Your Guide to Buying REITs: Best Platforms and Strategies

Ready to dive into real estate investing without owning physical property? This roadmap shows you exactly where to buy REITs and helps you evaluate which purchasing strategy fits your goals. Whether you’re drawn to individual equity REITs, diversified ETFs, or even exploring non-traded options, you’ll find actionable steps and practical comparisons to build confidence in your decision.

What You Need to Know Before Buying REITs

A REIT (Real Estate Investment Trust) is a company structured to own, manage, or finance income-producing real estate—from apartments and offices to warehouses and data centers. The key advantage: REITs let you capture real estate returns and cash flows without buying a building yourself.

Why REITs matter for your portfolio:

• REITs must distribute at least 90% of taxable income to shareholders as dividends, making them naturally income-focused
• They react differently to market cycles than traditional stocks, offering potential diversification
• Real estate values and rents often move with inflation, providing a partial hedge against rising prices

Most experts suggest allocating 5–15% of a diversified portfolio to real estate exposure, depending on your risk tolerance and income needs.

Where to Buy REITs: Your Main Channels

When you ask “where to buy reits,” you have four primary routes:

1. Online Discount Brokers (Easiest Entry Point)

Popular platforms like Fidelity, Charles Schwab, Merrill Edge, and TD Ameritrade offer commission-free trading for stocks and ETFs. You get immediate access, transparent pricing, and research tools. This is where most individual investors start because there’s low friction—open an account, fund it, and execute trades within minutes.

Pros: Low or zero commissions, fractional shares at some brokers, strong educational resources, real-time pricing
Cons: Minimal guidance; you make your own decisions

2. Full-Service Brokers and Financial Advisers

If you prefer guidance, firms like Morgan Stanley, Goldman Sachs Private Wealth Management, or independent advisers can recommend specific REITs and REIT strategies tailored to your situation. They also provide access to non-traded REITs (which we’ll cover below).

Pros: Personal advice, access to less liquid products, comprehensive planning
Cons: Higher fees, potentially higher minimums

3. Robo-Advisors and Automated Platforms

Services such as Betterment, Wealthfront, and M1 Finance include REIT ETFs in their model portfolios, offering automated rebalancing and lower effort.

Pros: Low fees, hands-off management, built-in diversification
Cons: Limited customization

4. Retirement Accounts (Tax-Efficient Option)

Many 401(k)s, IRAs, and Roth IRAs allow you to hold REIT stocks or REIT ETFs. This is often tax-efficient because REIT dividends are typically taxed as ordinary income—a tax burden you can defer or eliminate in a tax-sheltered account.

REIT ETFs vs. Individual REIT Shares: Which Should You Buy First?

REIT ETFs (Exchange-Traded Funds) bundle dozens or hundreds of REITs into a single fund. You buy one share and get instant diversification.

Popular REIT ETF tickers:

• VNQ (Vanguard Real Estate ETF) — broad U.S. exposure
• IYR (iShares U.S. Real Estate ETF) — similar broad coverage
• SCHH (Schwab U.S. REIT ETF) — low-cost option
• REET (Invesco Global Real Estate ETF) — international exposure

REIT ETF advantages:

• Lower single-company risk through diversification
• Expense ratios typically 0.07%–0.50% annually
• High daily liquidity and intraday pricing
• Simpler research than picking individual REITs

REIT ETF disadvantages:

• Dividend yield is an average; specialized REITs may pay more
• You’re exposed to all holdings, even weaker ones
• Expense ratios erode returns over time

Individual REIT shares give you targeted sector exposure—say, industrial logistics REITs or healthcare REITs—but require deeper research and carry concentration risk.

Individual REIT advantages:

• Precise sector or property-type targeting
• Potential for higher dividend yields from top performers
• Ability to avoid REITs you dislike

Individual REIT disadvantages:

• Higher research burden
• Single-company risk if one underperforms
• Potentially lower liquidity for smaller REITs

For most beginners, start with a REIT ETF. The diversification and lower effort justify the small fee drag.

How to Set Up Your REIT Purchase: Step-by-Step

Here’s the practical workflow:

1. Choose your account type
   Decide if you’re buying in a regular taxable brokerage account or a tax-advantaged account (IRA, 401(k)). If you’re buying REITs, the tax-advantaged route often makes sense because you’ll defer taxes on those dividend distributions.

2. Open and fund your brokerage account
   Select a broker (Fidelity, Schwab, Merrill, Interactive Brokers, etc.). You’ll provide basic info, verify identity, and link a bank account to transfer funds.

3. Research your target
   For REIT ETFs: Compare expense ratios, holdings, and dividend history. For individual REITs: Review funds from operations (FFO), occupancy rates, and property types.

4. Place your order

   • Market order: Executes immediately at the current price (best for REIT ETFs with tight spreads)
   • Limit order: Executes only at your specified price (useful if you want to avoid paying during market spikes)
     Choose the order type based on market conditions and your tolerance for execution timing.

5. Consider dividend reinvestment (DRIP)
   Enable automatic dividend reinvestment to compound your returns over time. Many brokers offer this at no extra cost.

6. Monitor your position
   Track occupancy trends, interest-rate movements, and sector news. REITs are sensitive to both property fundamentals and borrowing-cost cycles.

Key Evaluation Metrics: How to Choose Which REIT to Buy

Before committing capital, check these metrics:

Profitability and income:

• FFO (Funds From Operations): Operating earnings adjusted for depreciation. Compare FFO to the dividend payout to ensure sustainability.
• AFFO (Adjusted Funds From Operations): FFO minus capital expenditures—a closer proxy for cash available for distributions.
• Dividend yield and payout ratio: Is the dividend covered by earnings, or is the REIT depleting reserves?

