Best REIT ETFs To Buy in October 2024

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Real estate investment trust exchange-traded funds are becoming more popular as real estate values continue to soar, and many expect this trend will continue moving forward. But what are REIT ETFs, and what are the best options on the market?

Key Takeaways

• REIT ETFs diversify your real estate holdings by investing in collections of REITs.
• In addition to the potential for capital appreciation, REIT ETFs pay out dividends to investors.
• REIT ETFs, like all ETFs, trade on the open market, so you can buy and sell them yourself through a brokerage account.

8 REIT ETFs To Buy Right Now

These are eight of the best REIT ETFs to buy in October 2024:

1. Vanguard Real Estate ETF (VNQ)

• Assets under management: $38.64 billion
• Dividend yield: 3.62%
• Three-year return rate: 1.21%
• Expense ratio: 0.12%
• Top five holdings: Prologis Inc., American Tower Corp., Equinix Inc., Welltower Inc., Simon Property Group Inc.

The Vanguard Real Estate ETF is the largest real estate ETF on the market by total assets. It provides a diversified list of REIT holdings designed to track the returns of the MSCI US Investable Market Real Estate 25/50 Index. The fund provides investors with a high level of income, though they can also expect some price appreciation.

Vanguard offers some of the lowest expense ratios in the business. The average expense ratio on Vanguard ETFs is 0.05%, though VNQ has a slightly higher annual cost of 0.12%. Nonetheless, the fund’s fees are about half of the industry average, which is 0.22% annually.

2. Schwab US REIT ETF (SCHH)

• Assets under management: $8.01 billion
• Dividend yield: 2.85%
• Three-year return rate: 2.10%
• Expense ratio: 0.07%
• Top five holdings: Prologis Inc., American Tower Corp., Equinix Inc., Welltower Inc., Public Storage

The Schwab U.S. REIT ETF invests in a wide range of real estate investment trusts. The fund excludes non-REIT stocks that are commonly part of the portfolio in other real estate funds. One of the biggest draws to the fund is its expense ratio, which is far below the industry average at 0.07%.

Investors won’t give up performance in exchange for access to the low fees either, considering that it has performed well over time.

SCHH is no small fund. It’s the third-largest real estate ETF on the market by total assets, giving a nod to its popularity among investors. The fund also trades hands over 3.5 million times in the average trading session, so investors won’t experience liquidity issues when it’s time to exit their positions.

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3. The Real Estate Select Sector SPDR Fund (XLRE)

• Assets under management: $8.09 billion
• Dividend yield: 3.10%
• Three-year return rate: 2.17%
• Expense ratio: 0.09%
• Top five holdings: Prologis Inc., American Tower Corp., Equinix Inc., Welltower Inc., Public Storage

XLRE is the second-largest real estate ETF on the market by total assets, and shares of the fund trade hands over 5.6 million times during the average trading session.

Investors can diversify their holdings further with the fund because, unlike many of its competitors, it doesn’t invest only in REITs. It also invests in real estate stocks from the S&P 500.

The fund’s goal is to track the Real Estate Select Sector index as closely as possible before accounting for fees, and its expense ratio is significantly lower than the industry average at just 0.09%.

The fund has earned a rating of four out of five stars from Morningstar, validating its historical ability to outperform its peers.

4. iShares Core US REIT ETF (USRT)

• Assets under management: $2.85 billion
• Dividend yield: 2.80%
• Three-year return rate: 3.80%
• Expense ratio: 0.08%
• Top five holdings: Prologis Inc., Equinix Inc., Welltower Inc., Public Storage, Realty Income REIT Corp.

USRT’s objective is income and growth. This ETF appeals to investors looking for broad, long-term exposure to a variety of U.S. real estate property sectors. The fifth-largest REIT by assets, this fund from BlackRock tries to match the performance of the FTSE Nareit Equity REITS Index. USRT’s portfolio contains 135 holdings, and it boasts a low 0.08% expense ratio.

5. Invesco Active US Real Estate ETF (PSR)

• Assets under management: $69.1 million
• Dividend yield: 2.79%
• Three-year return rate: 0.14%
• Expense ratio: 0.35%
• Top five holdings: Welltower Inc., Equinix Inc., American Tower Corp., SBA Communications Corp. Class A, Brixmor Property Group Inc.

Whereas most ETFs in this roundup are index funds, Invesco’s Active U.S. Real Estate ETF is an actively managed fund that invests mostly in REITs included in the FTSE Nareit All Equity REITs Index. Fund managers review the portfolio each month with the goal of producing income and achieving high total returns through capital growth.

As an actively managed fund, PSR’s expense ratio is high compared to the ratios of index funds. Although its return is comparatively low, its dividend yields 2.79%.

6. Invesco S&P 500 Equal Weight Real Estate ETF (RSPR)

• Assets under management: $114.2 million
• Dividend yield: 2.55%
• Three-year return rate: 2.66%
• Expense ratio: 0.40%
• Top five holdings: Host Hotels & Resorts Inc., CBRE Group Inc., Weyerhaeuser Co., Digital Realty Trust, Simon Property Management

Investors looking for exposure to large-cap REITs might like the Invesco S&P 500 Equal Weight Real Estate ETF. The fund invests at least 90% of its assets in securities included in the real estate sector of the S&P 500. Although each holding is weighted equally, the index and RSPR both are rebalanced each quarter.

