How to Buy REITs: A Beginner's Step-by-Step Guide

Investing in real estate used to mean saving up a large down payment, dealing with mortgages, and managing tenants. Real Estate Investment Trusts (REITs) changed all of that. Today, anyone with a brokerage account can own a piece of income-producing real estate — shopping centers, apartment buildings, data centers, or warehouses — with as little as the cost of a single share.

But if you are new to REITs, you may be wondering: How do I actually buy one? What type of account do I need? Should I buy individual REITs or a REIT ETF? Are there any costs or risks I should know about before I start?

This guide walks you through every step of buying REITs as a beginner — from understanding your options to opening an account and making your first purchase. By the end, you will know exactly how to get started and what to watch out for along the way.

Understanding Your REIT Investment Options

Before you open a brokerage account or click "buy," it helps to understand the different ways you can invest in REITs. Not all REITs work the same way, and each option has a different level of accessibility, liquidity, and risk.

Publicly Traded REITs

Publicly traded REITs are listed on major stock exchanges like the New York Stock Exchange (NYSE) or Nasdaq. You can buy and sell shares the same way you would buy shares of any publicly traded company — through a brokerage account. According to Nareit, there are more than 200 publicly traded REITs in the United States.

Publicly traded REITs are regulated by the Securities and Exchange Commission (SEC) and are required to file regular financial reports. This transparency makes them easier to research and evaluate than non-traded or private REITs.

For most beginners, publicly traded REITs are the simplest and most accessible starting point.

Public Non-Traded REITs

Public non-traded REITs are registered with the SEC but are not listed on a stock exchange. You can purchase them through a broker or financial adviser who participates in the offering, but you cannot buy or sell them on an open market.

The SEC warns that non-traded REITs often do not estimate their per-share value until 18 months after their offering closes — which may be years after you invest. They also tend to have high upfront fees. According to investor.gov, sales commissions and upfront offering fees for non-traded REITs typically total approximately 9 to 10 percent of the investment, which significantly reduces the value of the investment from day one.

FINRA cautions investors that non-traded REITs are illiquid investments. If you need to access your money quickly, you may not be able to sell your shares. These products are generally not recommended for beginner investors.

Private REITs

Private REITs are not registered with the SEC and are not traded on any exchange. They are generally sold only to institutional investors or accredited investors who meet specific income or net worth requirements set by the SEC. Private REITs offer less transparency and regulatory oversight than publicly traded or public non-traded REITs.

For most individual investors just starting out, private REITs are not accessible and are generally not appropriate as a beginner investment.

REIT Mutual Funds and REIT ETFs

Instead of buying shares of a single REIT, you can also invest in a REIT mutual fund or a REIT exchange-traded fund (ETF). These funds hold a basket of REITs, which spreads your investment across many different REITs and real estate sectors in a single purchase.

REIT ETFs trade on stock exchanges just like individual stocks or publicly traded REITs. Many popular REIT ETFs track a broad real estate index, giving investors exposure to dozens or even hundreds of REITs at once. REIT mutual funds work similarly but are priced once per day after the market closes rather than throughout the trading day.

For beginners who prefer simplicity and built-in diversification, REIT ETFs are often a practical starting point.

How to Buy REITs: Step by Step

Buying publicly traded REITs and REIT ETFs involves a straightforward process that is nearly identical to buying any other stock or fund.

Step 1: Open a Brokerage Account

To buy publicly traded REITs or REIT ETFs, you need a brokerage account. Many major brokerages offer commission-free trading on stocks and ETFs, including publicly traded REITs. When comparing brokerages, consider factors such as account minimums, available investment options, research tools, and educational resources.

You can also buy REITs inside a tax-advantaged account such as an Individual Retirement Account (IRA), including a traditional IRA or a Roth IRA. Because REIT dividends are generally taxed as ordinary income, holding REITs inside a tax-advantaged account can reduce your current tax liability. Always consult a tax professional for guidance specific to your situation.

