How to buy REIT shares

You buy shares in a real estate investment trust the same way you buy stock in any other company: through a brokerage account. Open an account with a broker (online brokers like Fidelity, Charles Schwab, or Vanguard are common choices), fund it with cash, search for the REIT by its ticker symbol, and place a buy order for the number of shares you want. The transaction settles in two business days, and you own the shares outright.

You do not need a real estate license, a large down payment, or a mortgage. The barrier to entry is low—you can start with the cost of a single share, which ranges from under $10 to several hundred dollars depending on the REIT. You receive a statement showing your ownership, and dividends (if the REIT pays them) land in your account automatically.

The entire process takes minutes once your account is funded. You can buy and sell shares during market hours just like stock, which means you can exit your position far faster than you could sell a rental property or a commercial building.

Key Takeaways

  • You need a brokerage account with a broker like Fidelity, Charles Schwab, or Vanguard to buy REIT shares, and the process is identical to buying any stock.
  • REIT shares trade during stock market hours, so you can buy or sell within minutes and see your position update in real time.
  • You can start with a small amount of money—the cost of a single share—rather than saving for a down payment on property.
  • Dividends from REITs are paid directly to your brokerage account, and you receive tax documents (Form 1099) at year-end showing what you earned.
  • REITs held in tax-advantaged accounts like IRAs or 401(k)s may have different tax treatment than those held in regular taxable accounts.

Opening a brokerage account

Choose a broker and visit their website or app. Most brokers let you open an account online in 10 to 15 minutes. You will need your Social Security number, a government ID, your address, and a bank account or funding source to deposit money. Some brokers waive account minimums; others require $500 to $1,000 to start, though many have lowered or eliminated these requirements in recent years.

After you open the account, transfer money from your bank. This transfer typically takes one to three business days. Once the cash is in your brokerage account, you can buy REIT shares immediately.

Popular brokers for individual investors include Fidelity, Charles Schwab, E*TRADE, TD Ameritrade, and Vanguard. Each charges different commissions (many now charge zero commission per trade) and offers different research tools and educational resources. If you already have a retirement account or investment account somewhere, you can often buy REITs there without opening a new account.

Finding and researching REITs before you buy

Search for REITs by property type or name using your broker's search function or financial websites like Yahoo Finance, Google Finance, or Morningstar. REITs are organized by what they own: apartment buildings, office parks, shopping centers, data centers, hospitals, hotels, or mixed portfolios. Decide which property types interest you based on your investment goals and risk tolerance.

Read the REIT's annual report (Form 10-K) and quarterly reports (Form 10-Q), both filed with the Securities and Exchange Commission and available free on the SEC's EDGAR database or the REIT's investor relations website. These documents show what properties the REIT owns, how much debt it carries, what rent it collects, and how much it pays out in dividends. Look at the dividend yield (annual dividend divided by share price) and the payout ratio (dividends paid divided by funds from operations, or FFO) to understand whether the dividend is sustainable.

Compare the REIT's performance to others in the same sector. A REIT with a 5% dividend yield might look attractive until you see that competitors in the same property type are paying 6% or 7%. Check whether the REIT has raised or cut its dividend over the past few years—consistent or growing dividends suggest stable management and properties.

Understanding REIT share prices and market risk

REIT share prices move up and down during the trading day based on supply and demand, just like any stock. A REIT that owns apartment buildings might fall 10% in a day if interest rates spike, because investors suddenly prefer bonds. The same REIT might climb 8% the next week if a major competitor announces a dividend cut. This volatility is real, and it means your investment can be worth less than you paid for it on any given day.

The underlying properties—the actual apartments, offices, or warehouses—do not change in value as quickly as the share price does. A REIT's net asset value (NAV) per share, which reflects what the properties are actually worth, often differs from the trading price. This gap creates both risk and opportunity: you might buy shares at a discount to NAV (a bargain) or at a premium (overpaying relative to the property value).

If you need to sell your shares in a down market, you will lock in a loss. If you can hold through market swings, you have a better chance of recovering. This is why REITs work best for money you do not need for at least three to five years.

