5 best REIT stocks to invest in

Key Takeaways

• Numerous types of REITs focus on either all or specific areas of real estate, offering investors numerous options to choose from
• REITs are great investments to gain exposure to the real estate industry without directly owning any property
• Investors gain returns on their investments primarily through REIT dividends, which is great for long-term investors

Introduction

REITs are great investments that increases your exposure to the real estate industry without having to own property yourself. These asset classes can provide a steady income to your investment portfolio, which is why I have listed out the best REITs to invest in.

Investing in these REITs can earn attractive dividends while gaining exposure to the real estate market without needing to take on any of the risks of owning and managing properties directly.

What is a real estate investment trust?

A Real Estate Investment Trust (REIT) is a company that owns, operates, or finances income-producing real estate across a wide range of property sectors.

These properties can include residential buildings, commercial spaces, healthcare facilities, and more. REITs allow investors to access large-scale real estate investments without owning or directly managing the properties themselves.

Types of REITS

Below is a list of four of the most popular types of REITs. Each REIT type focuses on a specific area of the real estate industry, offering investors a wide range of choices based on their interests.

Equity REITs

These types of REITs are the most widely known REITs. They own and operate income-producing real estate, and generate revenue primarily through rent. Equity REITs cover many properties, including residential apartments, office space, shopping malls, etc..

Retail REITs

Retail is a subset of equity REITs designed for investors who only want exposure from retail properties, such as shopping malls, shopping parks, and large wholesale locations, among other retail properties.

Residential REITs

These types of REITs primarily focus on revenue generated through the ownership of residential buildings and receiving most of their income from rented homes. This REIT type is a strong sector, especially in places requiring higher-demand housing.

Industrial REITs

Mostly focused on warehouses and distribution centers. This type of REIT has grown in popularity, driven by the e-commerce boom and the need for last-mile delivery infrastructure. Investors are attracted to this type of REIT due to their growth potential and resilience in a digital economy.

Advantages of investing in REITS

By law, REITs must distribute a significant portion of their taxable income as dividends, making them an attractive option for income-seeking investors.

Investing in REITs allows you to diversify your portfolios and potentially benefit from both capital appreciation and regular income streams.

Best real estate stocks to invest In

Below is my top-pick list of the five best real estate stocks to invest in.

Realty Income Corporation (O)

Digital Realty Trust (DLR)

Public Storage (PSA)

Simon Property Group (SPG)

Vornado Realty Trust (VNO)

Criteria for selecting the best REIT stocks

When selecting the best REIT stocks, we evaluated the following essential criteria:

• Financial Stability: Our selected REITs must have a solid balance sheet that displays consistent revenue streams, this is key to a REIT's long-term stability and investor confidence.
• Dividend Yield: REITs are best known for their dividend yields, hence why we prioritize our list of REITs to show consistent, profitable, dividend payments.
• Market Position: The REIT's presence in high-demand real estate sectors, such as industrial, healthcare, or retail, is essential for long-term growth.
• Management Expertise: A capable and experienced management team is crucial in executing strategies and maximizing shareholder value.

Realty Income Corporation (O) – Best for reliable monthly income

Realty Income Corporation is a well-established REIT known for its monthly dividend payments. Specializing in commercial real estate, particularly retail and industrial properties, the company has a diverse portfolio of over 6,700 properties across the US and internationally.

Realty Income’s consistent track record of dividend payouts has earned it the nickname "The Monthly Dividend Company."

Key features:

• Reality Income's portfolio includes clients from the retail, healthcare, and industrial sectors.
• Over 6,700 properties across 49 states and some areas of Puerto Rico.
• Over 50 years of consistent monthly dividends.

Pros:

• A long history of reliable and growing dividends.
• Diversified portfolio with high-quality tenants.
• Focus on essential businesses that are less affected by economic downturns.

Cons:

• Sensitive to interest rate hikes, as rising rates could affect its debt servicing.

Realty Income is an excellent choice for income-focused investors seeking a stable monthly income stream, especially with its strong portfolio and history of paying dividends.

Digital Realty Trust (DLR) – Best for tech-savvy investors

Digital Realty Trust is one of the largest data center REITs, specializing in owning and managing facilities that offer cloud computing and other IT infrastructure services. With the recent release of DeepSeek's AI, companies are pouring investment into data-center-based REIT stocks in anticipation of the industry growing further.

