How to buy REIT shares through a brokerage account
You buy REIT shares the same way you buy stock: through a brokerage account with a broker like Fidelity, Charles Schwab, E*TRADE, or Vanguard. You open an account, 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 the shares appear in your account.
Most brokers charge no commission on stock trades, including REIT shares, though some may charge a small fee if you buy through certain investment platforms or advisory services. The price you pay per share changes throughout the trading day, just like any stock. You can place a market order (buy at the current price when ready) or a limit order (buy only if the price drops to a specific level you set).
You do not need a large amount of money to start. A single share of some REITs costs under $50, while others cost several hundred dollars per share. If you want to own a piece of multiple REITs without picking individual ones, you can buy REIT index funds or exchange-traded funds (ETFs) instead, which hold dozens of REITs in one fund.
Key Takeaways
- You need a brokerage account with a broker like Fidelity or Schwab to buy REIT shares, and most brokers charge no commission on the trade itself.
- REIT shares trade on stock exchanges during market hours, so the price changes throughout the day and you can set a specific price limit before you buy.
- REIT index funds and ETFs let you own pieces of many REITs at once without researching individual companies.
- REITs distribute most of their income to shareholders as dividends, which are taxed as ordinary income rather than capital gains in most cases.
- You can hold REIT shares in a regular taxable account, a retirement account like an IRA, or a 401(k) if your plan offers REIT options.
Opening a brokerage account if you don't have one
If you have never opened a brokerage account, the process takes 10 to 15 minutes online. Go to the broker's website, click "Open an Account" or "get your free guide," and fill in your name, address, Social Security number, and employment information. The broker will ask whether you want a standard taxable account, a retirement account (IRA), or both.
For most people starting out, a standard taxable brokerage account is the simplest choice. You can contribute any amount at any time, withdraw money whenever you want, and there are no contribution limits. A retirement account like a traditional or Roth IRA has annual contribution limits (currently $7,000 per year for people under 50) but offers tax advantages.
After you submit your process, the broker verifies your identity and approves your account, usually within a few minutes to a few hours. You then link a bank account to fund your brokerage account by transferring money. Most brokers let you transfer money electronically, and the funds arrive within one to three business days.
Finding and researching a specific REIT before you buy
Once your account is funded, search for a REIT by its ticker symbol. If you do not know the ticker, use your broker's search tool or visit a financial website like Yahoo Finance or Google Finance and search the REIT's name. The ticker is a short code — for example, SPG is the ticker for Simon Property Group, a REIT that owns shopping malls.
Before you buy, look at the REIT's dividend yield (the annual dividend payment divided by the share price), the types of properties it owns, and how long it has been paying dividends. Most REITs are required to distribute at least 90 percent of their taxable income to shareholders, so dividend payments are usually stable. You can find this information on the REIT's investor relations website or on financial sites like Seeking Alpha or Morningstar.
Check whether the REIT focuses on properties you understand — office buildings, apartment complexes, shopping centers, data centers, or hospitals, for example. A REIT that owns properties in a sector you believe will grow may be more appealing than one in a sector you think will shrink. However, diversification across multiple REITs or a REIT fund reduces the risk of betting wrong on a single property type.
Placing your first buy order
Once you have decided which REIT to buy, log into your brokerage account and navigate to the trading section. Enter the REIT's ticker symbol in the search box. The broker will show you the current price per share and the number of shares you can afford with your account balance.
Decide how many shares you want to buy. If the REIT costs $80 per share and you have $2,000 to invest, you can buy 25 shares (25 × $80 = $2,000). You can buy fractional shares with most brokers, so you could also buy 24.5 shares if you wanted to use exactly $1,960.
Choose between a market order and a limit order. A market order buys at the current price right away. A limit order lets you set a maximum price — for example, "buy 25 shares only if the price drops to $75 or lower." Limit orders can take days or weeks to fill if the price never reaches your target, or they may never fill at all. Market orders fill almost when ready during trading hours.
Review the order summary, confirm the number of shares and the estimated cost, and click "Submit" or "Place Order." The order executes when ready (for market orders) or waits for your price target (for limit orders). You will receive a confirmation email with the order details.