Real estate fundamentals:

• Occupancy rate: Higher occupancy (ideally >90%) supports reliable rental income.
• Lease terms: Long-term, inflation-linked leases provide stable cash flows.
• Property diversification: Exposure across property types (office, retail, industrial, residential, healthcare) and geographies reduces sector-specific risk.

Financial health:

• Debt-to-EBITDA ratio: High leverage magnifies interest-rate risk. Compare leverage across peers.
• Interest coverage ratio: Ensure the REIT can comfortably cover debt payments from operations.

Management quality:

• Track record of capital allocation, acquisitions, and dispositions
• Transparency in investor relations and guidance

Understanding REIT Costs and Taxes

Costs to factor in:

Tax implications:

REIT dividends are taxed as ordinary income in taxable accounts, not at the lower “qualified dividend” rate you’d get from regular stocks. This is one reason to hold REITs in IRAs or 401(k)s if possible.

In tax-advantaged accounts, you defer taxes on distributions, allowing dividends to compound until withdrawal.

Public vs. Non-Traded vs. Private REITs: What’s the Difference?

Publicly Traded REITs (Best for most investors)

Listed on major exchanges (NYSE, NASDAQ), they trade like regular stocks. High daily liquidity, transparent pricing, and immediate access.

Best for: Income seekers, active traders, regular investors

Public Non-Traded REITs (PNLRs)

Registered but not exchange-listed. They’re sold through brokers and financial advisers.

Caution: Higher upfront fees (often 7%–15%), limited liquidity, and restricted redemption windows. As of 2024, the SEC has issued investor alerts about fee structures and illiquidity risks in these products. Read offering documents carefully.

Best for: Only accredited investors with long time horizons who understand the illiquidity trade-off

Private REITs

Offered to accredited investors only, these are largely illiquid with limited transparency.

Caution: Minimal secondary market access, complex governance, and often multi-year lock-ups. Consult a licensed adviser before considering these.

Risks and Portfolio Role

Key risks:

• Interest-rate sensitivity: Rising rates can pressure REIT valuations and increase borrowing costs, especially for leveraged REITs
• Property market cycles: Local economic downturns reduce occupancy and rental growth
• Sector concentration: Specialized REITs (office, mall, data center) can underperform if their sector weakens
• Tenant and operational risk: Defaults or high vacancy rates cut into income

How REITs fit into a portfolio:

• Income generation: Consistent dividends support retirees and conservative investors
• Inflation hedge: Real estate prices and rents often rise during inflationary periods
• Diversification: Historical returns differ from stocks, providing uncorrelated exposure

A typical allocation is 5–15% of a diversified portfolio to real estate, adjusted for your objectives and risk tolerance.

Decision Flowchart: Where to Buy REITs

Ask yourself:

1. Do I want hands-off management?
   → Yes: Choose a robo-advisor or REIT ETF
   → No: Proceed to question 2

2. Do I need tax-sheltered growth?
   → Yes: Use your IRA or 401(k)
   → No: Open a taxable brokerage account

3. Do I want diversification or sector focus?
   → Diversification: Buy a REIT ETF (VNQ, IYR, SCHH)
   → Sector focus: Research and buy individual REITs

4. Am I willing to accept illiquidity for potentially higher yields?
   → Yes: Consider non-traded REITs (with caution and adviser input)
   → No: Stick to publicly traded REITs or ETFs

Practical Checklist Before Your First REIT Purchase

• [ ] Decide on allocation (% of portfolio)
• [ ] Choose account type (taxable, IRA, 401(k))
• [ ] Select broker and complete account setup
• [ ] Research target REIT/ETF: expense ratio, holdings, dividend history
• [ ] For individual REITs: verify FFO, occupancy, leverage ratios
• [ ] Understand tax implications and confirm withholding rules
• [ ] Check bid-ask spreads and typical daily volume (liquidity check)
• [ ] Place initial order (market or limit) and enable DRIP if desired
• [ ] Set calendar reminder to review quarterly earnings and sector trends

Real-World Scenario: Building Your REIT Position

Example 1: Conservative Income Seeker

• Goal: Generate $2,000/year in REIT dividend income
• Choice: Buy VNQ (broad REIT ETF) in a Roth IRA
• Action: Open Fidelity Roth IRA, transfer $40,000, buy VNQ at ~3–4% yield = ~$1,200–$1,600 annual dividends (tax-free growth)
• Benefit: Tax-deferred compounding, zero capital gains taxes on growth

Example 2: Sector-Focused Investor

• Goal: Gain exposure to industrial logistics demand (e-commerce boom)
• Choice: Research industrial REITs (e.g., PLD Prologis, DRE Duke Realty) or industrial-heavy REIT ETF
• Action: Place $10,000 limit order on one industrial REIT or diversified ETF with high industrial weighting
• Benefit: Targeted exposure to a macro trend you believe in

Next Steps: Ready to Buy Your First REIT?

1. Verify your target: Confirm the exact ticker (VNQ, IYR, SCHH, etc.) and exchange
2. Open your account: Choose broker, complete KYC, and fund your account
3. Place your order: Use the checklist above, then execute a market or limit order
4. Set up monitoring: Track quarterly distributions, sector news, and interest-rate trends
5. Rebalance periodically: Review your allocation annually and adjust if needed

The best time to start asking “where to buy reits” is when you’ve decided real estate exposure aligns with your goals. Once you’ve chosen your platform and vehicle, the mechanics are straightforward—similar to buying any other stock or ETF. Use this guide as your reference, consult official sources (SEC/Investor.gov for alerts, Nareit for REIT directories), and review your broker’s educational materials to stay informed.