7 Best REIT ETFs to Buy Right Now
Real estate investment trusts, or REITs, can be an excellent choice for investors seeking current income and the potential for capital appreciation.
Exchange-traded funds, commonly called ETFs, are among the most convenient and cost-effective investment vehicles Wall Street has to offer. It follows that REIT ETFs — ETFs that invest exclusively in REITs — are very popular with retail investors who appreciate dividend income and would like to see their holdings grow over time.
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REIT Definition
A REIT is a specialty investment company that invests shareholders’ capital in income-producing commercial real estate or interest-bearing financial instruments backed by commercial real estate. REITs are pass-through entities, meaning they enjoy favorable tax treatment as long as they distribute, or pass through, a minimum of 90% of taxable income to investors as a dividend.
REITs were created by Congress in 1960 to attract capital for much-needed development, and allow small investors to participate in the fast-growing, highly profitable commercial real estate industry.
There are three broad types of REITs: equity REITs, mortgage REITs (mREITs) and hybrid REITs. Equity REITs own and operate property directly. Mortgage mREITs buy and hold mortgages, mortgage-backed bonds or other real estate-backed financial instruments, such as triple net leases. A hybrid REIT, as one might expect, invests in both physical real estate and financial instruments. REITs tend to specialize in one or just a few commercial real estate asset classes. Some examples are multifamily, office property, health care facilities, retail, digital infrastructure REITs and more.
ETFs Explained
Open-ended mutual funds were created by the Investment Company Act of 1940. An ETF is a modern, more innovative version of the classic mutual fund. Like traditional mutual funds, ETFs are open-ended — meaning the number of shares is effectively unlimited — but unlike mutual funds, which are priced only once a day at the close of business, ETFs are dynamically priced and trade in real time on all major exchanges, just like shares of common stock do.
ETFs can be actively managed, meaning run by professional portfolio managers at asset management firms, or they can be passively managed, meaning they mirror specific indexes or are quantitatively traded based on a set of preset rules. ETFs can invest in all kinds of securities. There are equity ETFs that hold stocks, fixed income ETFs that own bonds and other specialty ETFs that focus on other, less common securities.
Advantages of REIT ETFs
There are roughly 225 publicly traded REITs trading on U.S. exchanges. They cover all real estate asset classes from data centers to health care to industrial to multifamily to retail to self-storage and beyond. The mREIT universe covers mortgages, reverse mortgages, residential mortgage-backed securities (RMBS), commercial mortgage-backed securities (CMBS), net lease investing, mortgage originators and mortgage servicers. The point is, there are many to choose from. Successful REIT investing requires expertise and specialized commercial real estate knowledge.
Professional Management
All ETFs, including REIT ETFs, are professionally managed. The REITs in an actively managed ETF portfolio are selected by skilled portfolio managers with access to comprehensive data and state-of-the-art analysis tools. Passively managed ETFs follow established benchmarks administered by respected research firms. REIT ETFs have several key advantages, but none are more important to the retail investor than high-quality professional management.
Diversification
Another critical benefit to REIT ETF investing is diversification. All investments have risks; diversification simply means spreading out those risks by investing in many securities rather than just a few. The REIT ETF with the fewest holdings is the Invesco S&P 500 Equal Weight Real Estate ETF (ticker: RSPR). That fund holds only about 30 individual REITs, yet it achieves far greater diversification than most small investors could gain on their own. On the other end of the spectrum, the Vanguard Real Estate ETF holds about 157 REITs, providing even greater diversification.
Cost Efficiency
The first ETF made available to retail investors — the SPDR S&P 500 ETF Trust (SPY) — was launched in 1993. Retail ETFs caught on quickly and have only become more popular since. Competition in the ETF industry, along with advancements in trading technology, has driven down the internal costs of ETF investing. Today, ETFs are among the most efficient and cost-effective investments available.
Seven REIT ETFs to Buy in Today’s Market
Investing in REIT-focused ETFs can provide investors with a regular dividend income and a real opportunity for long-term growth. This timely list of seven top-quality REIT ETFs should serve as an excellent starting point for any investor interested in real estate, dividend income and capital appreciation potential.
| REIT ETF | Expense Ratio | Forward Dividend Yield* |
| Vanguard Real Estate ETF (VNQ) | 0.13% | 4.0% |
| Schwab U.S. REIT ETF (SCHH) | 0.07% | 3.1% |
| Dimensional Global Real Estate ETF (DFGR) | 0.22% | 3.6% |
| Real Estate Select Sector SPDR Fund (XLRE) | 0.08% | 3.3% |
| VanEck Mortgage REIT Income ETF (MORT) | 0.43% | 11.0% |
| iShares Residential and Multisector Real Estate ETF (REZ) | 0.48% | 2.2% |
| Fidelity MSCI Real Estate Index ETF (FREL) | 0.08% | 3.5% |
*As of April 24 close.
Vanguard Real Estate ETF (VNQ)
With $66 billion in net assets, VNQ weighs in as the largest REIT ETF on the market. The popularity of this fund is due in part to the high regard investors have for The Vanguard Group, the owner and administrator of this ETF.
VNQ tracks the performance of the MSCI U.S. Investable Market Real Estate 20/50 Index. As mentioned in the introduction to this list, the fund has about 157 holdings. This comprehensive REIT ETF offers investors a proxy for almost the entire real estate sector.
