How to Make Money with REITs (2026): Dividends, Yields, and Real Estate Income

Most people who want to invest in real estate imagine the same thing: buying rental properties, dealing with tenants, managing repairs, and carrying hundreds of thousands in mortgage debt. For some, that’s the right path. For many others, the capital, risk, and hassle make it unrealistic.

REITs offer a completely different route to the same destination — real estate income — without owning a single property.

A REIT (pronounced “reet”) lets you invest in commercial real estate the same way you’d buy stock in a company. You purchase shares through your brokerage, the REIT collects rent from its properties, and it distributes most of that income directly to you as dividends. You don’t manage anything. You don’t get a call at 2 AM about a broken water heater. You don’t need a mortgage.

The trade-off, predictably, is that the returns are more modest than owning property directly with leverage. But the simplicity, liquidity, and accessibility make REITs one of the most practical ways for ordinary investors to add real estate to their portfolio.

This guide covers how REITs actually work, how the income math breaks down, the different REIT types and what they pay, the risks you need to understand, and whether this strategy fits your situation.

First — This Is Important…

Hey, my name is Mark.

After 15+ years testing income methods, REITs are something I include in my own portfolio for diversification and passive income. They’re legitimate and I respect the strategy. But like dividend stocks, the capital required for meaningful monthly income is substantial — and for anyone starting from limited savings, building income first makes more sense than optimizing investments.

The income model I rely on is local lead generation. I build simple websites that rank in Google and generate leads for local businesses. Each site pays $500–$1,200/month, recurring, with 92–97% margins. That recurring income funds my investment portfolio, including REITs.

Go here to see the exact system I use to do this

Now — here’s how making money with REITs actually works.

What REITs Are

A Real Estate Investment Trust is a company that owns, operates, or finances income-producing real estate. Congress created REITs in 1960 to give everyday investors access to large-scale commercial real estate — the kind of properties that were previously available only to wealthy individuals and institutions.

REITs own and manage everything from apartment buildings and office towers to shopping centres, data centres, hospitals, warehouses, cell towers, and self-storage facilities. Some of the largest REITs manage portfolios worth billions of dollars across thousands of properties.

To qualify as a REIT under IRS rules, a company must meet several requirements — but the one that matters most to you as an investor is this: a REIT must distribute at least 90% of its taxable income to shareholders as dividends.

That mandatory distribution is why REITs tend to pay significantly higher dividends than regular stocks. The company can’t hoard the cash. It has to give it to you.

Publicly traded REITs are listed on major stock exchanges (NYSE, Nasdaq) and can be bought and sold through any brokerage account, just like regular stocks. You can buy a single share of a REIT for $20–$200 depending on the company — no down payment, no mortgage, no closing costs.

How REITs Pay You

REIT income arrives through two channels.

Dividend Income (The Primary Channel)

REITs collect rent or interest from their real estate assets and distribute the majority of that income to shareholders. Most publicly traded REITs pay dividends quarterly, though some — like Realty Income, which has built its brand around this — pay monthly.

The amount you receive depends on how many shares you own and the dividend per share. If a REIT pays $3.00 per share annually and you own 500 shares, you receive $1,500 per year in dividends.

REIT dividend yields are typically higher than the broader stock market. While the S&P 500 averages a 1.5–2.0% yield, REIT yields commonly range from 3–7%, with some mortgage REITs and specialty REITs paying 8–12%.

Capital Appreciation (The Secondary Channel)

Like any stock, REIT share prices can rise over time as the underlying real estate becomes more valuable or the company grows. If you buy a REIT at $50 per share and sell it at $70, you’ve made a $20 per share capital gain in addition to any dividends collected.

Historically, dividends have contributed roughly half of total REIT returns, with price appreciation contributing the other half. Over the past 50 years, equity REITs have delivered average annual total returns of approximately 10–12%, competitive with the S&P 500.

The 90% Distribution Rule: Why REIT Yields Are High

This is the fundamental mechanic that makes REITs attractive for income investors.

