Buying real estate ETFs—often in the form of REITs—is an easy and affordable path to exposing your portfolio to the real estate market. Since REITs are required by law to pay out 90% of their taxable income annually, these funds are also a good source of income for investors.
Our list of the best real estate ETFs includes a variety of types of U.S. REITs, such as those specializing in offices, apartment buildings, warehouses, retail centers, medical facilities, data centers, cell towers, infrastructure and hotels.
- 9 Best Real Estate ETFs of April 2024
- iShares Core U.S. REIT ETF (USRT)
- The Real Estate Select Sector SPDR Fund (XLRE)
- JPMorgan BetaBuilders MSCI U.S. REIT ETF (BBRE)
- Vanguard Real Estate ETF (VNQ)
- Nuveen Short-Term REIT ETF (NURE)
- Invesco S&P 500 Equal Weight Real Estate ETF (RSPR)
- iShares Residential and Multisector Real Estate ETF (REZ)
- JPMorgan Realty Income ETF (JPRE)
- Pacer Benchmark Industrial Real Estate Sector ETF (INDS)
- Methodology
- What Is a REIT?
- Next Up In Investing
9 Best Real Estate ETFs of April 2024
Fund | Expense Ratio |
---|---|
iShares Core U.S. REIT ETF (USRT)
|
0.08%
|
The Real Estate Select Sector SPDR Fund (XLRE)
|
0.09%
|
JPMorgan BetaBuilders MSCI U.S. REIT ETF (BBRE)
|
0.11%
|
Vanguard Real Estate ETF (VNQ)
|
0.12%
|
Nuveen Short-Term REIT ETF (NURE)
|
0.35%
|
Invesco S&P 500 Equal Weight Real Estate ETF (RSPR)
|
0.40%
|
iShares Residential and Multisector Real Estate ETF (REZ)
|
0.48%
|
JPMorgan Realty Income ETF (JPRE)
|
0.50%
|
Pacer Benchmark Industrial Real Estate Sector ETF (INDS)
|
0.60%
|
Methodology
We screened the Morningstar Direct universe of 25,500 ETFs for the real estate and global real estate funds with Bronze, Silver or Gold Morningstar ratings to arrive at a list of 24 real estate ETFs.
Next we screened each of the remaining 24 ETFs looking for a mix of both broadly diversified and tightly focused real estate funds. We looked for funds that could benefit from tailwinds such as aging baby boomers fueling demand for healthcare facilities.
Then we looked for funds that have outperformed in major time periods such as the past three, five or 10 years. If a fund was too young, we looked at its performance since inception.
Our final list of the nine best real estate ETFs included several broadly diversified, low-fee, passively managed real estate companies. In a nod to the current rising interest rate environment, we selected an interest rate sensitive short-term real estate fund, NURE. Other sector choices were included based upon their ability to capitalize on current growth and demographic trends.
What Is a REIT?
REITs are companies that own or finance real estate assets. Shares of public REITs trade on stock exchanges, making it simple for anyone to invest in portfolios of real estate properties.
Some REITs specialize in every category of real estate property, residential and commercial. Many focus on a single type of property—retail, offices, apartments, medical, data centers—while some own a range of different types of properties.
These specialized companies get preferential tax treatment to help finance their operations and are also required to pay out 90% of their taxable income to shareholders in the form of dividends. As a result, REITs are a favorite of income investors.
They have typically performed well during periods of rising inflation and higher interest rates. According to the National Association of REITs (Nareit), the voice of the REIT industry, the average four-quarter return during rising interest rate periods is 16.55%, compared with 10.68% in non-rising rate periods.