Last updated Jul. 28, 2023 by Okechukwu Nkemdirim
Most leading real estate ETFs actively invest in real estate investment trusts (REITs). While you can directly invest in individual REITs, buying an ETF gives you the right to an ownership interest in many REITs and provides better diversification and broad exposure.
Liquidity is a bone of contention with most real estate investments, but ETFs are highly liquid since it is possible to buy and sell at any time, just like a share of stock.
However, consider buying REIT ETFs if you’re looking for a passive investment option. Please below are 17 of the best real estate and REIT ETFs.
USRT stands as one of the best REIT ETFs, offering an expense ratio as low as 0.08%, which is relatively lower than VNQ. It’s an excellent, low-cost option to try!
USRT tries to track the FTSE NAREIT Equity REITs Index, including United States real estate equities. However, excluding mortgage REITs, infrastructure REITs, and timber REITs. But a minimum of 80% of the fund’s assets will go towards Investment in the securities of the underlying index.
With a great track record of incredible fund performance, broad diversification, a competitive dividend yield, a focus on income-producing real estate, and a low expense ratio, Vanguard Real Estate ETF (VNQ) is a solid choice.
The VNQ is one of the most renowned real estate funds, having over $40 billion in assets under management. One of the advantages of investing in this ETF is that it provides excellent diversification using multiple asset classes.
VNQ invests in a variety of real estate, including office buildings, hotels, housing, storage facilities, and more. With more than 100 holdings, VNQ is well-rounded. Primarily, VNQ focuses on properties that generate current income – appreciation is secondary.
Another great REIT ETF investment platform to invest in is XLRE. XLRE attempts to track the Real Estate Select Sector Index, with at least 95% of its assets invested in the index’s securities. This features real estate management companies and REITs but excludes mortgage REITs.
However, by investing primarily in large-cap real estate companies in the US, XLRE offers little diversification. Nonetheless, it provides a low expense ratio and could be an excellent choice if it meets your real estate investment strategy.
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As an ETF platform, EWRE is motivated by the performance of the S&P 500 Equal Weight Real Estate Index and attempts to replicate this as closely as possible.
The index includes stocks of companies from the S&P 500 focusing on real estate. A minimum of 90% of the fund’s assets will be invested in securities making up the index.
This fund will give you a hold of large-cap and mid-cap holdings. Unlike the usual REIT ETF, EWRE does not invest directly in real estate. Rather, it invests in real estate stocks or platforms conducting business in the real estate industry.
The RWR tracks the Dow Jones U.S. Select REIT Index, having at least 80% of its portfolio invested in assets that are part of the underlying index.
This fund will expose you to a wide variety of publicly-traded REITs for residential and commercial real estate properties. In addition, it offers a little more diversification, unlike other funds discussed here.
REZ is an excellent choice for those looking to invest in residential REITs. The fund invests in public storage REITs, housing, and healthcare real estate. Unlike most of the funds we’ve covered, which focus on commercial real estate.
Furthermore, this ETF tracks the FTSE Nareit All Residential Capped Index, having at least 80% of its portfolio invested in assets from the underlying index.
However, the expense ratio is higher than other funds discussed here. Still, REZ is a great choice if you’re looking for a passive method to invest in residential real estate.
This REIT ETF tracks the Dow Jones U.S. Real Estate Index, including about 100 mid-cap and large-cap REITs. More than 80% of the fund’s assets go into Investment in equities that make up the underlying index.
IYR is quite similar to VNQ, although VNQ’s expense ratio stands significantly lower. However, there are some overlaps in the holdings of both funds, but they’re weighted differently. In addition, both IYR and VNQ offer some level of diversification.
Schwab ETF provides easy access to REITs because it only holds those entities. Unlike most ETFs, which include non-REIT real estate stocks in their portfolio.
As of early 2023, it had 139 REITs in the fund led by American Tower (8.3%), Prologis (7.7%), Crown Castle (5.6%), Equinix (4.5%), and Public Storage (3.6%).
Like many other REIT ETFs, Schwab’s funds hold REITs according to their market cap rather than using an equal weighting system.
Hence, it has almost identical top holdings like most other top REIT ETFs. What’s good is this ETF expense ratio. It’s an ultra-low 0.07%, which allows investors to keep a high percentage of the returns from the underlying REITs.
With the Real Estate Select SPDR, you can make more direct investments in real estate. However, this ETF only keeps REITs in the S&P 500 Index, limiting its investment pool. As of early 2022, this ETF kept only 29 REITs, led by some familiar names, including Prologis (11.2%),
American Tower (10.7%), Crown Castle (7.7%), Equinix (6.4%), and Public Storage (5.8%).
This group is still leading the way as one of the five largest REITs. Furthermore, this ETF provides a low expense ratio of 0.1%. Consequently, it’s a great option for investors looking for low-cost exposure to the biggest REITs.
The iShares Cohen & Steers REIT ETF is a REIT ETF managed by the renowned BlackRock. The ETF takes a pretty different approach to investing in REITs.
The ETF also concentrates on holding large real estate companies dominating their respective property categories. As a result, it has a focused portfolio of 30 REITs.