In addition, after Alibaba's earnings report was released, investors noticed huge growth coming from its cloud business, directly influencing data-center stocks to soar, including Digital Reality's.

With estimates of the digital infrastructure industry seeing a 10-12% CAGR throughout the 2020s, Digital Realty Trust is positioned well to capitalize on this industry's growth.

Features:

• Owns more than 280 data centers across 11 countries.
• Strong relationships with major tech companies, including Microsoft and Google.
• Positioned to benefit from the growing demand for cloud computing and data services.

Pros:

• Exposure to the booming data center and cloud storage sectors.
• Long-term contracts with top-tier tech companies.
• Strong growth potential with the increasing demand for data infrastructure.

Cons:

• Highly dependent on the tech industry, making it vulnerable to sector-specific risks.

For all you tech-savvy investors, Digital Reality is a good option when considering REITs investing, due to the company's exposure to the growing digital economy and need for more data centers.

Public Storage (PSA) – Best for real estate investors seeking stability

One of the largest self-storage REITs in the US. The company owns more than 2,500 storage facilities. This REIT stock has shown resilience, especially during the 2008 financial crisis, and can be considered a safer investment.

Features:

• Over 3,300 self-storage facilities in the U.S.
• High demand for storage space, especially in urban areas.
• Focus on acquiring and developing properties in key growth markets.

Pros:

• Resilient business model, especially during economic uncertainty.
• Strong market position with a broad geographical footprint.
• Reliable and consistent dividend payments.

Cons:

• Market sensitivity to real estate trends and competition from new entrants.

Public Storage stands out for its stability in a variety of market conditions. Investors looking for a safe, consistent income stream from a well-established REIT can consider Public Storage as an ideal option for long-term growth.

Simon Property Group (SPG) – Best for retail sector exposure

The largest retail-focused REIT in the US, Simon Property Group has a diverse portfolio that includes shopping malls, retail parks, and high-end consumer properties.

Although SPG saw massive challenges during the COVID pandemic, the company has shown strong resilience and its stock price has bounced back, surpassing pre-COVID levels.

Features:

• Operates 200+ retail properties across North America, Europe, and Asia.
• Focus on high-quality retail spaces, including flagship malls and outlet centers.
• Partnering with top brands, including Apple, Nike, and Tiffany.

Pros:

• Strong brand portfolio with premium tenants.
• Continually innovating and adapting to retail trends.
• Attractive dividend yield and stable income.

Cons:

• Vulnerable to retail industry volatility and e-commerce competition.

If you're seeking exposure to the retail real-estate sector, then SPG is likely a top pick for you. Its high-quality properties and adaptive strategy make it a solid pick for long-term investors looking for retail-focused REIT exposure.

Vornado Realty Trust (VNO) – Best for urban office space exposure

Vornado Realty Trust is one of the largest office REITs in the US, focused on key urban markets such as New York City and Washington. VNO specializes in office spaces and retail properties.

Features:

• Strong portfolio of office buildings and retail spaces in prime urban markets.
• Focus on high-quality properties in key metropolitan areas.
• Large tenant base, including financial services and tech companies.

Pros:

• Exposure to prime urban office spaces in high-demand locations.
• Attractive dividend yield and potential for capital appreciation.
• Strong leasing activity in key markets.

Cons:

• Sensitive to changes in the office space market, especially with remote work trends.

If you're looking to gain exposure across the real estate market, with a strong focus on major urban centers, then Vornado will offer you a solid option for long-term growth and income from commercial real estate.

Frequently asked questions

Should I invest in REITs?

If you're new to investing and are looking to gain exposure to the real estate sector, then investing in REITs might be the best way to go. You can own a small piece of stock that owns a wide range of estate servicing numerous sectors.

How do REITs make money?

REITs primarily earn an income through the renting of properties they own. In addition, REITs can also earn money through the purchasing, sales, or development of the properties they own.

Are REITs a good investment?

REITs can be a good investment for those seeking income from dividends and exposure to the real estate market. However, like all investments, they carry risks, so it’s important to consider your risk tolerance and investment goals.

Conclusion

You can see investing in REITs can be a great way to gain exposure to the real estate industry without purchasing your own properties. It can also help you avoid the complexities of purchacing and managing your own real estate portfolio but still benefit from the industry.

Whether you're looking for stable income, exposure to specific sectors, or long-term growth, these REITs offer valuable opportunities for investors.