You can buy REITs through a brokerage account the same way you buy stocks, or through funds that hold multiple REITs

A REIT (Real Estate Investment Trust) is a company that owns and operates income-producing property — apartments, offices, warehouses, hotels, data centers. When you buy shares of a REIT, you own a piece of that company. The mechanics of purchasing are straightforward: you need a brokerage account, money to invest, and a decision about which REIT or REIT fund to buy.

Most people buy REITs through the same brokerage where they hold stocks or mutual funds. Some buy individual REIT shares; others buy funds that hold dozens of REITs at once. The choice depends on how much time you want to spend researching individual properties and companies, and how much diversification matters to you.

Key Takeaways

  • You need a brokerage account with a firm like Fidelity, Vanguard, Charles Schwab, or a similar provider to buy REIT shares or REIT funds.
  • Individual REITs trade on stock exchanges under ticker symbols, and you can buy them during market hours just like stocks.
  • REIT mutual funds and exchange-traded funds (ETFs) let you own pieces of many REITs in a single purchase, reducing the risk that one company performs poorly.
  • REITs are required by law to distribute at least 90 percent of their taxable income to shareholders as dividends, which affects how they are taxed differently than stocks.
  • You can hold REITs in tax-advantaged accounts like IRAs and 401(k)s, though the tax treatment of REIT dividends varies depending on the account type.

Opening a brokerage account

Before you can buy any REIT, you need a brokerage account. This is a holding place for your money and your investments, managed by a licensed firm. Most major brokerages — Fidelity, Vanguard, Charles Schwab, E*TRADE, TD Ameritrade, and others — allow you to open an account online in minutes. You will need a Social Security number, proof of identity, and a bank account to transfer money in.

There is no fee to open most brokerage accounts. Some firms charge a monthly fee if your account balance falls below a certain amount (often $2,500 to $10,000), but many waive this for customers who set up automatic deposits or use other services. Once your account is open and funded, you can buy and sell REITs during market hours — typically 9:30 a.m. to 4 p.m. Eastern time on weekdays when the stock market is open.

If you already have a 401(k) through your employer or an IRA at a bank or brokerage, you may already have access to REIT investments through that account. Check with your plan administrator or log into your account to see what options are available.

Buying individual REIT shares

Individual REITs trade on major stock exchanges under ticker symbols, just like Apple or Microsoft. You can look up a REIT by name or ticker, see its current price, and place an order to buy a certain number of shares. The price per share varies widely — some REITs trade for under $20 per share, others for over $100.

When you buy an individual REIT, you own a direct stake in that company's properties and operations. You receive dividends (usually paid quarterly) based on the company's profits. You also bear the risk that the company performs poorly, its properties lose value, or its dividend gets cut. This is why many investors prefer to spread their money across multiple REITs rather than betting on one.

To buy individual REIT shares, log into your brokerage account, search for the REIT's ticker symbol, enter the number of shares you want to buy, and confirm the order. The transaction typically settles within two business days, meaning the shares appear in your account and your cash is deducted.

Buying REIT mutual funds and ETFs

A REIT mutual fund is a pool of money managed by a professional that buys shares of many different REITs. When you buy one share of the fund, you own a small piece of all the REITs inside it. An exchange-traded fund (ETF) works the same way but trades on a stock exchange like an individual stock, whereas a mutual fund is priced once per day after the market closes.

REIT funds reduce the risk that any single company's poor performance will hurt your investment. They also save you the work of researching and picking individual REITs. The trade-off is that you pay a fee — called an expense ratio — to the fund company for managing the fund. This fee is typically between 0.1 percent and 1 percent per year of your investment, though it varies widely.

Some REIT funds focus on specific property types (apartment REITs, office REITs, industrial REITs) or geographic regions. Others hold a broad mix. You can find REIT funds through your brokerage by searching for "REIT fund" or "REIT ETF" and comparing their holdings, fees, and performance history.

Understanding REIT dividends and taxes

REITs are required by federal law to distribute at least 90 percent of their taxable income to shareholders as dividends. This means REIT dividends are typically higher than stock dividends. However, REIT dividends are taxed as ordinary income (at your regular tax rate) rather than as may have access to dividends (which get a lower rate). This matters most if you hold REITs in a regular taxable brokerage account.

If you hold REITs in a tax-advantaged account like a traditional IRA or 401(k), you do not pay taxes on the dividends until you withdraw money from the account. If you hold them in a Roth IRA, you do not pay taxes on the dividends at all, as long as you follow the withdrawal rules. This is one reason many investors prefer to hold REITs in retirement accounts rather than in taxable accounts.

When you sell a REIT share for more than you paid for it, you owe capital gains tax on the profit. This works the same way as selling any stock. Keep track of what you paid for each share (your cost basis) so you can calculate your gain or loss when you sell.

How much money you need to start

The amount of money needed to buy your first REIT depends on the price per share and your brokerage's rules. Individual REIT shares can cost anywhere from $15 to $150 or more per share. Some brokerages allow you to buy fractional shares (a portion of one share) with as little as $1, while others require you to buy whole shares. Check your brokerage's minimum investment before you open an account.

REIT mutual funds and ETFs also have varying minimums. Some allow you to start with $100 or $500; others require $1,000 or more for the first purchase. After your initial purchase, many funds allow you to add money in smaller amounts or set up automatic monthly investments.

There is no legal minimum amount you must invest in REITs. Start with what you can afford and are comfortable risking. Many investors begin with a small amount in a REIT fund to learn how the investment works, then add more over time.

Comparing REITs before you buy

Before buying a specific REIT or REIT fund, look at a few basic facts: the property types it owns (apartments, offices, warehouses, etc.), its geographic focus, its dividend yield (the annual dividend divided by the share price), and its expense ratio if it is a fund. You can find this information on the REIT's website, on financial websites like Yahoo Finance or Morningstar, or through your brokerage's research tools.

Pay attention to the REIT's occupancy rate (the percentage of its properties that are rented) and the stability of its dividend. A REIT that has paid the same or growing dividend for many years is generally more stable than one that cuts its dividend frequently. However, past performance does not may provide future results.

If you are new to REITs, starting with a broad REIT fund (one that holds many different types of properties and regions) is often simpler than picking individual REITs. As you learn more, you can add individual REITs or more specialized funds if you want.

Frequently Asked Questions

Do I need a lot of money to buy a REIT?

No. Many brokerages allow fractional share purchases starting at $1, and REIT mutual funds often have minimums of $100 to $500. You can start small and add more over time. The amount depends on your brokerage and the specific REIT or fund you choose.

Can I buy REITs in my retirement account?

Yes. REITs can be held in traditional IRAs, Roth IRAs, 401(k)s, and other retirement accounts. Holding REITs in a retirement account is often advantageous because you avoid paying taxes on the dividends until you withdraw money (or never, in the case of a Roth IRA).

What is the difference between a REIT ETF and a REIT mutual fund?

Both hold multiple REITs, but ETFs trade on a stock exchange during market hours like individual stocks, while mutual funds are priced once per day after the market closes. ETFs often have lower expense ratios. Both reduce the risk of owning a single REIT.

How often do REITs pay dividends?

Most REITs pay dividends quarterly (four times per year), though some pay monthly or semi-annually. The frequency varies by REIT. You can find the dividend payment schedule on the REIT's investor relations website or through your brokerage.

Can I lose money investing in REITs?

Yes. REIT share prices fluctuate based on market conditions, property values, and the company's performance. If you sell a REIT for less than you paid, you lose money. However, if you hold the REIT long-term and reinvest dividends, you may recover losses over time. Past performance does not may provide future results.