INSIGHT

How to invest in REITS

June 12, 2025

Industries: Real Estate Investment Trusts (REITs)

Investing in real estate doesn’t have to mean buying buildings or managing tenants. Real estate investment trusts—REITs—offer businesses a straightforward way to tap into the income and growth potential of commercial properties without the headaches of direct ownership.

Whether you’re looking to diversify your portfolio, generate steady cash flow, or explore new asset classes, understanding how to invest in REITs can open doors to new opportunities for your organization.

The basics of REITs

When it comes to investing in real estate investment trusts (REITs), the concept is refreshingly straightforward. REITs are companies that own, operate, or finance income-producing real estate—think office buildings, shopping centers, apartments, and more.

By purchasing shares of a REIT, your business can access the benefits of commercial real estate, such as regular dividend income and portfolio diversification, without the need to directly buy or manage properties. If you’d like a deeper dive into the fundamentals, visit our comprehensive guide to what REITs are.

Why REITs appeal to businesses

REITs have become a go-to investment for businesses seeking more than just traditional stocks and bonds. The main reasons include:

Diversification benefits – REITs introduce a new asset class that doesn’t move in lockstep with traditional stocks and bonds, helping smooth out portfolio performance when other investments underperform
Steady cash flow – REITs are legally required to distribute at least 90% of taxable income as dividends, providing businesses with regular, predictable income streams often at higher yields than other equities
Real estate exposure without ownership hassles – Businesses can participate in commercial real estate income and appreciation without managing properties, negotiating leases, or handling maintenance
Flexibility and scalability – Easy to adjust real estate exposure by buying or selling REIT shares, allowing businesses to focus their energy on core operations rather than property management

Risk reduction – Real estate returns are influenced by different factors (local economies, property trends, rental income) than traditional investments, providing built-in portfolio balance

Types of REITs you need to know about

REITs come in several forms, each offering unique benefits and considerations for business investors. Understanding these types can help you select the right fit for your organization’s goals and risk profile.

Equity REITs

Equity REITs own and operate income-producing real estate, such as office buildings, shopping centers, apartments, and industrial properties. These REITs generate revenue primarily by leasing space and collecting rents from tenants. Their income is closely tied to the performance of the underlying real estate market, and they often provide steady dividend income along with the potential for property value appreciation over time.

Mortgage REITs

Mortgage REITs (often called mREITs) don’t own properties directly. Instead, they invest in mortgages and mortgage-backed securities, earning income from the interest on these loans.

Mortgage REITs can offer higher yields than equity REITs but are more sensitive to changes in interest rates and broader economic conditions. Their returns depend on the spread between the interest income from their mortgage assets and their own borrowing costs, making risk management and market awareness especially important.

Hybrid REITs

Hybrid REITs combine the strategies of both equity and mortgage REITs. They invest in both physical properties and mortgages or mortgage-backed securities. This flexible approach allows hybrid REITs to shift their focus between property ownership and mortgage investments based on changing market conditions. For businesses, hybrid REITs can offer a balanced income stream and potentially act as a buffer against market volatility.

Publicly Traded REITs

Publicly traded REITs are listed on major stock exchanges. They offer transparency, liquidity, and ease of access—you can buy and sell shares just like any other stock. This makes them a practical choice for businesses seeking flexibility and the ability to adjust their real estate exposure quickly.

Public Non-Traded REITs

Public non-traded REITs are registered with the Securities and Exchange Commission (SEC) but are not listed on stock exchanges. While they can provide access to commercial real estate, they tend to be less liquid and may charge higher fees. Their share values aren’t as readily available, and investors may face restrictions on when and how they can sell their holdings.

Private REITs

Private REITs are not registered with the SEC and do not trade on public exchanges. They are typically available only to institutional or accredited investors. Private REITs often require higher minimum investments and provide less transparency, but they may offer access to unique real estate opportunities not available in public markets.

Each type of REIT brings its own mix of income potential, risk, and operational complexity. By understanding these distinctions, your business can make more informed decisions about how to invest in REITs and build a portfolio that supports your long-term objectives.

Comparing REIT investment options

Let’s take a look at how these options stack up against key investment criteria.

