Real estate investment trusts, or REITs, offer a way for investors to pocket a share of real estate profits without the headaches of owning or managing physical properties. However, picking individual REITs demands deep dives and careful scrutiny to avoid costly pitfalls.
For those who prefer a hands-off approach but still crave solid returns from real estate, REIT ETFs come to the rescue. By bundling multiple REITs into a single fund, these ETFs provide broad exposure while spreading risk, so no single laggard drags your portfolio down.
Presented below is a curated rundown of some of the most sought-after REIT ETFs shaping the market today.
Top REIT ETFs to Watch in 2025
Before sinking funds into a REIT ETF, take a moment to examine the fund’s prospectus—it sheds light on the investment blueprint and portfolio composition.
Note: Return figures sourced from Morningstar as of July 1, 2025; dividend yields pulled from Yahoo Finance.
Vanguard Real Estate ETF (VNQ)
The Vanguard Real Estate ETF often tops the popularity charts. Its strategy revolves around mirroring an index comprised of firms that own and operate commercial and residential real estate across the U.S.
- 5-year annualized return: 6.5%
- Dividend payout: 4.1%
- Expense ratio: 0.13%
iShares U.S. Real Estate ETF (IYR)
One of the pioneers among REIT ETFs, this fund similarly tracks an index reflecting U.S.-based real estate enterprises, either through direct ownership or related involvement.
- 5-year annualized return: 6.5%
- Dividend payout: 2.6%
- Expense ratio: 0.39%
Real Estate Select Sector SPDR Fund (XLRE)
Representing a key pillar in the S&P 500, XLRE zeroes in on large-cap players dominating the American real estate landscape.
- 5-year annualized return: 7.1%
- Dividend payout: 3.3%
- Expense ratio: 0.08%
iShares Global REIT ETF (REET)
Seeking worldwide real estate exposure? REET tracks a global index that includes U.S. holdings among other international real estate players.
- 5-year annualized return: 6.6%
- Dividend payout: 3.5%
- Expense ratio: 0.14%
JPMorgan BetaBuilders MSCI U.S. REIT ETF (BBRE)
BBRE casts a wider net by encompassing small, mid, and large-cap companies mostly entrenched in commercial and niche real estate sectors across America.
- 5-year annualized return: 8.4%
- Dividend payout: 3.2%
- Expense ratio: 0.11%
Snapshot: REIT Market Stats
As of 2024, the U.S. REIT sector boasts a market capitalization exceeding $1.3 trillion, with equity REITs composing roughly 77% of this value. Dividend yields have hovered around 3-5%, reinforcing REITs’ reputation as reliable income generators.
Decoding REITs: What You Need to Know
REITs funnel investments into diverse real estate assets. A defining feature is their regulatory requirement to redistribute at least 90% of taxable income back to shareholders as dividends, sidestepping corporate tax and positioning themselves as dependable dividend payers.
Broadly, REITs split into three camps:
- Equity REITs: Hold ownership of physical properties or land outright.
- Mortgage REITs: Finance real estate via mortgages and loans.
- Hybrid REITs: Blend both equity holdings and mortgage-related assets.
REIT ETFs: Weighing the Upsides and Downsides
The Bright Side
- Compelling total returns. Equity REITs have clocked an average annual gain of 8.2% over the past two decades (through September 2024), offering a juicy dividend stream minus landlord duties.
- High liquidity. Unlike physical property, REIT ETFs can be bought or sold on the open market instantly when the stock exchange is operating.
- Diversification booster. Due to their relatively low correlation with traditional equities, adding REITs often smooths portfolio volatility.
The Catch
- Price swings. REIT ETFs are not immune to market jitters and can experience sharper fluctuations than brick-and-mortar real estate.
- Dependence on financial markets. Since REITs pay out most taxable income as dividends, they lean heavily on debt and equity markets for growth capital—making them vulnerable when borrowing costs surge.
- Tax treatments. Dividends from REITs generally count as ordinary income and can be taxed at higher rates, especially if reinvested, underscoring the importance of aligning investments with personal financial goals.
Key Tips for Selecting and Managing REIT ETFs
1. Do your homework on funds
When choosing REIT ETFs, scrutinize dividend consistency, yields, historical performance, and the fund’s underlying holdings. Integrating a REIT ETF can provide a valuable chunk of diversification within your portfolio.
2. Keep tabs on your strategy
Regularly reassess your holdings to stay in sync with evolving market conditions and your financial ambitions. Use complimentary tools offered by your broker to aid in tracking and rebalancing.
Where to Purchase REIT ETFs?
REIT ETFs are accessible through virtually all major brokerage platforms, enabling investors to seamlessly add real estate exposure to their baskets alongside stocks and bonds.
Disclaimer: Readers should undertake independent research before committing capital to investment vehicles. Past returns do not guarantee future gains.