Understanding REIT dividends and how they are taxed
Most REITs pay dividends quarterly, meaning four times per year. The dividend is usually paid in cash directly into your brokerage account. Some brokers let you set up automatic reinvestment, which uses the dividend to buy more shares of the same REIT instead of leaving the cash sitting in your account.
REIT dividends are taxed differently than stock dividends. Most REIT dividends are taxed as ordinary income at your regular tax rate, not at the lower capital gains rate. This means if you own REIT shares in a taxable account, you will owe taxes on the dividends each year, even if you do not sell the shares. If you own REIT shares in a retirement account like a traditional IRA or 401(k), the dividends are not taxed until you withdraw money from the account.
Your broker will send you a Form 1099-DIV each January showing the total dividends you received during the previous year. You use this form to report the income on your tax return. If you reinvest dividends, you still owe taxes on them — reinvestment does not avoid the tax bill.
Holding REITs in retirement accounts versus taxable accounts
You can hold REIT shares in a regular taxable brokerage account, a traditional IRA, a Roth IRA, or a 401(k) plan if your employer's plan offers REIT options. The account type affects how and when you pay taxes on the dividends and gains.
In a taxable account, you pay taxes on dividends each year and on any capital gains when you sell the shares. In a traditional IRA, you do not pay taxes on dividends or gains while the money is in the account, but you pay ordinary income tax on all withdrawals in retirement. In a Roth IRA, you do not pay taxes on dividends or gains ever, as long as you follow the withdrawal rules.
Because REIT dividends are taxed as ordinary income (not capital gains), many investors prefer to hold REITs in retirement accounts where the tax on dividends is deferred or eliminated. However, you can hold REITs in any account type, and the choice depends on your overall financial situation and how much you have already contributed to retirement accounts this year.
Selling REIT shares when you want to exit
To sell REIT shares, log into your brokerage account, find the REIT in your holdings, and click "Sell." Enter the number of shares you want to sell and choose between a market order (sell at the current price when ready) or a limit order (sell only if the price reaches a specific level). Review the order and click "Submit."
The sale settles in two business days, and the cash appears in your brokerage account. You can then withdraw the cash to your bank account or use it to buy other investments. When you sell, you may owe capital gains tax if the share price has risen since you bought it. If you held the shares for more than one year, the gain is taxed at the long-term capital gains rate, which is usually lower than your ordinary income tax rate.
There is no penalty for selling REIT shares early. You can buy and sell as often as you want, though frequent trading can trigger short-term capital gains taxes (at your ordinary income rate) and may result in trading fees if your broker charges them.
Frequently Asked Questions
Do I need a lot of money to start investing in REITs?
No. A single REIT share can cost anywhere from $20 to several hundred dollars, and most brokers let you buy fractional shares. You can start with as little as $100 or $500. If you want to own multiple REITs without researching each one, a REIT ETF or index fund may cost even less per share.
Can I buy REITs directly from the REIT company without a broker?
Some REITs offer dividend reinvestment plans (DRIPs) that let you buy additional shares directly, but you still need a brokerage account to buy your first shares. A few REITs also offer direct stock purchase plans, but these are uncommon. Using a broker is the standard and simplest route.
What happens to my REIT shares if the company goes bankrupt?
If a REIT goes bankrupt, shareholders are last in line to recover money, after creditors and bondholders. You could lose your entire investment. This is why diversifying across multiple REITs or buying a REIT fund reduces risk — a single REIT's failure does not wipe out your entire REIT holdings.
Can I lose money on REIT shares?
Yes. REIT share prices fluctuate daily based on market conditions, interest rates, and the REIT's performance. If you sell when the price is lower than what you paid, you realize a capital loss. However, if you hold the shares long-term and collect dividends, the total return (dividends plus price appreciation) often offsets short-term price drops.
Should I reinvest REIT dividends or take them as cash?
Reinvesting dividends lets your investment grow faster through compounding, but you still owe taxes on the dividends. Taking dividends as cash gives you flexibility to spend or invest elsewhere. The choice depends on your financial goals and whether you need the income now or can let it grow.