Regular corporations earn profits, pay corporate income taxes, then decide whether to distribute some earnings as dividends. They can retain as much cash as they want.

REITs operate differently. To maintain their tax-advantaged status (REITs don’t pay corporate income taxes on distributed income), they must pay out at least 90% of taxable income as dividends. Many pay out 100% or more (funded by depreciation allowances that shelter income).

This means REIT investors receive a larger share of the company’s cash flow than investors in typical stocks. It also means REITs have less retained earnings to fund growth — which is why they frequently issue new shares or take on debt to finance acquisitions. This isn’t inherently bad, but it’s a dynamic you should understand.

Yield Math: What REIT Income Actually Looks Like

Let’s run the numbers the same way we do across all these income investing articles — because capital requirements are the number that matters most.

The average yield across publicly traded equity REITs runs approximately 4–5% as of 2026, though individual REITs range widely from 2% to 10%+.

Monthly Income Target	Annual Income Needed	Capital at 4% Yield	Capital at 5% Yield	Capital at 7% Yield
$100/month	$1,200	$30,000	$24,000	$17,143
$250/month	$3,000	$75,000	$60,000	$42,857
$500/month	$6,000	$150,000	$120,000	$85,714
$1,000/month	$12,000	$300,000	$240,000	$171,429
$2,500/month	$30,000	$750,000	$600,000	$428,571

The pattern is identical to dividend stocks: meaningful monthly income requires meaningful capital. At a 5% yield, $1,000/month in REIT dividends requires $240,000 invested. The slightly higher average yield compared to regular dividend stocks helps — but doesn’t change the fundamental capital requirement.

Types of REITs

Understanding the different REIT categories helps you choose the right fit for your portfolio and risk tolerance.

Equity REITs (Most Common)

These own and operate physical properties. They collect rent from tenants and distribute the income. Examples include Realty Income (retail and commercial properties), Prologis (industrial warehouses), American Tower (cell towers), and Welltower (healthcare facilities). Equity REITs make up roughly 90% of all publicly traded REITs.

Mortgage REITs (mREITs)

These don’t own properties — they invest in real estate debt, specifically mortgages and mortgage-backed securities. They earn income from the interest spread between their borrowing costs and the interest they receive on their mortgage investments. Mortgage REITs typically pay much higher yields (7–12%) but are significantly more volatile and sensitive to interest rate changes. They’re the riskier subset of the REIT universe.

Hybrid REITs

These own both physical properties and mortgage investments. They’re less common and offer a blend of equity and mortgage REIT characteristics.

REIT Sectors: Where the Properties Are

The REIT universe spans nearly every commercial real estate sector. Each behaves differently and carries different risk profiles.

REIT Sector	What They Own	Typical Yield Range	Key Risk Factor
Residential	Apartments, manufactured housing	3–5%	Rent regulation, housing supply
Commercial/Retail	Shopping centres, malls, net-lease properties	4–6%	E-commerce disruption, consumer spending
Industrial	Warehouses, logistics centres, data centres	2–4%	Economic slowdowns, supply glut
Healthcare	Hospitals, senior living, medical offices	4–6%	Regulatory changes, operator quality
Infrastructure	Cell towers, fibre networks	2–4%	Technology shifts, capital intensity
Office	Office buildings, coworking spaces	4–7%	Remote work trends, vacancy rates
Self-Storage	Storage facilities	3–5%	Overbuilding, economic sensitivity
Specialty	Timberland, farmland, casinos, outdoor advertising	Varies	Sector-specific factors

Data centres and industrial REITs have been among the strongest performers in recent years, driven by e-commerce growth and AI infrastructure demand. Office REITs have struggled as remote work reduced demand for traditional office space. Sector selection matters significantly.

Risk Factors

REITs carry specific risks that differ from regular stock investing.

Interest Rate Sensitivity

This is the single biggest risk factor for REITs. When interest rates rise, REIT prices typically fall for two reasons. First, higher rates make bonds and savings accounts more competitive with REIT yields, reducing investor demand. Second, REITs rely on debt financing for growth — higher rates increase borrowing costs and reduce profitability. The 2022–2023 rate hiking cycle punished REITs significantly, with many declining 20–30%.

