Real estate has long been a popular investment, but buying property directly is expensive and demanding. Real estate investment trusts, or REITs, offer a far simpler route: a REIT lets you own a slice of income producing real estate by buying shares, much as you would own a share of any company, rather than buying a whole building and becoming a landlord. This gives you exposure to property, diversification and a stream of dividend income, though with real risks of its own. Here is how to invest in real estate through REITs, drawing on the SEC and FINRA. You can build an income projection with our dividend income planner. Own Real Estate Without Being a Landlord Many people would like to invest in real estate but are put off by the huge cost of buying property and the work of being a landlord. REITs solve this elegantly. A real estate investment trust lets you own a slice of income producing real estate simply by buying its shares, in the same way you would buy shares of any company, so you gain exposure to property without purchasing a whole building, finding tenants or handling repairs. In effect, you own a small piece of a portfolio of many properties, sharing in the income and value they generate. This is educational guidance, not personalized advice. What a REIT Is A REIT, or real estate investment trust, is a company that owns and typically operates income producing real estate or real estate related assets, as the SEC explains. The properties a REIT owns can be physical real estate, such as apartment buildings, offices, shopping centres or warehouses, or real estate related debt, such as mortgages. Most REITs specialise in a particular type of property, so there are retail REITs, office REITs, residential REITs, healthcare REITs and industrial REITs, among others. This is educational guidance, not personalized advice. How REITs Work and Pay Dividends A defining feature of REITs, and a major reason investors like them, is the way they distribute income. Because of the rules under which they are established, a REIT must distribute at least 90 percent of its taxable income to shareholders each year in the form of dividends, as the SEC notes. This requirement means REITs typically pay out most of their earnings, so they tend to offer relatively high and regular dividend income compared with many ordinary companies, which is a key part of their appeal for income focused investors. This is educational guidance, not personalized advice. Publicly Traded Versus Non Traded REITs One of the most important distinctions to grasp, and one that strongly affects risk, is between publicly traded and non traded REITs. Publicly traded REITs, also called exchange traded REITs, are registered with the SEC, file regular reports, and are listed on an exchange such as the NYSE or NASDAQ, so you can buy and sell their shares easily through a normal brokerage account at a transparent market price, making them generally liquid. This is educational guidance, not personalized advice. If you are still choosing where to hold your account, our compare brokers tool sets out fees, features and account types side by side. The Benefits of Investing in REITs REITs offer several genuine benefits that explain their popularity as a way to add real estate to a portfolio. First and most obviously, they give you access to real estate investment without the enormous cost, time and effort of buying and managing property directly, as the SEC notes many investors find. Second, they provide diversification, since real estate can behave differently from stocks and bonds, and a REIT itself typically holds many properties, spreading risk. Third, they deliver regular dividend income, thanks to the requirement to distribute most of their earnings. This is educational guidance, not personalized advice. The Risks You Must Weigh For all their appeal, REITs carry real risks that you must weigh honestly before investing. Like any investment tied to asset values, REIT share prices can fall, sometimes sharply, if property values or rental income decline, so they are far from a guaranteed or safe holding. REITs are also notably sensitive to interest rates, since rising rates can increase their borrowing costs and make their dividend yields less attractive relative to safer alternatives, which can weigh on their prices. This is educational guidance, not personalized advice. How to Invest in REITs Investing in REITs is straightforward for most people, and the simplest approaches are usually the best. The easiest way to buy a publicly traded REIT is through a normal brokerage account, purchasing its shares just as you would any stock. For most investors, an even simpler and more diversified route is to buy a REIT index fund or REIT exchange traded fund, which holds many different REITs in a single, low cost, diversified investment, sparing you from picking individual ones and spreading your risk across the sector. This is general education, not personalized advice. Common Mistakes People Make REITs trip investors up in a few predictable ways. Here are the four to avoid. Treating REITs as safe because they pay dividends Why it backfires: Assuming REITs are a safe, steady income investment ignores that their share prices can fall sharply if property values or rents decline, and that their generous dividends are not guaranteed and can be cut. Do this instead: Approach REITs as a real investment with real risk, not a safe income source, recognising that their prices can drop and dividends can be reduced, and size your position accordingly rather than reaching for the yield alone. Buying non traded REITs without understanding them Why it backfires: Investing in non traded REITs without grasping their drawbacks ignores the SEC’s warnings that they can be illiquid for years, lack a readily available price, carry high costs, and may pay distributions partly from your own invested money. Do this instead: Be very cautious of non traded REITs and strongly favour publicly traded ones, which are listed, liquid and transparent, and if a non traded REIT is recommended, review it carefully and check the adviser proposing it before investing. Overlooking interest rate sensitivity Why it backfires: Ignoring how REITs respond to interest rates ignores that rising rates can raise their borrowing costs and make their yields less attractive relative to safer alternatives, which can weigh on their prices. Do this instead: Understand that REITs are notably sensitive to interest rates, factor this into your expectations rather than being surprised when rate changes move their prices, and treat them as one diversified part of a portfolio rather