Investment Type	Liquidity	Diversification	Minimum Investment	Transparency	Fees	Suitable For
Publicly Traded REITs	High	Low-Med	Low	High	Low	Most businesses
REIT Mutual Funds	High	High	Low-Med	High	Med	Businesses seeking simplicity
REIT ETFs	High	High	Low	High	Low	Businesses needing flexibility
Public Non-Traded REITs	Low	Med	Med-High	Med	High	Long-term, patient investors
Private REITs	Very Low	Med	High	Low	High	Institutional investors

4 ways businesses can invest in REITs

Businesses have a variety of ways to invest in REITs, each with its own advantages and considerations. Understanding your options can help you find the right fit for your organization’s goals, risk profile, and operational needs.

1. Direct investment in REIT stocks

Purchase shares of individual publicly traded REITs through a brokerage account. This gives you direct exposure to specific real estate sectors—office buildings, shopping centers, or apartments—letting you tailor investments to your business strategy.

When evaluating individual REITs, focus on sector focus, management quality, dividend history, and the underlying property portfolio.

2. REIT mutual funds

These funds pool capital from multiple investors and are professionally managed across a diversified basket of REITs. They offer built-in diversification and professional oversight, reducing single-REIT risk. Perfect for businesses wanting broad real estate exposure with a hands-off approach.

3. REIT exchange-traded funds (ETFs)

REIT ETFs trade like stocks and provide instant diversification across multiple REITs. They combine stock-like liquidity with mutual fund diversification, typically featuring lower fees and all-day trading flexibility.

4. Indirect investment via retirement plans

Many workplace retirement plans offer REIT access through mutual funds or ETFs. This efficiently provides employees with real estate exposure while supporting long-term financial wellness.

No matter which route you choose, aligning your REIT investments with your organization’s objectives and risk tolerance is key. Each option offers a different balance of control, diversification, and complexity—so you can select the approach that best supports your business’s growth and financial strategy.

Key considerations (and risks) for business investors

Before your business invests in REITs, it’s important to understand the key considerations and risks that come with this unique asset class. By being proactive and informed, you can make decisions that align with your organization’s goals and risk tolerance.

Market and sector risks: REITs are tied to real estate market health and economic cycles. Property value shifts, commercial space demand changes, or tenant defaults can impact investments. Different REIT types (office, retail, industrial) respond differently to market trends.
Interest rate sensitivity: Interest rates directly influence REIT performance. Mortgage REITs are particularly sensitive since their income depends on the spread between borrowing costs and mortgage interest. Rising rates can affect property values and capital costs, potentially reducing returns.
Liquidity: Investment liquidity varies by REIT type. Publicly traded REITs offer high liquidity for quick adjustments. Non-traded and private REITs are less liquid, potentially tying up capital longer with exit restrictions.
Tax implications: REITs distribute most taxable income as dividends, typically taxed as ordinary income rather than at lower qualified dividend rates. Consider holding REIT investments in tax-advantaged accounts to manage overall tax liability.
Regulatory and governance factors: Publicly traded REITs provide transparency through SEC registration and regular reporting. Non-traded and private REITs may offer less operational visibility, increasing risk. Always review governance structures and regulatory compliance before committing capital.

By weighing these factors, your business can approach REIT investing with confidence and clarity, positioning your organization for sustainable growth and resilient income streams.

REIT investment checklist

Here’s a quick checklist to guide your business through the REIT investment process:

Define your investment objectives: income, capital appreciation, diversification, or inflation hedge.
Assess your organization’s risk tolerance and liquidity needs.
Conduct due diligence:
- Review REIT portfolios, tenant quality, lease terms, property types, and geographic focus.
- Analyze key financial metrics like FFO (Funds From Operations), AFFO (Adjusted Funds From Operations), NAV (Net Asset Value), and dividend sustainability.
- Evaluate the management team and governance practices.
Understand fee structures: brokerage commissions, fund expense ratios, and management fees.
Monitor and review your investments regularly, keeping an eye on performance, market trends, real estate sector dynamics, and interest rate changes.

Learn to invest in REITs with BPM

Real estate investment trusts (REITs) give your business new ways to generate income, diversify your portfolio, and access commercial real estate—without the complexity of direct ownership.

If you’re ready to explore how REITs can support your growth, connect with BPM’s real estate team for tailored guidance and strategic insights. Reach out to our real estate specialists today to start the conversation.