs, a problem at that company can hurt your portfolio significantly. Most investors who buy individual REITs own at least three to five, spread across different property types.

Using REIT ETFs and mutual funds for diversification

A REIT ETF is a fund that holds dozens of individual REITs in a single investment. You buy one share of the ETF, and you instantly own a slice of many REITs. Popular REIT ETFs include VNQ (Vanguard Real Estate ETF), SCHH (Schwab U.S. REIT ETF), and IYR (iShares U.S. Real Estate ETF). These trade on stock exchanges just like individual REITs, and you buy them the same way — through your brokerage, with no commission at most firms.

REIT mutual funds work similarly but are priced once per day instead of trading throughout the day. Vanguard, Fidelity, and T. Rowe Price all offer REIT mutual funds. Some are actively managed (a manager picks which REITs to own) and some are index funds (they track a REIT index like the MSCI US REIT Index). Index REIT funds typically charge lower fees than actively managed ones.

The advantage of REIT ETFs and mutual funds is instant diversification: you own many REITs and property types in one purchase, reducing the risk that a single company's problems will hurt you. The disadvantage is that you give up control — the fund manager decides which REITs to own, and you pay an annual fee (called an expense ratio) for that management. REIT ETF expense ratios typically range from 0.10% to 0.40% per year, while actively managed REIT mutual funds may charge 0.50% to 1.00% or more.

Tax considerations for REIT accounts

REITs are required by law to distribute at least 90% of their taxable income to shareholders as dividends. This means you receive regular dividend payments, usually quarterly. In a taxable brokerage account, those dividends are taxed as ordinary income in the year you receive them, even if you reinvest them. This can result in a significant tax bill, especially if you own high-yielding REITs.

In a retirement account like a traditional IRA or 401(k), REIT dividends are not taxed when you receive them. Instead, taxes are deferred until you withdraw money from the account. In a Roth IRA, REIT dividends are never taxed, as long as you follow the withdrawal rules. For this reason, many investors hold REITs in retirement accounts to avoid the annual tax hit.

If you do hold REITs in a taxable account, keep records of all dividends received. Your brokerage will send you a Form 1099-DIV each January showing the dividends you received in the prior year, which you will report on your tax return. Some REIT dividends may be classified as return of capital rather than ordinary income, which affects how you report them — your brokerage will specify this on the 1099-DIV.

Minimum investment amounts and account requirements

Most brokerages have no minimum investment to buy a single share of a REIT or REIT ETF. If a REIT trades at $50 per share, you can buy one share for $50 (plus any trading fees, though most brokerages charge none). Some brokerages offer fractional shares, meaning you can invest any dollar amount, even if it does not equal a whole share price.

Retirement accounts like IRAs have annual contribution limits set by the IRS, but no minimum to open. For 2024, you can contribute up to $7,000 per year to a traditional or Roth IRA (or $8,000 if you are 50 or older). A 401(k) through an employer may have a minimum contribution, but this depends on your employer's plan rules.

Some brokerages offer special accounts for specific purposes — a custodial account for a minor, a trust account, or an SEP-IRA for self-employed people. These accounts can hold REITs, but the rules for contributions and withdrawals vary. Ask your brokerage about the account type that fits your situation.

How to research and compare REITs before buying

Before you buy a REIT, gather basic information: What type of property does it own? Where are the properties located? How much debt does the REIT carry? What is the dividend yield? How has the stock price performed over the past three and five years? Your brokerage's research tools usually provide this information, or you can visit the REIT's investor relations website directly.

Look at the REIT's annual report (called a 10-K filing) and quarterly reports (10-Q filings), which are available on the SEC's EDGAR database or the REIT's website. These documents show the properties owned, the tenants, lease terms, and financial performance. Pay attention to occupancy rates (what percentage of space is rented) and rent growth (whether rents are rising or falling). A REIT with high occupancy and rising rents is generally healthier than one with falling occupancy.

Compare the dividend yield to other REITs in the same sector. If one REIT yields 6% and similar ones yield 3%, ask why — it may be a bargain, or it may be a sign of financial trouble. Check the REIT's debt-to-equity ratio and interest coverage ratio (how easily it can pay interest on its debt). A REIT with high debt and weak coverage is riskier.

Getting started with your first REIT purchase

Choose a brokerage. If you do not already have one, Fidelity, Charles Schwab, and E*TRADE are popular choices for individual investors. Open an account online — the process usually takes 10 to 15 minutes. You will need to provide your name, address, Social Security number, and employment information. Choose between a taxable account and a retirement account (IRA or 401(k)) based on your tax situation and how long you plan to hold the investment.

Deposit money into your account. Most brokerages accept bank transfers, which typically settle within one to three business days. Once the money is in your account, search for a REIT by its ticker symbol. Read the price, the dividend yield, and the recent performance. If you are new to REITs, consider starting with a REIT ETF like VNQ or SCHH — they offer instant diversification and are simpler than picking individual REITs. Place your order and confirm it. The transaction will settle in two business days, and the shares will appear in your account.

Frequently Asked Questions

Can I buy REITs directly from the REIT company without a brokerage?

Some REITs offer dividend reinvestment plans (DRIPs) that let you buy additional shares directly, but you still need to own at least one share first, which requires a brokerage. A few REITs offer direct stock purchase plans, but these are rare. For most investors, a brokerage account is the standard and easiest route.

What is the minimum amount of money I need to start buying REITs?

There is no set minimum. If a REIT trades at $30 per share and your brokerage offers fractional shares, you can invest $10 or $50. If you want to buy a full share, the cost depends on the REIT's current price, which ranges from under $10 to over $100 per share. Most investors start with $500 to $1,000 to build a small diversified portfolio.

Should I buy individual REITs or a REIT ETF?

REIT ETFs are simpler and safer for most investors because they spread your money across many REITs and property types. Individual REITs give you more control but require more research and carry higher risk if you own only a few. If you are new to REITs, an ETF is usually the better starting point.

Do I have to pay taxes on REIT dividends every year?

Yes, if you hold REITs in a taxable account. You owe taxes on dividends in the year you receive them, even if you reinvest them. Holding REITs in a retirement account like an IRA or 401(k) defers or eliminates these taxes, which is why many investors prefer that approach.

Can I buy REITs through my 401(k) or IRA?

Yes. Most 401(k) plans and IRAs allow you to buy individual REITs or REIT mutual funds. A Roth IRA is especially tax-efficient for REITs because dividends are never taxed. Check with your plan administrator or brokerage to confirm which REIT investments are available in your specific account.