Real estate investing made easy.
If you want a simpler way to invest in real estate than owning rental properties or flipping houses, investors should look to real estate investment trusts, or REITs. These trusts invest in real estate either through direct ownership of properties or by buying mortgages and other mortgage-related securities. However, REITs play in a number of areas -- from retail to health care to residential -- so investors are best served trading the sector broadly. But what blend makes the most sense? We'll explore this by looking at 10 of the best REIT ETF options to buy today.
Updated on May 2, 2018: This slideshow was originally published on Jan. 27, 2017, and has been updated to provide recent information.
#10: VanEck Vectors Mortgage REIT Income ETF (MORT)
MORT invests in mortgage REITs. These REITs borrow money to invest in mortgages or mortgage-backed securities, and make money off the spread in interest rates. MORT invests in 26 such mREITs, with a heavy overweight in Annaly Capital Management (NLY) and AGNC Investment Corp. (AGNC), which make up a combined 22 percent of the fund. Like all REITs, mREITs must pay out at least 90 percent of their taxable income in dividends.
Expenses: 0.41 percent, or $41 annually per $10,000 invested
Dividend yield: 10.4 percent
#9: iShares Residential Real Estate Capped ETF (REZ)
REZ invests in equity REITs -- trusts that actually own and operate real estate properties. REZ's name implies that it invests in residential-focused companies, and it does, but it also holds health care and self-storage trusts as well. In fact, self-storage REIT Public Storage (PSA) is the top holding at roughly 10 percent of the fund, followed by apartment REITs AvalonBay Communities (AVB) and Equity Residential (EQR). Those two yield 3.7 percent and 3.6 percent, respectively.
Expenses: 0.48 percent
Dividend yield: 3.9 percent
#8: iShares U.S. Real Estate ETF (IYR)
IYR invests in a wide blend of 124 U.S.-based REITs. Not only does IYR have more holdings than MORT and REZ, but it also covers more areas of the REIT world -- including retail, residential, office, health care and even some mREITs -- and it's less top-heavy than the other two funds. Communications REIT American Tower Corp. (AMT) is the top holding at roughly 6 percent, followed by mall operator Simon Property Group (SPG) and another communications REIT, Crown Castle International (CCI) at 4.9 percent and 4.2 percent, respectively.
Expenses: 0.44 percent
Dividend yield: 3.8 percent
#7: PowerShares KBW Premium Yield Equity REIT Portfolio (KBWY)
While REITs in general are a high-yielding asset class (higher even than stocks in the 1998-2017 period), the KBWY looks to maximize that by investing in some of the market's highest-yielding equity REITs. This is the best of the best. The top investments among the mere 30 stocks in KBWY include Global Net Lease (GNL), constituting 5.8 percent of the portfolio and yielding 12.1 percent, and Washington Prime Group (WPG) constituting 5.7 percent of the portfolio and yielding 16.7 percent.
Expenses: 0.35 percent
Dividend yield: 8.4 percent
#6: iShares Cohen & Steers REIT ETF (ICF)
Next among the best REIT ETFs in the market is ICF, a diversified fund that invests in 30 trusts considered to be the largest and most dominant in their respective property sectors. Specialized trusts, retail trusts and residential REITs each constitute around 20 percent of the fund. Top holdings aren't too surprising, featuring big REIT names Prologis (PLD) and Simon Property, as well as data center REIT Equinix (EQIX), but the yield is one of the lowest of the best REITs.
Expenses: 0.34 percent
Dividend yield: 3.4 percent
#5: Vanguard REIT ETF (VNQ)
Vanguard brings its special brand of low-cost diversified exposure to the REIT world via the VNQ, which immediately stands out with its dirt-cheap expenses and exposure to 184 U.S. REITs that cover a wide swath of the real estate space. Specialized REITs make up nearly 25 percent of the fund, with residential, office, retail and health care trusts all receiving double-digit weightings. Top holdings include SPG, PLD and EQIX.
Expenses: 0.12 percent
Dividend yield: 4.8 percent
#4: SPDR Dow Jones REIT ETF (RWR)
The RWR is yet another broad-based U.S. REIT ETF, though the price of this one depends a bit more heavily on its top stock holdings. SPG makes up nearly 8 percent of the fund, Prologis nearly 6 percent, Public Storage almost 5 percent and AvalonBay nearly 4 percent. Here, industrial office-focused trusts have about 29 percent exposure, residential is second at 21 percent, and retail also gets double-digit exposure at 19 percent.
Expenses: 0.25 percent
Dividend yield: 3.2 percent
#3: First Trust S&P REIT Index Fund (FRI)
The FRI is built in a similar vein to VNQ, holding a fairly diversified blend of real estate investment trusts and featuring retail at just under 20 percent of the fund. FRI is slightly less diverse at 160 holdings to VNQ's 184, but its top 10 holdings compose 33 percent of the total portfolio compared to VNQ's 37 percent. Top holdings will sound familiar -- Simon Property, Prologis and Public Storage.
Expenses: 0.49 percent
Dividend yield: 2.8 percent
#2: iShares Global REIT ETF (REET)
If you're looking for international exposure, REET is one of the best REITs you can buy -- though it's not heavily global considering U.S. REITs still make up more than 60 percent of the fund. The rest of REET's geography weight is thick in developed markets, with Japan and Australia at roughly 7 percent weightings and the U.K. at 6 percent. Top holdings are dominated by U.S. REITs, too, including SPG and PLD. The only internationals in the top 10 are France's Unibail-Rodamco and Hong Kong's Link Real Estate Investment Trust.
Expenses: 0.14 percent
Dividend yield: 4.1 percent
#1: Schwab U.S. REIT ETF (SCHH)
In many ways, Schwab's SCHH isn't terribly different from many of the other blended REIT offerings on this list, stacking SPG, PSA and PLD up at the top, and offering large weights in retail, residential and specialty real estate. However, SCHH has all other REIT ETFs beat in one respect -- expenses that would win any limbo contest.
Expenses: 0.07 percent
Dividend yield: 2.8 percent
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