You can buy REITs through a brokerage account the same way you buy stocks

A REIT (Real Estate Investment Trust) is a company that owns and operates income-producing real estate — apartment buildings, shopping centers, warehouses, hotels, or medical offices. When you buy shares of a REIT, you own a piece of that company and receive a portion of the income it generates from rent and property sales. You do not own the buildings themselves; you own shares in the business that owns them.

To buy REIT shares, you open a brokerage account (online or through a financial institution), fund it with cash, search for the REIT by its ticker symbol, and place an order to buy a specific number of shares at the current market price. The process takes minutes once your account is set up. Most REITs trade on major stock exchanges like the NYSE or NASDAQ, so you can buy and sell them during regular market hours just like any other stock.

The main advantage is simplicity: you do not need a large amount of money upfront, you can start with a single share, and you can sell whenever you want. The trade-off is that you have no control over which properties the REIT owns or how it operates them — you are betting on the management team's decisions.

Key Takeaways

  • You need a brokerage account with a broker like Fidelity, Charles Schwab, E-Trade, or Vanguard to buy REIT shares, and the account setup takes 10 to 15 minutes online.
  • REIT shares trade on stock exchanges during market hours, so you can buy one share or thousands at the current market price without negotiating.
  • Most REITs distribute at least 90 percent of their taxable income to shareholders as dividends, which are usually taxed as ordinary income rather than capital gains.
  • You can hold REITs in a regular taxable brokerage account, a retirement account like an IRA or 401(k), or both, depending on your tax situation and investment timeline.
  • REIT prices fluctuate with the stock market and interest rates, so the value of your shares can go down as well as up.

Opening a brokerage account and funding it

Choose a broker that offers REIT trading. Major brokers include Fidelity, Charles Schwab, E-Trade, Vanguard, Interactive Brokers, and TD Ameritrade. Each charges different commission rates (many now charge zero commission per trade), offers different research tools, and has different account minimums. Some brokers have no minimum deposit; others require $500 to $2,500 to open an account.

Go to the broker's website and click the link to open a new account. You will provide your name, address, Social Security number, employment information, and banking details. The broker will verify your identity and may ask about your investment experience and financial situation. This process usually takes 10 to 15 minutes, and your account is often approved within one business day.

Once your account is open, link a bank account and transfer money into it. You can transfer as little as $100 or as much as you want. The money usually arrives within one to three business days. Some brokers offer the ability to buy fractional shares, meaning you can invest any dollar amount — for example, $50 — rather than waiting to save enough for a full share.

Finding and researching specific REITs before you buy

Search for REITs by property type or by name. If you want to invest in apartment buildings, search "apartment REIT" or "residential REIT." If you want to invest in data centers, search "data center REIT." Major REIT categories include residential, retail, industrial, healthcare, hospitality, and office. Your broker's website usually has a screener tool that lets you filter by property type, dividend yield, market cap, and other metrics.

Once you find a REIT you are interested in, read its most recent annual report (called a 10-K), which is filed with the SEC and available free on the SEC's EDGAR database or on the REIT's investor relations website. The 10-K tells you which properties the REIT owns, how much debt it carries, what percentage of its income goes to dividends, and what risks management sees. You can also read the quarterly earnings report (10-Q) to see how recent performance compares to the year before.

Check the REIT's dividend history. Most REITs are required to distribute at least 90 percent of taxable income to shareholders, so look at whether the dividend has been stable, growing, or shrinking over the past three to five years. A REIT that cuts its dividend is usually a sign that property values or rents are falling. Compare the dividend yield (annual dividend divided by share price) to other REITs in the same category and to the overall stock market to see whether you are being paid fairly for the risk.

Placing your first REIT purchase order

Log into your brokerage account and navigate to the trading section. Search for the REIT by its ticker symbol — for example, "SPG" for Simon Property Group or "PLD" for Prologis. The ticker appears in quotes on financial websites and in your broker's search box.

Click on the REIT name to open its quote page. You will see the current price, the day's high and low, the 52-week high and low, the dividend yield, and other data. Click "Buy" or "Place Order." Your broker will ask you how many shares you want to buy. Enter the number and choose your order type: 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). For most investors, a market order is simpler and executes right away during market hours.

Review the order summary, which shows the number of shares, the estimated cost, and any commission or fees. Click "Confirm" or "Submit." The order executes when ready if the market is open and you placed a market order. Your broker will send you a confirmation email with the trade details, and the shares will appear in your account within one to two business days (the settlement period).

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 allow you to set up automatic reinvestment, which buys additional shares with the dividend money instead of leaving it as cash.