Dividend Cuts

While the 90% distribution rule forces REITs to pay out income, the amount can decrease if the underlying properties generate less revenue. Economic downturns that reduce occupancy rates or rental income can lead to dividend cuts. During COVID-19, several hotel and retail REITs reduced or suspended dividends entirely.

Sector-Specific Risks

An office REIT faces different threats than an industrial REIT. Remote work trends have crushed office demand in some markets while warehouse demand has soared. Investing in a single REIT sector concentrates your risk. Diversifying across multiple sectors (or using a REIT ETF) reduces this exposure.

Leverage Risk

REITs use significant debt to acquire properties. A typical REIT might have a debt-to-equity ratio of 0.5–1.0. In stable environments, leverage amplifies returns. In downturns or rising rate environments, leverage amplifies losses. Check a REIT’s balance sheet — lower debt relative to assets generally means lower risk.

Tax Treatment (Less Favorable Than Qualified Dividends)

Here’s an important distinction many investors miss: most REIT dividends are taxed as ordinary income, not at the preferential qualified dividend rate. If you’re in the 24% tax bracket, you pay 24% on REIT dividends compared to 15% on qualified dividends from regular stocks. This tax disadvantage makes REITs particularly well-suited for tax-advantaged accounts (IRA, Roth IRA, 401k) where the dividend tax treatment doesn’t matter.

Yield Traps

As with dividend stocks, an unusually high REIT yield can signal trouble rather than opportunity. If a REIT yields 12% and its peers yield 5%, the market is pricing in a high probability of a dividend cut, declining property values, or both. Always investigate why a yield is abnormally high before buying.

Pros and Cons

Pros: Access to real estate income without owning property. Higher dividend yields than most stocks (typically 4–7%). Required to distribute 90%+ of income — you get the cash flow. Highly liquid — buy and sell shares instantly through your brokerage. Professional management handles all property operations. Diversification across multiple properties and sometimes multiple sectors. No minimum investment beyond the cost of a single share. Historical total returns competitive with the S&P 500.

Cons: Significant capital required for meaningful income ($240,000+ for $1,000/month). REIT dividends taxed as ordinary income (not qualified dividend rates). Highly sensitive to interest rate changes. Share prices can decline even while dividends are maintained. Sector-specific risks (office, retail) can cause significant losses. Leverage amplifies both gains and losses. No control over property management decisions.

Who REITs Are For

REITs fit well if you want real estate exposure without the complexity of owning property directly, are building a diversified portfolio and want to add an income-producing asset class, have capital in a tax-advantaged account (IRA, Roth IRA) where the unfavourable dividend tax treatment doesn’t apply, want higher yields than typical stock dividends, or are willing to accept interest rate sensitivity in exchange for higher current income.

Who REITs Are NOT For

REITs aren’t the right primary strategy if you need substantial income within the next 1–2 years and have limited capital. If you have $10,000, a REIT portfolio yielding 5% generates $500 per year — about $42/month. That’s real money, but it’s not life-changing income. REITs also aren’t ideal if you hold them in a taxable account and are in a high tax bracket (the ordinary income tax treatment erodes returns), can’t tolerate significant price volatility during rising rate environments, or are looking for the control and leverage benefits of owning physical property.

For a broader view of realistic income timelines across different strategies, see realistic online income expectations.

How to Start Investing in REITs

Step 1: Open a brokerage account. Any major brokerage (Fidelity, Schwab, Vanguard) offers access to publicly traded REITs. If possible, use a tax-advantaged account (Roth IRA or traditional IRA) to shelter REIT dividends from unfavourable tax treatment.

Step 2: Decide between individual REITs and REIT ETFs. Beginners generally benefit from starting with a REIT ETF, which provides instant diversification across dozens of REITs. The Vanguard Real Estate ETF (VNQ) holds 150+ REITs with a 0.12% expense ratio. The iShares U.S. Real Estate ETF (IYR) is another popular option. More experienced investors can select individual REITs based on sector preference, yield targets, and company quality.