than a sure thing. Concentrating in a single REIT or sector Why it backfires: Putting a large sum into one REIT or one property sector ignores that many REITs are concentrated in a single type of property or region, so they may carry more risk and less diversification than assumed. Do this instead: Spread your real estate exposure, ideally by using a diversified REIT index fund or ETF that holds many REITs across sectors, rather than betting heavily on a single REIT or a single corner of the property market. The Honest Bottom Line A REIT lets you own a slice of income producing real estate by buying shares, giving you property exposure without the cost and hassle of being a landlord. REITs own real estate or real estate related debt, often specialising by sector, and because they must distribute at least 90 percent of their taxable income as dividends, they tend to pay relatively high and regular income. This is educational information, not financial advice. Frequently asked questions What is a REIT? A REIT, or real estate investment trust, is a company that owns and typically operates income producing real estate or real estate related assets, as the SEC explains. The properties can be physical real estate, such as apartment buildings, offices, shopping centres or warehouses, or real estate related debt, such as mortgages. Most REITs specialise in a particular type of property, so there are retail, office, residential, healthcare and industrial REITs, among others. When you buy shares in a REIT, you become part owner of that real estate business and share in the rental income and any change in the value of its properties. This turns the traditionally expensive, illiquid world of property into something you can invest in with a simple share purchase. Why do REITs pay high dividends? Because of the rules under which they are established, a REIT must distribute at least 90 percent of its taxable income to shareholders each year in the form of dividends, as the SEC notes. This requirement means REITs typically pay out most of their earnings, so they tend to offer relatively high and regular dividend income compared with many ordinary companies, which is a key part of their appeal for income focused investors. Broadly, equity REITs own and operate properties and earn rental income, while mortgage REITs finance real estate and earn interest. Bear in mind, though, that these dividends are not guaranteed: like any company, a REIT can reduce its dividend if its income falls, so the income is attractive but not certain. What is the difference between publicly traded and non traded REITs? Publicly traded REITs, also called exchange traded REITs, are registered with the SEC, file regular reports, and are listed on an exchange such as the NYSE or NASDAQ, so you can buy and sell their shares easily through a normal brokerage account at a transparent market price, making them generally liquid. Non traded REITs are also registered and file reports, but their shares are not listed on any exchange, which the SEC warns creates serious drawbacks: there is no readily available market price, they can be very difficult to sell and may lock up your money for years, their valuations are opaque, they can carry high costs, and they may pay distributions partly from your own invested money or borrowings, reducing the value of your shares. For most investors, publicly traded REITs are far the safer choice. What are the benefits of investing in REITs? REITs offer several genuine benefits. First, they give you access to real estate investment without the enormous cost, time and effort of buying and managing property directly, which the SEC notes many investors value. Second, they provide diversification, since real estate can behave differently from stocks and bonds, and a REIT itself typically holds many properties. Third, they deliver regular dividend income, thanks to the requirement to distribute most earnings. Fourth, publicly traded REITs offer liquidity, letting you buy or sell easily, unlike a physical property. And they have a low cost of entry, since you can start with the price of a few shares. Together these make REITs an accessible, income generating way to include real estate in a portfolio. What are the risks of REITs? REITs carry real risks. Like any investment tied to asset values, REIT prices can fall, sometimes sharply, if property values or rental income decline, so they are far from safe. They are also notably sensitive to interest rates, since rising rates can increase their borrowing costs and make their yields less attractive relative to safer alternatives, which can weigh on prices. Many REITs are concentrated in a single property sector or region, so they may lack the breadth of diversification you might assume. Non traded REITs add serious further risks: illiquidity, opaque valuations and high costs. And their dividends, while typically generous, are not guaranteed and can be cut. Approaching REITs with clear eyes about these risks, rather than seeing only the income, is essential. How do I invest in REITs? Investing in REITs is straightforward, and the simplest approaches are usually best. The easiest way to buy a publicly traded REIT is through a normal brokerage account, purchasing its shares just as you would any stock. For most investors, an even simpler and more diversified route is to buy a REIT index fund or REIT exchange traded fund, which holds many different REITs in a single, low cost, diversified investment, sparing you from picking individual ones and spreading your risk across the sector. You can verify the registration of any REIT and review its reports through the SEC EDGAR database, and you should check out any broker or adviser recommending one. Given their drawbacks, be very cautious about non traded REITs and favour liquid, publicly traded options, ideally through a diversified fund. Sources All claims in this article are supported by the sources listed below. Verify details against the originals before making investment decisions. U.S. Securities and Exchange Commission, Investor.gov. Real Estate Investment Trusts (REITs). Accessed 10 June 2026. Financial Industry Regulatory Authority (FINRA). Investing Basics. Accessed 10 June 2026. Before you act on thisThis article explains how something works. It is general education, not advice about your situation. It does not consider your goals, income, tax position or how much risk you can afford.Investing involves risk, including losing money. Before you act, speak to a licensed professional. You can check whether someone is licensed at Investor.gov and FINRA BrokerCheck.Disclaimer · Terms of Use