REIT dividends are taxed differently than stock dividends. Most REIT dividends are taxed as ordinary income at your regular tax rate (10 percent to 37 percent depending on your income), not at the lower capital gains rate (0, 15, or 20 percent). This means REITs are often better held in tax-advantaged retirement accounts like a traditional IRA, Roth IRA, or 401(k), where dividends are not taxed each year. If you hold REITs in a regular taxable brokerage account, you will owe taxes on the dividends every year, even if you do not sell the shares.

When you sell REIT shares, you also owe capital gains tax on any profit. If you held the shares for more than one year, the gain is taxed at the long-term capital gains rate. If you held them for one year or less, it is taxed as ordinary income. Your broker will send you a 1099-DIV form (for dividends) and a 1099-B form (for sales) at tax time, which you use to report the income on your tax return.

Choosing between a taxable account, IRA, or 401(k)

A taxable brokerage account has no contribution limits and no withdrawal restrictions. You can buy and sell whenever you want and withdraw the money anytime. The downside is that you pay taxes on dividends and capital gains every year. This account makes sense if you want to invest a large amount, you may need the money within a few years, or you want maximum flexibility.

A traditional IRA lets you contribute up to $7,000 per year (or $8,000 if you are 50 or older). You do not pay taxes on dividends or gains while the money is in the account. You pay taxes when you withdraw money in retirement. You cannot withdraw before age 59½ without a penalty (with some exceptions). This account is best if you want to reduce your current taxable income and you are saving for retirement.

A Roth IRA also lets you contribute up to $7,000 per year, but you contribute after-tax dollars. Dividends and gains grow tax-free, and you pay no taxes on withdrawals in retirement. You can withdraw your contributions (not the earnings) anytime without penalty. This account is best if you expect to be in a higher tax bracket in retirement or you want tax-free growth.

A 401(k) through your employer may allow you to invest in REITs through a self-directed brokerage window or through a REIT-focused mutual fund or ETF option. Contribution limits are much higher ($23,500 per year in 2024, or $31,000 if you are 50 or older). Taxes work the same way as a traditional IRA: you do not pay taxes on dividends or gains while the money is in the account, and you pay taxes on withdrawals in retirement.

Watching your REIT investment over time

REIT share prices move with the stock market and with interest rates. When interest rates rise, REIT prices often fall because investors can earn higher returns in bonds and savings accounts, making REITs less attractive. When interest rates fall, REIT prices often rise. Property values and rent growth also affect the price: if the properties a REIT owns are appreciating and rents are rising, the share price usually rises too.

Check your account quarterly to see whether the dividend was paid and to review the REIT's earnings report. Most REITs release earnings four times per year, usually within 30 to 45 days after the end of each quarter. Read the earnings report to see whether the REIT is collecting rent, whether occupancy rates are stable or falling, and whether management is raising or lowering its outlook for the year ahead.

You do not need to trade frequently. Most REIT investors buy and hold for years, collecting dividends along the way. If you want to diversify, you can buy shares in multiple REITs across different property types — for example, one apartment REIT, one industrial REIT, and one healthcare REIT. This spreads your risk across different real estate sectors and different management teams.

Frequently Asked Questions

How much money do I need to start investing in REITs?

Many brokers have no minimum deposit, and most REITs trade at prices between $50 and $200 per share. If your broker offers fractional shares, you can start with as little as $1 or $5. If your broker does not offer fractional shares, you need enough to buy at least one full share, which typically costs $50 to $200 depending on the REIT.

Can I buy REITs through my 401(k)?

Many 401(k) plans offer REIT-focused mutual funds or ETFs as investment options. Some plans also offer a self-directed brokerage window that lets you buy individual REIT shares. Check your plan's investment menu or contact your plan administrator to see what REIT options are available.

What is the difference between buying individual REIT shares and a REIT mutual fund or ETF?

Individual REIT shares give you ownership in one company; you control exactly which REITs you own. A REIT mutual fund or ETF holds dozens or hundreds of REIT shares in one fund, spreading your risk across many companies and property types. Mutual funds and ETFs are simpler if you want when ready diversification but charge an annual fee (usually 0.1 to 1 percent of your investment).

Do I have to hold REITs in a retirement account to avoid taxes?

No, but it is often a good idea. REIT dividends are taxed as ordinary income, which is usually higher than the capital gains rate. Holding REITs in a traditional IRA or 401(k) lets you defer taxes until retirement. If you hold them in a taxable account, you will owe taxes on dividends every year, even if you do not sell the shares.

What happens if a REIT cuts its dividend?

A dividend cut usually signals that the REIT's income has fallen — rents are down, occupancy is falling, or debt payments are rising. The share price often falls when a dividend is cut because investors are receiving less income. You can hold and hope the REIT recovers, or you can sell and move your money to a REIT with a more stable dividend.