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MillionaireGuide

Investing & Markets

REIT Investing

Own property income without owning any property

Updated 2026-08-04

At a glance

Capital needed
Low capitalUnder $500
Time to first income
MonthsPart-time friendly
Income ceiling
Salary replacement~$30k – $80k/yr
Risk
Moderate3 out of 5
Effort model
Passive
Route to wealth
Compounding
Scalability
5 out of 5
Competition
1 out of 5
Typical earnings
3–6% dividend yield plus variable capital growth
Startup cost
The price of one share

How it works

A real estate investment trust owns income-producing property — warehouses, flats, data centres, shopping centres — and is generally required to distribute most of its taxable income to shareholders. You buy shares like any stock and receive a share of the rent, without a mortgage, a tenant or a repair to arrange.

How to start

  1. 01

    Decide why you want property exposure

    If you want diversification and income, REITs do the job. If you want leverage and control, they do not — that requires owning the asset directly.

  2. 02

    Understand the sector you are buying

    Industrial, residential, healthcare, retail and data centre REITs behave very differently. Buying "property" without knowing which is buying a sector bet blind.

  3. 03

    Use funds of REITs rather than single names

    Individual REITs carry concentrated tenant and geographic risk. A diversified REIT index fund removes most of it for a very low fee.

  4. 04

    Check debt levels and interest cover

    REITs are leveraged businesses. Those with high debt and short maturities suffer badly when rates rise, which is when they most often cut distributions.

  5. 05

    Hold them in a tax-sheltered account where possible

    REIT distributions are frequently taxed as ordinary income rather than at favourable dividend rates, which makes account placement unusually important.

Honest trade-offs

What works

  • Property exposure with none of the management, tenants or maintenance
  • Fully liquid — sellable in seconds, unlike a building
  • Accessible with tiny amounts of capital
  • Higher income yield than most broad equity indices

What does not

  • No leverage, which removes the main advantage of owning property directly
  • Distributions are often taxed less favourably than qualified dividends
  • Share prices move with equity markets, so diversification benefit is smaller than expected
  • Highly sensitive to interest rates, both in valuation and in refinancing cost

Risks and failure modes

  • Rising interest rates hitting both valuations and the cost of the REIT's own debt
  • Structural decline in a sector, as with some retail and office property
  • Distribution cuts during downturns, exactly when the income is most needed

Common questions

They are simpler, liquid and diversified, and they require none of your time. They also remove leverage, control and the ability to force appreciation, which are the main reasons direct property builds wealth faster. REITs are a good way to own property; direct ownership is a better way to build wealth with it.

Typically 3–6%, higher in sectors the market views as risky. Yields materially above that range usually reflect expected trouble rather than a bargain.

Less than the label suggests. They are listed equities and fall alongside the market in broad sell-offs. The diversification is real over long periods but largely absent during the sharp declines when it would be most useful.

Related techniques

Rental Property

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Capital
$10k+
First income
Months
Risk
Ceiling
Seven figures

Index Fund Investing

Investing

Capital
Under $500
First income
Years
Risk
Ceiling
Six figures

Dividend Investing

Investing

Capital
$10k+
First income
Months
Risk
Ceiling
Six figures

Commercial Real Estate

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Capital
$10k+
First income
Months
Risk
Ceiling
Seven figures