7 Best REIT ETFs to Buy Right Now

A real estate investment trust, or REIT, is a unique type of company that invests most of its assets in income-producing real estate. REITs that own commercial buildings directly are called equity REITs. Another type of REIT, called a mortgage REIT, or mREIT, holds commercial mortgage loans against income property. A REIT must, by law, distribute at least 90% of its taxable income to shareholders as dividends.

Most REITs specialize in one class of commercial real estate. Simon Property Group Inc. (ticker: SPG), for example, invests in shopping malls. Equity Residential Properties Trust (EQR), on the other hand, focuses on apartment buildings. There are REITS for almost all types of commercial real estate.

REIT investing offers investors wide-ranging exposure to the commercial real estate industry – a key component of the U.S. economy. REITs pay regular dividends and many have excellent growth potential.

REIT ETFs are exchange-traded funds that allocate capital into publicly traded REITs. They are an accessible and professionally managed way for retail investors to profit from real estate.

A REIT ETF can be an excellent investment for people seeking growth and income, as long as they’re willing to accept some market volatility. REIT ETFs behave like fixed-income securities, which means they tend to go down when interest rates go up and generally go up when rates go down.

When the current interest rate cycle reverses – which some experts predict will be soon – investors who own REITS ETFs should benefit.

With all that in mind, here is our list of the seven best REIT ETFs to buy right now:

*12-month yield as of Dec. 6 close

SPDR Dow Jones REIT ETF (RWR)

RWR is a REIT ETF in the SPDR family of funds managed by ETF giant State Street Global Advisors. The fund is designed to track the Dow Jones US Select REIT Index. It holds 107 REITs that were chosen to reflect the publicly traded REIT market.

RWR provides a healthy, quarterly dividend yield, but it strives to be more than just an income product. REITs whose share value does not closely correlate with actual real estate valuations are excluded. The idea is to make RWR a true proxy for direct ownership.

The fund rebalances quarterly, helping to maintain its cap-weight allocation. The low expense ratio of 0.25% makes RWR one of the least expensive ETFs on our list.

iShares Cohen & Steers REIT ETF (ICF)

Cohen & Steers Inc. (CNS) has been a leader in real estate research for more than three decades. ICF is a REIT ETF based on the Cohen & Steers US Majors Realty Portfolio Index. That cap-weight index is made up of REITs that are dominant players in their categories.

The objective of ICF is to represent large-cap REITs judged to have superior potential for income growth and capital appreciation.

With an average daily volume of over 480,000 shares, ICF offers investors excellent liquidity. Its exposure to the major real estate classes provides good industry diversification. In addition, the ETF has a reasonable expense ratio and a dependable dividend yield.

Invesco KBW Premium Yield Equity REIT ETF (KBWY)

KBWY will be of special interest to investors who have high income as their primary objective.

This ETF, which is based on the KBW Nasdaq Premium Yield Equity REIT Index, is unique because it is not equally weighted or cap weighted. It’s dividend-yield weighted, meaning REITs with superior dividend yields receive higher allocations. The result is an above-average yield compared to most REIT ETFs.

Another interesting aspect of KBWY is that it invests exclusively in small- and mid-cap REITs, offering investors diversification based on market capitalization.

iShares Mortgage Real Estate Capped ETF (REM)

Recently, rising rates have hurt REIT performance, but dividend yields have gone up as share prices fell. This is especially true of mREIT ETFs, such as REM.

REM is based on the FTSE Nareit All Mortgage Capped Index, which is made up of REITs that hold commercial and residential real estate mortgages. REITs in REM may be originators (lenders), or they may buy mortgages or mortgage-backed securities from Wall Street investment banks. The ETF holds 32 issues, its largest single position being Annaly Capital Management Inc. (NLY), which comprises more than 15% of the fund’s assets.

Mortgage rates are higher today than they’ve been in decades. Investing in REM is one way to benefit from that situation. When rates do finally fall, REM shareholders should experience significant capital appreciation.

Global X Data Center REITs and Digital Infrastructure ETF (VPN)

VPN is somewhat aggressive for a REIT ETF, but it’s still worth thinking about. Its sponsor, Global X, is headquartered in New York City but is part of Mirae Financial Asset Group, a Korean company with $565 billion in assets under management that does business around the globe.

VPN, which is based on the Solactive Data Center REITs & Digital Infrastructure Index, owns REITs that operate in the fast-growing technology space – specifically, server farms, data facilities and phone towers.

The rationale behind investing in VPN is the incredible growth of information technology. That growth is driven by increasing AI adoption, the expansion of 5G communication, and the ever-increasing interconnectivity of people and devices around the world.

REITs like American Tower Corp. (AMT) and Digital Realty Trust Inc. (DLR) – top holdings inside VPN – are bound to benefit as technology continues to advance.

iShares Residential and Multisector Real Estate ETF (REZ)

The multifamily (apartment building) market of the commercial real estate industry is booming. There are several reasons for this phenomenon, but the two biggest factors are an ongoing housing shortage and unaffordable mortgage rates that discourage home buyers.

REZ is an index ETF that tracks the FTSE Nareit All Residential Capped Index. Given current market fundamentals, investors should consider adding this ETF to their portfolios.

This fund made our list based on its residential REIT holdings, but investors should note that there are health care and self-storage REITs among its 38 holdings.

Pacer Industrial Real Estate ETF (INDS)

The industrial real estate industry includes facilities like trucking terminals, warehouses and distribution centers. INDS is a strategy-driven ETF designed to take advantage of the income and growth potential of industrial properties. INDS seeks to duplicate the performance of the Solactive GPR Industrial Real Estate Index after fees and expenses are deducted.

Industrial real estate has experienced excellent performance over the last several years, meaning occupancy has been high and rent growth has been strong. The catalyst has been incredible growth in e-commerce and rapid home delivery, and there are no signs of a slowdown.