Owning real estate sounds like something only adults with mortgages do — but what if you could own a tiny slice of a shopping mall, an apartment complex, or a warehouse for the price of a pair of sneakers? That's exactly what a REIT (Real Estate Investment Trust) lets you do. Let's explain how.
REITs: Real Estate You Can Buy Like a Stock
A REIT (pronounced "reet") is a company that owns and operates income-producing real estate — think apartment buildings, shopping centers, office towers, warehouses, cell phone towers, even data centers. Instead of buying a building yourself, you buy shares of the REIT on the stock market, just like buying shares of Apple or Nike.
By law, REITs must pay out at least 90% of their taxable income to shareholders as dividends. That's why REITs are known for often paying higher dividend yields than typical stocks — the rent collected from tenants gets passed along to you as a shareholder.
So instead of saving up for years for a down payment on property, you could buy one REIT share for maybe $20-$100 and immediately own a fraction of real, physical buildings generating rental income.
How REITs Make (and Lose) Money
REITs make money mainly two ways: rent collected from tenants, and the buildings themselves gaining value over time. When you own REIT shares, you benefit from both — regular dividend payments plus potential price appreciation of the shares.
But REITs aren't risk-free. Real estate values can drop during economic downturns. If tenants can't pay rent (something that happened to many shopping mall and office REITs during the pandemic), dividends can get cut. Rising interest rates also tend to hurt REIT prices, since real estate is often bought with debt, and borrowing becomes more expensive.
Different REITs focus on different property types — residential, retail, industrial, healthcare facilities, even data centers for the internet — so performance really depends on the sector and the broader economy.
Why Add Real Estate to a Portfolio?
Real estate often behaves differently from stocks and bonds, which is why some investors use REITs for diversification — spreading money across assets that don't all move in the same direction at the same time.
REITs also give you exposure to real estate without the headaches of being a landlord: no fixing broken pipes, no screening tenants, no huge mortgage. You can buy or sell shares any trading day, unlike physical property which can take months to sell.
That said, REITs are still stocks at heart — they can be volatile, and a REIT-focused ETF spreads risk across many properties and REIT companies rather than betting on just one building or company.
How Teens Can Actually Access REITs
You can buy individual REIT stocks or REIT ETFs through a custodial account just like any other stock or fund. A REIT ETF holds dozens of different REITs at once, which smooths out the ups and downs of any single property type or company.
Before buying, check the REIT's dividend history, what kind of properties it owns, and how it performed during past downturns — the same research habits you'd use for any stock, covered in how to research stocks.
Remember, dividends from REITs are generally taxed differently (often as regular income) than qualified stock dividends, which matters once you start filing taxes — rules change yearly, so always check current guidelines or ask a parent/tax preparer.
Try It: Compare Real Estate to Stocks
A smart exercise: pick one REIT (say, one that owns apartment buildings) and one regular stock, and track their price and dividend behavior for a month. Notice how REIT prices react to interest rate news differently than, say, a tech stock reacts to a product launch.
This kind of comparison builds your instinct for how different asset types behave — a skill that matters whether you're deciding on asset allocation or just trying to understand the news.
Try it: Use our simulator to add a REIT ETF to a mock portfolio alongside stocks and bonds, and see how the mix changes your overall risk and return.