You can buy REITs through a regular brokerage account, in mutual funds or ETFs, or directly from some companies
A REIT (Real Estate Investment Trust) is a company that owns and operates income-producing real estate. To invest in one, you need a brokerage account — the same kind you would use to buy stocks. You can then purchase REIT shares directly, buy them bundled inside a mutual fund or exchange-traded fund (ETF), or in some cases buy them straight from the REIT company itself through a direct investment program.
The path you choose depends on how much money you want to invest, whether you want to own one REIT or many, and how much time you want to spend managing the investment. All three routes are available to individual investors; none requires special permission or a minimum account balance beyond what your brokerage sets.
Key Takeaways
- You need a brokerage account to buy REIT shares directly, and you can open one online with most major brokerages in under an hour.
- REIT mutual funds and ETFs let you own dozens of REITs in a single purchase, spreading your money across different property types and regions.
- Direct investment programs (DRIPs) let you buy REIT shares straight from the company, sometimes with lower fees, but are available only from certain REITs.
- REITs held in a regular brokerage account are taxed as ordinary income, not at the lower capital gains rate, so tax-advantaged accounts like IRAs may be a better fit.
- You can hold REITs inside an IRA, 401(k), or other retirement account, which shields the income from annual taxes.
Opening a brokerage account and buying individual REIT shares
To buy REIT shares directly, you first open a brokerage account with a firm that offers stock trading. Major brokerages include Fidelity, Charles Schwab, E*TRADE, Vanguard, and TD Ameritrade, though many others exist. You can open an account online by providing your name, address, Social Security number, and employment information. The process typically takes 10 to 20 minutes, and you can fund the account by linking a bank account or transferring money electronically.
Once your account is funded, you search for the REIT by its stock ticker symbol (a four- or five-letter code like "O" for Realty Income or "PLD" for Prologis). You enter the number of shares you want to buy and place the order during market hours. The shares settle in your account within two business days. You then own those shares outright and receive any dividends the REIT pays directly into your account.
Buying individual REITs gives you control over exactly which properties and companies you own. It also means you can buy as few as one share (though some brokerages charge a commission per trade, which makes very small purchases uneconomical). The downside is that you are responsible for researching each REIT's financial health, property portfolio, and dividend history yourself.
Investing through REIT mutual funds and ETFs
A REIT mutual fund or REIT ETF is a basket of many REITs managed by a professional fund company. When you buy one share of a REIT fund, your money is pooled with other investors' money and spread across 20, 50, or sometimes over 100 different REITs. This approach is called diversification — if one REIT performs poorly, the others cushion the impact.
To buy a REIT fund, you still need a brokerage account. You search for the fund by its ticker symbol (examples include "VNQ" for Vanguard Real Estate ETF or "SCHH" for Schwab U.S. REIT ETF) and buy shares the same way you would buy an individual REIT. The difference is that the fund company handles the buying and selling of the underlying REITs for you.
REIT funds charge an annual fee called an expense ratio, typically between 0.10% and 0.50% per year. This fee is deducted automatically from your account. In exchange, you get professional management, when ready diversification, and the ability to own a broad slice of the real estate market with a single purchase. ETFs tend to have lower fees than mutual funds and trade throughout the day like stocks, while mutual funds trade only once per day at closing price.
Direct investment programs (DRIPs) for buying REITs without a broker
Some REITs offer direct investment programs, also called DRIPs, that let you buy shares straight from the company without going through a brokerage. To participate, you contact the REIT's investor relations department, request an enrollment form, and mail it back with your initial investment. The REIT then opens an account in your name and buys shares on your behalf.
The main advantage of a DRIP is lower or no transaction fees — you avoid brokerage commissions entirely. Many DRIPs also offer a small discount on the share price or let you reinvest dividends automatically at no cost. The disadvantages are that the process is slower (it can take weeks to open an account and settle your first purchase), you cannot sell shares as quickly as you can through a broker, and you have to manage the account separately from any other investments you own.