Step 2: Fund Your Account

Once your account is open, you will need to transfer funds from your bank account to your brokerage account. This process typically takes one to three business days, depending on your brokerage and funding method. Some brokerages allow you to begin investing the same day you deposit funds, while others may require the funds to fully settle before trading.

Step 3: Decide Between Individual REITs and REIT ETFs

Before placing an order, decide whether you want to buy shares of an individual REIT or invest in a REIT ETF or mutual fund.

Individual REITs: You choose a specific company, such as one that owns apartment buildings, cell towers, or warehouses. You are concentrated in one company and one sector of real estate.
REIT ETFs: A single purchase gives you exposure to dozens of REITs across multiple real estate sectors. This provides automatic diversification and typically lower research requirements.
REIT mutual funds: Similar to ETFs, but priced once per day and often actively managed, which may result in higher fees.

Neither option is inherently better — the right choice depends on your investment goals, how much time you want to spend researching individual companies, and how much concentration risk you are comfortable with.

Step 4: Research Your Investment

Before investing in any REIT, take time to understand what it owns, how it generates income, and how it has managed its finances.

For publicly traded REITs, the SEC's EDGAR database (edgar.sec.gov) allows you to review annual reports (Form 10-K), quarterly reports (Form 10-Q), and offering documents. This is an important tool for verifying a REIT's registration status and reviewing its financial disclosures.

Key things to research for individual REITs include:

The type of real estate the REIT owns (residential, commercial, industrial, healthcare, etc.)
Occupancy rates and tenant quality
Funds From Operations (FFO) — the key profitability metric for REITs
Dividend history and consistency
Debt levels and leverage
Management track record and compensation structure

Step 5: Place Your Order

Once you have decided what to buy and have funded your account, placing an order for a publicly traded REIT or REIT ETF is done through your brokerage's trading platform — the same way you would buy any stock. You will search for the REIT or ETF by its ticker symbol, enter the number of shares you want to purchase, and submit your order.

Most publicly traded REITs can be purchased for the cost of a single share plus any applicable brokerage fees, though many brokerages now offer commission-free trading on exchange-listed securities.

Step 6: Verify REIT Registration Before Investing

Investor.gov recommends verifying the registration status of any REIT before investing. You can check whether a REIT is registered with the SEC using the SEC's EDGAR system at edgar.sec.gov. This step is especially important if someone is recommending a REIT investment to you. The SEC warns investors to be wary of any person who attempts to sell REITs that are not registered.

How It Works in Practice: A Hypothetical Example

The following is a hypothetical example to illustrate how buying a REIT works in practice. The numbers are invented for educational purposes only and do not represent any actual REIT or investment outcome.

Imagine an investor named Jordan who has $1,000 to invest and wants exposure to real estate. Jordan opens a brokerage account, deposits $1,000, and decides to invest half in a REIT ETF and half in one individual publicly traded REIT.

Jordan uses the SEC's EDGAR database to look at the most recent annual report for the individual REIT. The report shows strong occupancy rates, a history of steady Funds From Operations (FFO), and a consistent dividend payment record over the past several years.

Jordan searches for the REIT ETF and individual REIT by their ticker symbols in the brokerage platform. Both are listed on a major stock exchange, so the purchase is as simple as entering the number of shares and confirming the order. The transactions complete instantly during market hours.

After the purchase, Jordan begins receiving quarterly dividend distributions from both the ETF and the individual REIT. These dividends are deposited directly into the brokerage account. Jordan can choose to reinvest the dividends or hold them as cash.

This example is hypothetical. Actual REIT investing involves real market risk, and dividend payments are not guaranteed. There is no guarantee that any investment in a REIT will generate positive returns or maintain its dividend.

Why This Matters to REIT Investors

Understanding how to buy REITs properly — and what you are actually buying — is the foundation of successful REIT investing. Many beginners simply search for the highest dividend yield and click buy without understanding the differences between REIT types, the importance of liquidity, or the fee structures involved in non-traded products.