RSPR has a rating of four out of five stars from Morningstar. A comparatively low average trading volume suggests this ETF could be less liquid than others in this roundup, but it could also be less volatile.

7. Global X SuperDividend REIT ETF (SRET)

• Assets under management: $228.9 million
• Dividend yield: 7.32%
• Three-year return rate: -0.44%
• Expense ratio: 0.59%
• Top five holdings: National Health Investors Inc., Omega Healthcare, Sabra Health Care, MFA Financial Inc., Covivio SA

At first glance, negative returns over three years might give you pause. But SRET’s yield is 7.32%, while the category average is 3.73%. The fund’s objective is to generally track the price and yield of the Solactive Global SuperDividend REIT Index. The index, in turn, tracks 100 of the world’s highest-dividend-yielding securities, weighting each equally, according to VettaFi.

While this is a risky fund because of its reliance on dividends and international holdings, it has distributed dividends every month for the past nine years.

8. VanEck Mortgage REIT (MORT)

• Assets under management: $309.1 million
• Dividend yield: 8.05%
• Three-year return rate: -4.62%
• Expense ratio: 0.43%
• Top five holdings: Annaly Capital Management Inc., AGNC Investment Corp., Starwood Property Trust Inc., Rithm Capital Corp., Blackstone Mortgage Trust Inc.

The VanEck Mortgage REIT tries to replicate the price and yield of the MVIS US Mortgage REITs Index, which tracks the overall performance of U.S. mortgage REITs. It provides exposure to a range of mortgage investments, which means it’s sensitive to changing interest rates and regulations, as VanEck notes in its fund description.

On the upside, mortgage REITs often provide better yields compared to other types of REITs, as MORT’s yield demonstrates.

What Are REIT ETFs?

REITs, or real estate investment trusts, are a form of an investment fund. Their portfolios include real estate holdings designed to provide price appreciation and income for investors. These holdings can range from single-family homes to strip malls to commercial buildings that span several acres.

Real estate ETFs incorporate diversified REIT holdings. As is the case with other types of funds, some REIT ETFs are actively managed, which means that fund managers hand-select holdings to meet the funds’ objectives. Other REIT ETFs are designed to match the performance of an index of real estate-related securities.

Good To Know

Real estate holdings provide the basis for gains in REITs. Therefore, these investments perform well when the real estate market is up and may perform poorly when real estate values are down.

Top Reasons To Consider REIT ETFs

REIT ETFs let you invest in real estate without buying property. Here are some reasons why you should consider investing in them:

• While REITs can appreciate in value over time, their primary objective usually is to produce income for investors. To that end, REITs return at least 90% of their profits back to investors by paying periodic dividends.
• Investing in a single REIT gives you exposure to one company’s portfolio, but a REIT ETF gives you exposure to many REITs’ portfolios, which diversifies your real estate and/or financial-sector investments.
• Compared to REIT mutual funds, REIT ETFs are easier to trade, and you can trade them with smaller investments.

Pros and Cons of REIT ETFs

REIT ETFs are a worthy addition to many investors’ portfolios, but they have some downsides you should consider before you invest.

Pros

• Offer an accessible way to invest in real estate
• Generate income through dividend distributions
• Initial investment can be as low as the price of one share
• Diversify portfolios that contain traditional stock and bond mix, thus hedging against stock market cycles and periods of high inflation

Cons

• Long-term investment that can be slow to appreciate
• Mostly consist of index funds that aim to match, not beat, their benchmarks
• Tied to potentially volatile real estate markets, especially local markets where portfolio properties are located

How To Invest In REIT ETFs

ETFs, including REIT ETFs, trade on stock exchanges, such as the New York Stock Exchange, so you can purchase them through an investment brokerage. What’s more, ETFs trade similarly to stocks — you can buy and sell whenever the markets are open. Here are the steps to take:

1. Open an account on your preferred brokerage website.
2. Link a bank account to your new brokerage account so that you can transfer funds to pay for your trades.
3. Research REIT ETFs on the broker’s website, paying careful attention to features like expense ratio, fund objective, dividend yield and performance.
4. With the REIT you want on your screen, click the purchase or trade button to start your order. Follow the prompts to submit the order.
5. Watch for confirmation that your trade went through.

Joshua Rodriguez and Cynthia Measom contributed to the reporting for this article.

Data is accurate as of Oct. 1, 2024, and is subject to change.

Methodology: GOBankingRates looked at the 22 REIT ETFs available in U.S. markets, per ETF.com. Selections for this roundup were based on assets under management, 30-day SEC dividend yields and three-year annualized performance as well as expense ratios. The picks represent a diverse grouping — broad and narrow, index and actively managed — to appeal to a range of investment styles and goals.

Editorial Note: This content is not provided by any entity covered in this article. Any opinions, analyses, reviews, ratings or recommendations expressed in this article are those of the author alone and have not been reviewed, approved or otherwise endorsed by any entity named in this article.

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