How to buy REITs
You buy most REITs the same way you buy stocks: through a brokerage account, using the ticker symbol. You open an account with a broker (online brokers like Fidelity, Charles Schwab, or E*TRADE are common), fund it with cash, search for the REIT by name or ticker, and place an order. The transaction settles in two business days, and you own the shares. Some REITs also sell shares directly to investors without a broker, though this is less common and usually requires a larger initial investment.
The account type you choose matters for taxes. A regular taxable brokerage account has no contribution limits but you pay taxes on dividends and gains each year. A 401(k) or IRA lets you hold REITs tax-deferred or tax-free, depending on the account, but has annual contribution limits and withdrawal rules. Many people hold REITs in retirement accounts specifically because REIT dividends are taxed as ordinary income, not capital gains, so the tax shelter is valuable.
Key Takeaways
- You can buy individual REIT shares through any brokerage account by searching for the ticker symbol and placing an order like you would for a stock.
- Most brokers charge no commission on stock trades, but some REITs have minimum investment amounts or account minimums you should check before opening an account.
- Holding REITs in a 401(k) or IRA shields you from annual taxes on dividends, which is often more valuable than holding them in a taxable account because REIT dividends are taxed as ordinary income.
- REIT mutual funds and exchange-traded funds (ETFs) let you own many REITs in one purchase, spreading risk across properties and management teams.
- You can also buy REIT shares directly from the company through a direct stock purchase plan, though these usually require a larger initial investment than a brokerage account.
Opening a brokerage account to buy individual REITs
Start by choosing a broker. Most online brokers have zero commission on stock trades, so the main differences are the user interface, research tools, and account minimums. Common brokers include Fidelity, Charles Schwab, E*TRADE, TD Ameritrade, and Interactive Brokers. Some brokers have no account minimum; others require $500 to $2,500 to open. Check the broker's website for current minimums and any fees for inactive accounts.
Once you open an account, you will link a bank account and transfer cash. The transfer usually takes one to three business days. After the cash settles, you can search for a REIT by its ticker symbol (for example, SPG for Simon Property Group or O for Realty Income) and place a buy order. You can place a market order, which executes when ready at the current price, or a limit order, which executes only if the price drops to a level you set. Most brokers let you buy fractional shares, so you do not need to own a whole share to invest.
After you place the order, it settles in two business days. You then own the shares and will receive dividends according to the REIT's distribution schedule, usually quarterly. Dividends are automatically deposited into your brokerage account unless you set up automatic reinvestment.
Buying REITs through mutual funds and ETFs
A REIT mutual fund or REIT ETF holds dozens or hundreds of individual REITs in one fund. You buy one fund share and own a piece of many REITs at once. This spreads your risk: if one REIT performs poorly, the others cushion the impact. Mutual funds are actively managed (a manager picks which REITs to hold) or passively managed (they track an index like the MSCI US REIT Index). ETFs are almost always passive and track an index.
You buy mutual funds and ETFs through the same brokerage account you would use for individual stocks. Search for the fund by name or ticker, place an order, and own it after two business days. Mutual funds typically have a minimum investment of $1,000 to $3,000, though some have lower minimums for retirement accounts. ETFs have no minimum beyond the price of one share. Both pay dividends, usually quarterly, and you can set them to reinvest automatically.
The main trade-off is cost. A mutual fund or ETF charges an annual expense ratio (typically 0.1% to 1% per year for REIT funds) to cover management and administration. An individual REIT has no ongoing fee, but you pay a one-time commission if your broker charges one (most do not). If you own many individual REITs, a fund may be simpler and cheaper than managing them separately.
Direct stock purchase plans and dividend reinvestment plans
Some REITs let you buy shares directly from the company through a direct stock purchase plan (DSPP). You enroll through the REIT's investor relations website, link a bank account, and buy shares without a broker. Initial investments usually range from $500 to $5,000, and subsequent purchases can be smaller. You avoid broker commissions, but you also lose the flexibility of a brokerage account: you cannot sell quickly, and you cannot place limit orders.
A dividend reinvestment plan (DRIP) automatically uses your dividends to buy more shares of the same REIT. You can set up a DRIP through your broker or directly with the REIT. DRIPs are useful if you want to compound your returns over time without manually reinvesting, but they create more tax records because each reinvested dividend is a taxable event in a regular brokerage account.
