15 Ways to Get Started Investing in REITs

Real estate investment trusts (REITs) have been around since President Dwight D. Eisenhower signed legislation aimed at opening the lucrative world of commercial real estate investing to the average American.

Since then, REITs have been combining the risks and benefits of owning property with the liquidity and transparency of owning shares of stock. REITs own pools of real estate or real estate-backed loans and use their income to meet the IRS mandate of distributing at least 90% of their taxable income to shareholders in the form of dividends.

It's that flow of dividend income that helps make them so attractive to hundreds of millions of investors, often as much for long-term investments as share price growth.

There are different kinds of REITs. This list will begin with the major types and then move on to some specific stocks available to investors in the public exchanges.

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Private, non-traded REITs are generally the province of institutional investors and accredited investors, defined by the SEC as someone with a net worth of $1 million (not counting their primary residence) or with an income of $200,000 a year for the two prior years ($300,000 if married).

They're exempt from Securities and Exchange Commission (SEC) registration and don't trade on the public stock exchanges. Minimum investments vary widely, and while they can provide rich returns, they're highly illiquid. That means you can't just sell your shares whenever you want. But you can make some serious cash with them, and that's why they exist.

ALSO READ: A Beginner's Guide to Private REITs

Also called public non-listed REITs, these investment pools must comply with SEC regulations just like publicly traded REITs, but they generally restrict redemptions.

That limits their liquidity but also can be a way to see better returns than you might with an equivalent investment in a traded equity. Kind of like a CD versus savings account in that regard. Some online investment platforms offer these kinds of REITs, such as the RealtyMogul Income REIT.

Equity REITs are companies that directly buy, sell, own, and operate real estate. There are about 180 of them on the major exchanges.

Most have a specific focus, such as retail, industrial, or residential, with subsets like mobile tower/infrastructure specialists, data centers, and even farmland and billboards. A growing number have a diversified mix, typically some combination of office, retail, industrial, and multifamily.

ALSO READ: What Is an Equity REIT?

There also are a few dozen mortgage REITs. These companies buy, sell, and own loans and packages of loans backed by the real estate those loans financed.

Some mortgage REITs are direct lenders, but the largest primarily make their livings on loans packaged by big government-sponsored entities like Fannie Mae (OTC:FNMA) and Freddie Mac (OTC:FMCC). There are also mortgage REITs specializing in commercial lending to builders and other businesses.

Mortgage REITs tend to pay much higher dividends than equity REITs but are also particularly sensitive to interest rate movements.

ALSO READ: Investing in Mortgage REITs

Vanguard Real Estate ETF (NYSEMKT:VNQ) is an exchange-traded fund (ETF) that tracks a major real estate index that includes REITs and other commercial real estate holders. With about 160 REITs in its portfolio, this $42 billion fund is by far the largest of REIT ETFs and is often used as an industry performance benchmark. Right now, it's yielding just under 3%.

ALSO READ: What are Exchange-Traded Funds?

Real Estate Select SPDR Fund (NYSEMKT:XLRE) is a much smaller ETF with a tighter focus. It invests only in REITs belonging to the S&P 500, a group of about 30 of the largest REITs. That's a good way to gain exposure to some of the industry's biggest names and enjoy a current yield of about 3%.

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Fidelity Real Estate Income Fund (NASDAQMUTFUND:FRIFX) is a good example of the multiple mutual funds available for investment in this sector. This fund's top 10 holdings are all REITs, none of them comprising more than 3% of the portfolio. It currently has a portfolio worth about $6 billion and is yielding about 5.2%.

At about $126 billion, American Tower (NYSE:AMT) is the largest of all REITs as measured by market cap (you get that by multiplying share price by the number of shares). American Tower got that way by being a pioneer -- and now titan -- in the mobile tower business, with about 220,000 communications sites in place worldwide.

If you had the luck and/or foresight to have put $10,000 down on American Tower stock when it went public in 1998, reinvest the dividends, and still hold it, you'd have nearly $1.4 million for your efforts. Right now, you'll get about a 2.1% dividend yield for any shares you own.

ALSO READ: Why I'll Never Sell American Tower

Like American Tower, Digital Realty (NYSE:DLR) is considered an infrastructure REIT, and it's one of the largest standalone operators of data centers on the planet. Digital Realty operates about 300 large centers on six continents, providing a nerve center for the storage and movement of massive amounts of data for major cloud providers and thousands of other clients.

This company is a dividend machine, too, with 19 straight years of payout increases and a current yield of about 3.8%.

Prologis (NYSE:PLD) is another behemoth among REITs, with a market cap of about $97 billion and a collection of about 4,700 warehouses on four continents. Prologis also is in the process of buying its largest REIT rival in this space race and will soon have a capacity of well over a billion square feet of highly desirable logistics room for rent.

Analysts rate Prologis a buy, and its popularity keeps its price high, pushing its yield down to about 2.4%. But its financial strength makes that payout look mighty secure.

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Medical Properties Trust (NYSE:MPW) is one of the world's largest private owners of hospitals, with about 440 facilities on four continents, primarily in the United States.

This company's stock has fallen along with the market, pushing the yield up to a very nice 7.25% of late. Its strong balance sheet and high-performing portfolio make this healthcare REIT a popular buy-and-hold for investors interested in both share growth and passive income.

ALSO READ: What is Passive Income?

Realty Income (NYSE:O) is one of the best-known and most widely held REITs. That's the result of more than 50 years, without fail, of paying dividends monthly and raising the dividend at least once for more than 25 years.

That makes this retail REIT a Dividend Aristocrat, with stock in the self-branded "Monthly Dividend" company now yielding about 4.2% from a growing portfolio of more than 11,000 properties.

W.P. Carey (NYSE:WPC) is a great example of a diversified REIT, with a roughly even mix of retail, office, and industrial properties and about two-thirds of its business in the United States and the rest overseas, primarily in Europe.

W.P. Carey stock is currently yielding a respectable 5% or so, and it's raised that payout at least once a year for the past quarter-century.

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AGNC Investment (NASDAQ:AGNC) is a classic mortgage REIT with a portfolio comprising government-backed mortgage securities. Like its peers, AGNC makes its living on the spread between what it pays for those securities and the interest it makes while holding them -- and when it works that way, the money it makes from selling them. Also, like its peers, this REIT pays an outsized yield. In this case, it's about 11.7%.

We'll finish this list with a great example of a specialized REIT. Postal Realty is considered an office REIT, but its portfolio is unique: nearly 1,200 post offices in 49 states.

The U.S. Postal Service makes for a particularly dependable tenant, and this 30-year-old company has raised its dividend a smidgeon every quarter since going public in 2019. The stock now delivers a yield of about 5.4%.

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Presented by Motley Fool Stock Advisor
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There are so many options for REIT investing now that even a newcomer can feel as comfortable diving in with a few shares as they would buying a major index fund. You can also put big bucks down in a private REIT that could provide access to deals that would otherwise not be available in the public markets. And there’s a lot in between to suit nearly any investing taste and wallet.

Marc Rapport has positions in AGNC Investment Corp., Digital Realty Trust, Medical Properties Trust, Realty Income, and Vanguard Real Estate ETF. The Motley Fool has positions in and recommends American Tower, Digital Realty Trust, Prologis, and Vanguard Real Estate ETF. The Motley Fool has a disclosure policy.