DRIPs work best if you plan to hold the REIT for many years and want to add to your investment regularly. They are less practical if you think you might need to sell within a few years or if you want to own multiple REITs — you would have to enroll in each company's DRIP separately.
Tax treatment of REIT investments in regular accounts
REIT dividends are taxed as ordinary income, not as capital gains. This means they are taxed at your regular income tax rate, which is typically higher than the long-term capital gains rate. If you hold a REIT in a regular (taxable) brokerage account, you will owe federal income tax on the dividends every year, even if you do not sell the shares.
Because of this tax treatment, many investors hold REITs inside tax-advantaged retirement accounts instead. In an IRA or 401(k), the dividends are not taxed each year — they grow tax-deferred until you withdraw the money in retirement. This can significantly increase your long-term returns, especially if you reinvest the dividends to buy more shares.
If you do hold REITs in a taxable account, keep records of your purchase price and the dividends you receive each year. Your brokerage will send you a Form 1099-DIV at tax time showing the total dividends paid, which you report on your tax return.
Holding REITs in retirement accounts
You can hold REIT shares, REIT funds, or both inside an IRA, Roth IRA, 401(k), or other retirement account. The process is the same as buying them in a regular account — you log into your retirement account at your brokerage, search for the REIT or fund, and place an order. The main difference is that the dividends and any gains are not taxed each year.
In a traditional IRA or 401(k), you do not pay taxes on the dividends or gains until you withdraw the money in retirement. In a Roth IRA, you do not pay taxes on the dividends or gains ever, as long as you follow the withdrawal rules. This makes retirement accounts especially attractive for REIT investing, since REITs pay high dividends that would otherwise be taxed annually.
The downside is that retirement accounts have contribution limits — for 2024, you can contribute up to $7,000 per year to an IRA (or $8,000 if you are 50 or older) and up to $23,500 per year to a 401(k) (or $31,000 if you are 50 or older). If you want to invest more than these limits, you would need to use a taxable brokerage account for the excess.
Comparing the three investment routes
| Route | Account Type Needed | Minimum Investment | Fees | Best For |
|---|---|---|---|---|
| Individual REIT shares | Brokerage account | Price of one share (typically $50–$200) | Brokerage commission (often $0 for online brokers) | Investors who want to pick specific REITs and have time to research |
| REIT mutual fund or ETF | Brokerage account | Price of one share (typically $20–$100) | Annual expense ratio (0.10%–0.50%) | Investors who want when ready diversification and hands-off management |
| DRIP (direct investment) | None (REIT company account) | Varies by REIT (often $250–$1,000) | None or very low | Long-term investors who plan to hold for years and reinvest dividends |
Frequently Asked Questions
Do I need a lot of money to start investing in REITs?
No. You can buy a single share of a REIT or REIT fund for the price of that share, which is often $20 to $200. Many brokerages have no account minimum. If you want to use a DRIP, the minimum is set by the REIT company and typically ranges from $250 to $1,000.
Can I buy REITs inside my 401(k) or IRA?
Yes. Most 401(k) plans and IRAs held at major brokerages let you buy individual REIT shares or REIT funds. The dividends and gains grow tax-deferred (or tax-free in a Roth IRA), which is one reason REITs are popular in retirement accounts.
What happens if a REIT cuts its dividend?
If a REIT reduces or stops paying dividends, the share price often falls because investors buy REITs partly for the income. You can sell your shares at any time through your brokerage, but you may sell at a loss if the price has dropped. This is why researching a REIT's financial health before buying is important.
Is it better to buy individual REITs or a REIT fund?
A REIT fund spreads your money across many REITs, so one poor performer does not hurt as much. Individual REITs give you more control but require more research. Many investors use both — a REIT fund for broad exposure and one or two individual REITs they believe in strongly.
How often can I buy and sell REIT shares?
You can buy and sell REIT shares through a brokerage as often as you want during market hours (9:30 a.m. to 4 p.m. Eastern time on weekdays). Shares settle within two business days. With a DRIP, selling is slower — you typically have to request a sale in writing and wait several weeks for the proceeds.