Tax treatment of REITs in different account types
REIT dividends are taxed as ordinary income, not capital gains, even if the REIT earned the money through property sales. This means they are taxed at your regular income tax rate, which is usually higher than the capital gains rate. In a taxable brokerage account, you owe taxes on dividends every year, which can eat into your returns.
In a traditional 401(k) or traditional IRA, REIT dividends are not taxed until you withdraw money in retirement. In a Roth 401(k) or Roth IRA, REIT dividends are never taxed, as long as you follow withdrawal rules. This tax shelter is one reason many investors hold REITs in retirement accounts: the ordinary income tax treatment makes the tax deferral or tax-free growth especially valuable.
Contribution limits explore to retirement accounts. For 2024, you can contribute up to $7,000 per year to a traditional or Roth IRA (or $8,000 if you are 50 or older), and up to $23,500 to a 401(k) (or $31,000 if you are 50 or older). These limits reset each January. A taxable brokerage account has no contribution limit, but you pay taxes on dividends and gains each year.
Comparing costs and account minimums across brokers
| Broker | Account Minimum | Stock Commission | Fractional Shares |
|---|---|---|---|
| Fidelity | None | None | Yes |
| Charles Schwab | None | None | Yes |
| E*TRADE | None | None | Yes |
| TD Ameritrade | None | None | Yes |
| Interactive Brokers | $0 (but $10/month fee waived with $25,000+ balance or $100+ monthly trades) | None | Yes |
Most major brokers have eliminated account minimums and commissions on stock trades. The differences now lie in research tools, mobile apps, and customer service. If you are just starting, Fidelity, Charles Schwab, and E*TRADE are solid choices because they have no minimums, no commissions, and strong educational resources. Interactive Brokers is cheaper for very active traders but charges a monthly fee unless you maintain a high balance or trade frequently.
What to check before you buy
Before placing an order, look up the REIT's dividend yield and distribution history. The yield tells you what percentage of your investment you will receive as dividends each year. A REIT paying a 4% yield on a $10,000 investment will distribute roughly $400 per year, though this can vary. Check whether the REIT has raised, cut, or suspended dividends in the past, because this affects your income.
Also check the REIT's sector. Office REITs, retail REITs, apartment REITs, and industrial REITs behave differently depending on economic conditions. A diversified REIT fund spreads this risk automatically, but if you are buying individual REITs, owning a mix of sectors reduces the chance that one downturn wipes out your returns.
Finally, confirm the REIT's expense ratio if you are buying a fund, and check whether your broker charges any fees for holding the REIT or reinvesting dividends. Most do not, but it is worth a quick search on the broker's fee schedule.
Frequently Asked Questions
Can I buy a REIT with $100?
Yes, if your broker offers fractional shares. Most major brokers do, so you can buy a fraction of one REIT share for any amount. ETFs and mutual funds also have no minimum share price, so you can invest $100 in a REIT fund. Direct stock purchase plans usually have higher minimums, often $500 to $1,000.
Do I need a special account to buy REITs?
No. You can buy REITs in any brokerage account: a regular taxable account, a 401(k), an IRA, or a direct stock purchase plan. The account type affects how you are taxed on dividends and gains, but not whether you can own the REIT. Many investors prefer retirement accounts because REIT dividends are taxed as ordinary income, so the tax shelter is especially valuable.
What is the difference between a REIT ETF and a REIT mutual fund?
Both hold many REITs in one fund, but ETFs trade like stocks (you can buy and sell during market hours at changing prices) while mutual funds trade once per day after the market closes at a fixed price. ETFs usually have lower expense ratios and no minimum investment. Mutual funds are often actively managed, meaning a manager picks which REITs to hold. For most people, a low-cost REIT ETF is simpler and cheaper.
How often do REITs pay dividends?
Most REITs pay dividends quarterly, though some pay monthly or semi-annually. Check the REIT's investor relations page or your broker's holdings page to see the distribution schedule. Dividends are usually paid in cash to your account, but you can set up automatic reinvestment to buy more shares instead.
Can I lose money on a REIT?
Yes. REIT share prices rise and fall based on property values, interest rates, and investor demand. If you sell when the price is lower than what you paid, you lose money. Dividends can also be cut or suspended if the REIT's income falls. Holding a diversified REIT fund reduces this risk compared to owning one or two individual REITs.