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

A Real Estate Investment Trust (REIT) trades on a stock exchange the same way a company stock does. You open a brokerage account—at firms like Fidelity, Charles Schwab, E*TRADE, or your bank's investment arm—and search for the REIT by its ticker symbol. You place an order, the shares settle in your account, and you own a piece of the real estate portfolio that REIT holds. No special account type is required, and no real estate license is needed.

The entire process takes minutes once your brokerage account is funded. You pay the same trading commissions (often zero at major brokers) that you would for any stock purchase. The REIT sends you quarterly distributions—payments from the rental income and property sales the trust generates—which you can reinvest or take as cash.

Key Takeaways

  • Individual REITs trade on stock exchanges and can be bought through any brokerage account with a few clicks, the same way you buy company stock.
  • REIT mutual funds and exchange-traded funds (ETFs) let you own dozens or hundreds of REITs in a single purchase, spreading your money across different property types and regions.
  • Most brokerages charge no commission to buy or sell REIT shares, but you pay the bid-ask spread—the difference between what buyers and sellers are willing to pay.
  • REITs must distribute at least 90 percent of their taxable income to shareholders as dividends, so expect quarterly payments but also higher tax bills than stock dividends.
  • Your brokerage account statement shows your cost basis and gains, which you will need at tax time to report dividend income and any profit when you sell.

Opening a brokerage account to buy individual REITs

Start by choosing a brokerage firm. Most major banks offer brokerage services, and independent brokers like Fidelity, Charles Schwab, E*TRADE, and TD Ameritrade are common choices. You will need to provide your Social Security number, proof of identity, and a funding method—a bank account to transfer money from, or a check you can mail in.

The account opening process takes 10 to 20 minutes online. You will choose between a regular taxable account (called a cash account or margin account) or a tax-advantaged account like an IRA if you want to hold REITs for retirement. For most people starting out, a regular taxable account is simpler. Once the account is open and funded, search for the REIT's ticker symbol—for example, SPG for Simon Property Group or PLD for Prologis—and place a buy order for the number of shares you want.

You can buy as few as one share at most brokers. The price per share varies widely; some REITs trade for under $20 per share, others for over $100. Your total cost is the share price times the number of shares, plus any trading fees (though most brokers now charge zero commission).

Using REIT mutual funds and ETFs to own many properties at once

If you want exposure to real estate without picking individual REITs, a REIT mutual fund or REIT ETF holds dozens or hundreds of REITs in one fund. You buy one fund share, and your money is spread across many properties—apartment buildings, office parks, shopping centers, data centers, warehouses—and many different REIT companies. This reduces the risk that any single REIT performs poorly.

A mutual fund is managed by a fund company; you buy shares directly from them or through a brokerage. An ETF is similar but trades on a stock exchange like a regular stock. Both charge an annual fee called an expense ratio, typically between 0.1 and 0.5 percent per year for REIT funds. That means if you invest $10,000 in a fund with a 0.3 percent expense ratio, you pay about $30 per year in fees, deducted automatically from your account.

Popular REIT ETFs include VNQ (Vanguard Real Estate ETF), SCHH (Schwab U.S. REIT ETF), and XLRE (Real Estate Select Sector SPDR Fund). Each holds a different mix of REITs, so compare their holdings and fees before choosing. You buy them through any brokerage account the same way you buy individual REITs—search by ticker, place an order, and own the fund.

Understanding the costs: commissions, spreads, and expense ratios

Most brokerages charge zero commission to buy or sell REIT shares or REIT funds. However, you still pay the bid-ask spread—the difference between what a buyer is willing to pay and what a seller is asking. If a REIT is trading at a bid of $49.95 and an ask of $50.05, you pay $50.05 to buy and receive $49.95 if you sell immediately. That $0.10 spread is your cost, and it varies depending on how actively the REIT trades.