The fund manages concentration risk by limiting any single REIT to a maximum of 20% of assets. Also, the aggregate weight of REITs that make up over 5% of the fund cannot exceed 50% of net assets.
VNQ is a fairly low-priced fund with an expense ratio of 0.13%.
Current yield: 4%
Schwab U.S. REIT ETF (SCHH)
SCHH follows the Dow Jones Equity All REIT Capped Index. It’s a $7 billion ETF designed to provide investors with a simple, straightforward approach to broad market REIT investing in a low-cost package.
The fund holds about 120 REITs. It offers excellent geographic diversification and is well diversified by real estate class. It owns data center REITs, self-storage companies, industrial real estate firms, retail REITs and more. The number one holding in the fund right now is the cellular antenna company, American Tower REIT Corp. (AMT), which represents 7.7% of assets.
The fund’s benchmark is fairly static, so investors won’t see excess internal trading. The expense ratio for SCHH is just 0.07%.
Current yield: 3.1%
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Dimensional Global Real Estate ETF (DFGR)
With the U.S. markets off to a volatile and unpredictable start in 2025, now may be the perfect time to consider a global REIT ETF.
DFGR is a $2.3 billion REIT that gives capital appreciation equal status with current income. If those goals appeal to you, this might be an ETF to add to your portfolio.
As a global fund, DFGR is not limited to U.S. REITs. This fund looks for quality commercial real estate companies all over the world, including developing nations and emerging-market countries. That offers investors more opportunity but also means that this fund carries more risk than domestic ETFs. In other words, DFGR is only suitable for more aggressive investors who understand the unique risks of international investing.
This is an actively managed fund with global reach. Investors can expect the cost structure to be somewhat higher than they’d find in a passively managed, domestic ETF. DFGR’s expense ratio comes in at 0.22%.
Current yield: 3.6%
Real Estate Select Sector SPDR Fund (XLRE)
XLRE is an interesting, low-cost ETF in the very popular SPDR family of index ETFs. Investors looking to make a strategic allocation to the real estate sector of the S&P 500 should consider purchasing this $7.4 billion fund.
XLRE closely tracks the S&P Real Estate Sector Index. That benchmark includes all S&P 500 companies in the GICS real estate sector. The fund’s low expense ratio of 0.08% all but eliminates benchmark tracking error. The fund only invests in equity REITs that directly own physical real estate. Mortgage REITs and hybrid REITs are excluded.
More than 18% of the fund’s net assets are invested in digital infrastructure REITs American Tower, Digital Reality Trust Inc. (DLR) and Crown Castle Inc. (CCI). The ongoing data center boom in America and around the world may prove beneficial to XLRE over the long run.
Current yield: 3.3%
VanEck Mortgage REIT Income ETF (MORT)
Any well-thought-out, well-constructed REIT ETF portfolio should include at least one mREIT, which generally earns money by collecting interest on mortgages or mortgage bonds rather than by collecting rent. These REITs also tend to have a higher dividend yield.
MORT is an index fund based on the MVIS U.S. Mortgage REIT Index, a prominent benchmark in the mREIT space. The goal of this ETF is to match the performance of the underlying index after the 0.43% expense ratio is subtracted.
MORT has $312 million in net assets, but it provides shareholders with a relatively high and very dependable dividend yield. The bonds in the portfolio, however, can be very sensitive to interest rate fluctuations. Expect this fund’s share price to trend upward when rates are falling and fall when rates are rising.
Current yield: 11%
iShares Residential and Multisector Real Estate ETF (REZ)
REZ has net assets under management of just over $859 million. The fund mirrors the FTSE Nareit All Residential Capped Index. REZ invests mostly in residential real estate companies like apartment-community company AvalonBay Communities Inc. (AVB) and single-family rental REIT Invitation Homes Inc. (INVH). However, as its name implies, it also invests in specialty and multisector REITs, such as self-storage giant Public Storage (PSA) and health care facilities operator Ventas Inc. (VTR).
Unlike most other funds on this list, REZ is not a comprehensive REIT fund. This ETF is for investors who want targeted exposure, mostly to multifamily and residential real estate, health care, and self-storage. Investors should also be aware that the fund has fewer than 40 holdings.
The fund is rebalanced and, if necessary, reconstituted quarterly, but changes are not excessive. REZ has an expense ratio of 0.48%.
Current yield: 2.2%
Fidelity MSCI Real Estate Index ETF (FREL)
Boston-based Fidelity Investments is a respected financial services firm and one of the world’s largest asset managers. FREL has net assets of about $1 billion. The fund tracks the MSCI USA IMI Real Estate 25/25 Index and invests in REITs of all market capitalizations.
FREL is a broad-based fund holding over 140 REITs covering all commercial real estate classes. Based on current configurations, however, the fund is concentrated in retail, cellular telecom towers, health care and warehouses. Those industries make up about 48% of the fund’s assets.
Great diversification, a dependable dividend and quality professional management make FREL an excellent choice as a core real estate holding. It’s also very low-cost, with an expense ratio of 0.08%.
Current yield: 3.5%
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7 Best REIT ETFs to Buy Right Now originally appeared on usnews.com
Update 04/25/25: This story was previously published at an earlier date and has been updated with new information.