Because ICS takes a more proactive approach to investing in REITs, it charges a higher expense ratio of 0.33%. Nonetheless, it’s solid for investors who want to concentrate on the dominant REITs without limiting themselves to those in the S&P 500.
Investors seeking an ETF that offers broad coverage of US real estate are recommended to consider FREL. The platform tracks the MSCI USA IMI Real Estate 25/25 Index, which typically highlights the performance of real estate in US equities.
The diversification of FREL is great, and the expense ratio of 0.08% is extremely low! As a result, it’s a great option for investors looking for low-cost exposure to the biggest REITs.
MORT attempts to track the results of the MVIS US Mortgage REITs Index. Unlike most REIT types that invest in income-generating properties, this ETF invests both in mortgages and mortgage-backed securities. It may include a mixture of small-cap, mid-cap, and large-cap companies.
Generally, mortgage REITs provide higher earning potential but also bring a higher level of risk. Moreover, the annual dividend yield of MORT is relatively higher than any of the other funds mentioned here, so it’s easy to know why this fund is attractive.
The INDS is a unique fund and one of the best real estate and REIT ETFs available. It aims at tracking the performance of the Benchmark Industrial Real Estate SCTR Index.
Also, it’s a non-diversified fund that invests mostly in storage facilities, warehouses, manufacturing facilities, and another related real estate that focuses on the distribution of goods.
With inflation becoming a significant concern, short-term leases can attract investors because they offer the opportunity for an increase in rental income as rent rises.
Investors seeking to take advantage of the Internet’s growth can consider the newly launched Global X Data Center REIT & Digital Infrastructure ETF. More so, this ETF invests in property that hosts the servers that power the Internet (Data Centers) and other related digital infrastructure.
Since its inception, Global X Data Center REITs & Digital Infrastructure has increased its assets by up to $83.11 Million and invested in 24 different REITs. Their popular Investment includes American Tower Corp, Crown Castle Intl Corp, Equinix Inc., Digital Realty Trust Inc., and China Tower Corp LTD-H.
SPDR DJ Wilshire Global Real Estate ETF attempts to replicate the total return performance of the Dow Jones® Global Select Real Estate Securities Index.
Furthermore, this REIT ETF keeps a diversified mix of assets in the United States and overseas.
Additionally, RWO has over $1.336 Billion in assets and has, so far, managed them at a competitive 0.50% fee. Besides, the top five holdings are Prologis Inc., Public Storage, Welltower Inc., Realty Income Corporation, and Digital Realty Trust Inc.
The PFFR is a fund that correlates with the performance of the Indxx REIT Preferred Stock Index. It’s the only ETF that provides preferred securities issued by REITs and thus attracts a guaranteed pool of investors.
The fund features approximately 67% property REITs and up to 33% mortgage REITs as well. The balance allows for a more predictable revenue stream and offers long-term investors looking for a more stable investment in REITs.
The SPRE is an Islamic sharia-law-based compliant fund that attempts to reflect the performance of the S&P Global All Equity REIT Shariah Capped Index. It has 32 holdings that constitute a collective investment scheme in real estate that combines the prime features of real estate and a trust fund.
Further, the fund offers the benefit of diversification to an investor’s portfolio. However, it should be noted that it is created for investors that can withstand the fundamentals of sharia law. Nonetheless, its high dividend and income features attract substantial investor interest.
Frequently Asked Questions related to The Best Real Estate and REIT ETFs.
Based on performance, Investment offers, and reliability, the best REITs are
Gaming and Leisure Properties Inc. (GLPI), Camden Property Trust (CPT), Iron Mountain Inc. (IRM), VICI Properties Inc. (VICI), and Realty Income Corp. (O). Others include STAG Industrial Inc. (STAG), Getty Realty Corp. (GTY), Gladstone Commercial Corp. (GOOD). There’s also AGNC Investment Corp. (AGNC), Digital Realty Trust Inc. (DLR), and Armour Residential REIT Inc. (ARR).
REITs are a good investment for several reasons. Most importantly, it offers investors numerous benefits that make them an ideal fit in almost any investment portfolio. These include attractive income, long-term competitive performance, liquidity, transparency, and diversification.
The safest REIT are those paid by Camden Properties Trust (CPT 0.47%), Prologis (PLD -0.22%), and Realty Income (O -1.19%). These REITs provide investors with rock-solid income streams.
Based on investment opportunities, reliability, sustainability, and overall performance, the top five ETFs to buy include iShares MSCI USA Value Factor ETF (VLUE), Schwab Fundamental U.S. Large Company Index ETF (FNDX), Vanguard Value Index Fund ETF (VTV), Invesco FTSE RAFI US 1000 ETF (PRF), and Nuveen ESG Large-Cap Value ETF (NULV).
Some high-dividend REITs available are PennyMac Mortgage Investment Trust, Armour Residential REIT Inc., Apollo Commercial Real Estate Finance Inc., Chimera Investment Corp, Medical Properties Trust Inc., Office Properties Income Trust, and VICI Properties Inc.