REIT mutual funds and ETFs charge an annual expense ratio. This is not a one-time fee; it is deducted from the fund's value every year. A low-cost REIT ETF might charge 0.12 percent annually, while an actively managed REIT mutual fund might charge 0.75 percent or more. Over time, lower fees mean more of your money stays invested and working for you.

Some brokerages offer commission-free mutual fund purchases, but others charge a transaction fee the first time you buy. Check your broker's fee schedule before you invest. For most people, ETFs are simpler and cheaper than mutual funds because they trade like stocks and have lower expense ratios.

How REIT dividends work and what they mean for your taxes

REITs are required by law to distribute at least 90 percent of their taxable income to shareholders as dividends. This means you receive quarterly payments—usually four times per year—from the rental income and property sales the REIT generates. A REIT paying a 4 percent dividend yield means you receive 4 percent of your investment's value in annual dividend payments, split into four quarterly checks.

Unlike stock dividends, which are often taxed at favorable rates, REIT dividends are taxed as ordinary income at your regular tax rate. This makes REITs less tax-efficient in a regular brokerage account. If you hold REITs in a tax-advantaged account like a traditional IRA or Roth IRA, the dividend income is not taxed until you withdraw money (or never, in the case of a Roth). This is one reason many investors hold REITs inside retirement accounts rather than in taxable accounts.

Your brokerage sends you a Form 1099-DIV each January showing all the dividends you received during the previous year. You report this income on your tax return. If you sold REIT shares at a profit, you also report the capital gain. Keep your brokerage statements so you can calculate your cost basis—what you originally paid for the shares—which you need to determine your gain or loss.

Timing your purchase and managing your REIT holdings

You can buy REITs anytime the stock market is open, Monday through Friday during regular trading hours (9:30 a.m. to 4 p.m. Eastern time). You can also place orders after hours or before the market opens, but they will not execute until the next trading session. Most brokerages let you set up automatic purchases—for example, buying $500 worth of a REIT ETF every month—which is a simple way to invest regularly without thinking about timing.

REIT prices fluctuate daily based on market conditions, interest rates, and the real estate market. If you are investing for the long term, short-term price swings matter less than the dividends you collect and the property value growth over years. If you need to sell, you can do so anytime the market is open; the sale settles in two business days, and the cash lands in your account ready to withdraw or reinvest.

Review your REIT holdings once or twice per year. Check whether the properties the REIT owns still match your goals—for example, if you wanted apartment buildings but the REIT has shifted to office space, you might sell and buy a different REIT. Rebalance if one holding has grown much larger than the others and now represents too much of your portfolio.

Frequently Asked Questions

Do I need a lot of money to start investing in REITs?

No. You can buy a single share of most REITs or REIT ETFs for anywhere from $20 to $150 per share, depending on the fund. Many brokerages also allow fractional share purchases, so you can invest any dollar amount, even $50. Start with what you can afford and add more over time.

Can I hold REITs in a retirement account like an IRA?

Yes. REITs can be held in a traditional IRA, Roth IRA, or 401(k) if your plan allows it. This is often a better choice than holding them in a taxable account because REIT dividends are taxed as ordinary income, and a retirement account shields you from that tax burden until you withdraw money.

What happens if a REIT cuts its dividend?

If a REIT reduces or stops its dividend, the share price usually falls because investors buy REITs partly for the dividend income. You can sell and move your money to a different REIT, or hold if you believe the REIT will recover. Check the REIT's quarterly earnings reports and investor presentations to understand why the dividend changed.

Is it better to buy individual REITs or a REIT fund?

A REIT fund spreads your money across many properties and companies, reducing risk if one REIT performs poorly. Individual REITs let you target specific property types—apartments, data centers, or warehouses—but require more research. Most beginners benefit from starting with a low-cost REIT ETF.

How do I report REIT income on my taxes?

Your brokerage sends you a Form 1099-DIV showing dividend income and a Form 1099-B showing any capital gains from sales. Report the dividend income on your tax return as ordinary income. If you sold shares at a profit, report the capital gain. Keep your statements to prove your cost basis if the IRS questions your return.