The key advantages of buying publicly traded REITs include:

Accessibility: You can start with the cost of a single share in most cases.
Liquidity: Shares trade on major exchanges during market hours, so you can sell whenever you choose.
Transparency: SEC-regulated REITs are required to file regular financial disclosures.
Dividend income: REITs must distribute at least 90% of taxable income annually as dividends (IRC §857).
Diversification: REIT ETFs allow you to spread investment across many property types and companies.

Important trade-offs to understand:

Publicly traded REITs are subject to stock market volatility — their share prices can fall even when the underlying real estate performs well.
REIT dividends are generally taxed as ordinary income, which may be higher than the tax rate on qualified stock dividends.
Non-traded REITs carry high upfront fees and limited liquidity, making them unsuitable for many beginner investors.

Risks and Considerations

Before buying any REIT, it is important to understand the risks involved. The following risks are relevant to most REIT investments:

Market risk: Publicly traded REIT share prices fluctuate with the stock market. A REIT's share price can decline even if its underlying properties are performing well.
Interest rate risk: REITs tend to be sensitive to interest rate changes. When interest rates rise, REITs often face higher borrowing costs and may become less attractive compared to fixed-income investments.
Liquidity risk: Publicly traded REITs are liquid, but non-traded and private REITs can be extremely difficult to sell. Understand the liquidity profile of any REIT before investing.
Dividend risk: REIT dividends are not guaranteed. A REIT can reduce or suspend its dividend if income declines.
Concentration risk: Investing in a single REIT concentrates your exposure to one company and one sector. A problem with that sector (e.g., retail vacancies, office demand decline) can significantly affect your investment.
Fee risk with non-traded REITs: Upfront sales commissions and fees on non-traded REITs can total 9 to 10 percent of your investment, reducing its value from the start.
Fraud risk: The SEC and FINRA both caution investors to be alert to REIT-related fraud. Always verify that a REIT is registered with the SEC using the EDGAR database before investing.

Key Metrics to Review Before Buying a REIT

When evaluating an individual REIT for purchase, these are the most important metrics to understand:

Funds From Operations (FFO)

Funds From Operations (FFO) is the standard profitability metric for REITs. It adjusts GAAP net income by adding back real estate depreciation and amortization and removing gains or losses from property sales. FFO gives a clearer picture of a REIT's ongoing cash-generating ability than net income alone. Most REIT annual reports and investor presentations include FFO.

Dividend Yield

Dividend yield is the annual dividend per share divided by the current share price, expressed as a percentage. It gives you a sense of the income you might receive relative to the price you pay. Be cautious about chasing very high dividend yields — an unusually high yield can sometimes signal that the dividend is at risk of being cut.

Occupancy Rate

For equity REITs that own physical properties, occupancy rate measures the percentage of available space that is leased to tenants. Higher occupancy generally means more reliable rental income. Declining occupancy can signal problems with a REIT's properties or sector.

Debt Levels

REITs typically carry significant debt to finance property acquisitions. Reviewing a REIT's debt-to-equity ratio or debt-to-asset ratio helps you understand its financial leverage and how sensitive it may be to rising interest rates or declining property values.

Common Mistakes to Avoid When Buying REITs

Buying based on yield alone: A high dividend yield is attractive, but it does not automatically mean a good investment. High yields can reflect a declining share price or an unsustainable payout.
Not verifying SEC registration: Before investing in any REIT that is recommended to you, check its registration status on the SEC's EDGAR database. Unregistered REIT-like products carry significant fraud risk.
Ignoring fees on non-traded REITs: Non-traded REITs can charge upfront fees of 9 to 10 percent according to investor.gov. These fees immediately reduce the value of your investment.
Underestimating liquidity risk: Non-traded and private REITs may lock up your investment for years. Only invest money you can afford to leave illiquid for an extended period.
Overlooking tax implications: REIT dividends are generally taxed as ordinary income, not at the lower qualified dividend rate. Consider the tax impact before investing, especially in taxable accounts. Consult a tax professional.
Not diversifying: Putting all your REIT investment into a single company or one property type concentrates your risk. Consider spreading your investment across multiple REITs or using a REIT ETF for built-in diversification.