Tax treatment of REIT dividends

REIT dividends are taxed as ordinary income, not as capital gains, even if you hold the shares for years. This means they are taxed at your regular income tax rate, which is typically higher than the long-term capital gains rate. If you earn $50,000 a year and receive $2,000 in REIT dividends, that $2,000 is added to your taxable income and taxed at your marginal rate.

You will receive a Form 1099-DIV at the end of each year showing how much you received in dividends. Keep this for your tax return. If you hold REIT shares in a tax-deferred account like a traditional IRA or 401(k), you do not pay tax on the dividends until you withdraw money from the account. This tax deferral is one reason many investors hold REITs in retirement accounts rather than regular taxable accounts.

If you sell REIT shares for more than you paid, you owe capital gains tax on the profit. If you sell for less, you can deduct the loss against other gains or, in some cases, against ordinary income (up to $3,000 per year). Track your cost basis (what you paid) carefully so you can calculate gains and losses accurately.

Choosing between individual REITs and REIT funds

You can buy shares in individual REITs one at a time, or you can buy a REIT mutual fund or exchange-traded fund (ETF) that holds dozens or hundreds of REITs. Individual REITs give you control and let you focus on specific property types or companies you believe in. REIT funds spread your money across many REITs, which reduces the risk that one bad performer will hurt your returns.

REIT funds charge an expense ratio—an annual fee, usually 0.3% to 1% of your investment—to cover management and administration. Individual REITs have no ongoing fee beyond the commission you pay to buy and sell (which is usually zero at modern brokers). If you plan to hold for decades, the fee difference compounds; if you are just starting out and want broad exposure, a fund is simpler.

Many investors use both: a core position in a diversified REIT ETF for stability, plus a few individual REIT shares in sectors they understand well. This hybrid approach balances simplicity with control.

Setting up automatic dividend reinvestment

Most brokers offer a dividend reinvestment plan (DRIP), which automatically uses your dividend payments to buy more shares of the same REIT. If you receive a $50 dividend and the share price is $25, DRIP buys you two more shares. Over time, this compounds your position without you having to do anything.

DRIP is useful if you want to grow your REIT holdings passively and do not need the dividend income for living expenses. It is less useful if you rely on the dividend as cash flow or if you want to rebalance your portfolio by moving money between different investments.

You can turn DRIP on or off in your broker's settings. If you turn it off, dividends land in your cash account as cash, and you decide what to do with them. Either way, you still owe income tax on the dividends in the year you receive them, even if you reinvest them.

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 for anywhere from $10 to $300, depending on the REIT. Some brokers have no account minimum. You can start with $100 or $500 and add more over time. This is one of the main advantages of REIT shares over owning rental property directly.

Can I hold REIT shares in a retirement account like an IRA?

Yes. You can buy REIT shares inside a traditional IRA, Roth IRA, SEP-IRA, or 401(k) through most brokers. In a traditional or SEP-IRA, dividends are tax-deferred. In a Roth IRA, dividends and gains grow tax-free if you follow the withdrawal rules. This tax advantage makes retirement accounts an especially good place for REITs.

What happens if a REIT cuts its dividend?

The share price usually falls when a dividend is cut, because investors who bought for the income are now getting less. If you need the dividend for cash flow, a cut hurts. If you are focused on long-term growth, a cut might signal that the REIT is reinvesting in properties or paying down debt, which could benefit you later. Read the REIT's announcement to understand why the cut happened.

Can I lose money investing in REITs?

Yes. REIT share prices can fall if interest rates rise, if the real estate market weakens, or if the specific REIT mismanages its properties or takes on too much debt. You could sell at a loss. However, if you hold through downturns and the REIT continues to pay dividends, you may recover over time. This is why REITs are best for money you can afford to keep invested for years.

How often should I check on my REIT investments?

Check your account quarterly when the REIT reports earnings, or annually at minimum. You do not need to watch the share price daily—market swings are normal and do not reflect changes in the underlying properties. If you are reinvesting dividends, you can check even less often. If you are relying on dividend income, review it when the REIT announces changes to the payout.