Step 3: Evaluate before buying. For individual REITs, check the dividend yield and whether it’s been stable or growing, the Funds from Operations (FFO) — this is the REIT equivalent of earnings per share and more relevant than traditional EPS, the payout ratio as a percentage of FFO (below 85% is generally sustainable), the debt-to-equity ratio (lower is safer), occupancy rates across the REIT’s portfolio, and the quality and diversification of tenants.

Step 4: Consider your allocation. Financial advisors commonly suggest 5–15% of a diversified portfolio allocated to REITs. Going much higher concentrates your exposure to real estate and interest rate risk.

Step 5: Reinvest or collect. If you’re building wealth, reinvest dividends to compound your position. If you need current income, collect the cash dividends.

For deeper research on stocks and income-producing investments, see stock newsletters.

REIT Investment Strategies

There are several approaches to building a REIT portfolio, depending on your goals and risk tolerance.

Income-focused approach. Prioritise REITs with the highest sustainable yields. This typically means targeting equity REITs in the 4–6% range across stable sectors like net-lease retail, healthcare, and residential. Avoid chasing the 10%+ yields from mortgage REITs unless you understand and accept the additional volatility.

Growth-focused approach. Target REITs in expanding sectors — data centres, industrial logistics, and cell tower REITs — where property demand is rising and rental rates are increasing. These often have lower current yields (2–4%) but stronger price appreciation potential.

Diversified approach. Use a REIT ETF as your core position, then add individual REITs in sectors you have conviction about. This gives you broad exposure while allowing tactical tilts. A common allocation might be 60% REIT ETF plus 40% in 3–5 individual REITs you’ve researched.

Dividend reinvestment approach. If you don’t need current income, reinvesting REIT dividends through a DRIP compounds your position over time. A $50,000 REIT portfolio yielding 5% with reinvested dividends grows to approximately $132,000 in 20 years from dividends alone — before any price appreciation.

Frequently Asked Questions

Can you live off REIT income? Yes, with enough capital. At a 5% yield, $600,000 invested in REITs generates approximately $30,000/year or $2,500/month. Most people who live off REIT income spent years or decades building their portfolios.

Are REITs a good investment for beginners? REIT ETFs are beginner-friendly — they offer instant diversification and require no real estate knowledge beyond basic investing concepts. Individual REITs require more research to evaluate properly.

How do REITs compare to owning rental property? Rental property offers higher cash-on-cash returns through leverage and tax deductions but requires active management, significant capital (down payment), and illiquidity. REITs offer lower returns but complete passivity, instant liquidity, and no management responsibility. They’re complementary strategies, not competitors.

What’s a good REIT yield? For equity REITs, 3–6% is typical and generally sustainable. Yields above 7–8% from equity REITs should be investigated carefully — the high yield may signal risk. Mortgage REITs routinely yield 8–12% but carry significantly higher risk.

How often do REITs pay dividends? Most pay quarterly. Some, like Realty Income, pay monthly. The payment frequency doesn’t affect your total annual income — it only changes how often you receive it.

Should I hold REITs in a Roth IRA? Ideally, yes. Roth IRA distributions are tax-free, which eliminates the disadvantage of REIT dividends being taxed as ordinary income. This maximizes your after-tax return.

The Bottom Line

REITs are one of the most accessible ways to invest in real estate and generate income without the complexity of direct property ownership. The 90% distribution requirement creates yields that are materially higher than most stock dividends, and the long-term total returns have been competitive with the broader market.

But as with every capital-dependent investment strategy, the math requires substantial starting capital for substantial income. If you’re starting with $5,000–$20,000, REIT dividends will supplement your income modestly while you build toward larger positions over time.

The approach that’s worked best for me is generating income through a business first — building an asset that produces monthly cash flow — and then systematically investing that cash flow into income-producing assets like REITs. The business handles the near term. The investments handle the long term.

If you want to see how that income engine works, here’s the model I use to build simple websites that rank in Google and generate $500–$1,200/month each in recurring lead generation revenue.