Frequently Asked Questions

How much money do I need to start buying REITs?

Most publicly traded REITs can be purchased for the price of a single share, which may be as low as a few dollars depending on the REIT. Many REIT ETFs are similarly accessible. Some brokerages also offer fractional shares, allowing you to invest even smaller amounts. Non-traded and private REITs often require significantly higher minimum investments.

Do I need a special account to buy REITs?

No. You can buy publicly traded REITs through a standard brokerage account, just like buying stocks. You can also buy REITs inside a tax-advantaged account such as a traditional IRA or Roth IRA, which can help manage the tax impact of REIT dividends.

Is it better to buy individual REITs or a REIT ETF?

Both approaches have advantages. Individual REITs allow you to focus on a specific company or sector you understand well. REIT ETFs provide instant diversification across many REITs and require less individual research. For beginners, REIT ETFs are often a simpler starting point, while experienced investors may prefer selecting individual REITs.

Can I buy REITs in a retirement account?

Yes. Publicly traded REITs and REIT ETFs can be held inside an IRA or 401(k) if your plan allows it. Holding REITs in a tax-deferred or tax-exempt account can reduce the annual tax impact of REIT dividend income, since those dividends are generally taxed as ordinary income in taxable accounts. Consult a tax professional to understand the best account type for your situation.

How do I check if a REIT is legitimate?

You can verify the registration status of any publicly traded or non-traded REIT using the SEC's EDGAR system at edgar.sec.gov. Legitimate REITs registered with the SEC are required to file regular financial reports. The SEC warns investors to be wary of any person who attempts to sell REITs that are not registered.

When do REITs pay dividends?

Most publicly traded REITs pay dividends quarterly, though some pay monthly. The dividend schedule varies by individual REIT. Your brokerage account will display dividend payment dates and deposit distributions directly to your account. REITs are required by law to distribute at least 90% of their taxable income annually as dividends.

Conclusion

Buying REITs is straightforward for most investors — especially publicly traded REITs and REIT ETFs, which can be purchased through any standard brokerage account with the cost of a single share. The process closely mirrors buying stocks or ETFs, making it one of the most accessible ways to add real estate exposure to an investment portfolio.

The key steps are: understand your options (publicly traded REITs, REIT ETFs, or non-traded products), open a brokerage account, fund it, research your investment using SEC filings and authoritative sources, and verify registration status before buying.

Be cautious about non-traded REITs, which carry high fees and limited liquidity. And always be alert to potential fraud — legitimate REITs are registered with the SEC and can be verified on the EDGAR database.

As you continue your REIT investing journey, take time to understand the metrics that matter — including Funds From Operations (FFO), dividend yield, occupancy rates, and debt levels. A well-informed investor is better prepared to evaluate opportunities and avoid common mistakes.

Keep learning about REITs, real estate investing, and the broader investment landscape. Understanding how each piece of the picture fits together puts you in a stronger position to build a portfolio that works for your long-term financial goals.

Sources

U.S. Securities and Exchange Commission (SEC) — Investor.gov: Real Estate Investment Trusts (REITs) — https://www.investor.gov/introduction-investing/investing-basics/investment-products/real-estate-investment-trusts-reits
FINRA — Real Estate Investment Trusts: Alternatives to Ownership — https://www.finra.org/investors/alerts/public-non-traded-reits-perform-careful-review-investing
Nareit — Frequently Asked Questions About REITs — https://www.reit.com/what-reit/frequently-asked-questions
Prologis — A Complete Guide on How to Invest in REITs — https://www.prologis.com/what-we-do/resources/reit-investing-guide
NerdWallet — Best-Performing REITs and How to Invest — https://www.nerdwallet.com/investing/learn/reit-investing
Charles Schwab — Real Estate Investment Trusts (REITs) — https://www.schwab.com/stocks/understand-stocks/reits
SEC — EDGAR Database for REIT filings and registration verification — https://www.sec.gov/cgi-bin/browse-edgar

How to Buy REITs: A Beginner's Step-by-Step Guide