The Top Real Estate Stocks and REITs

Real estate has long been one of the most reliable ways to build wealth, but buying physical property isn’t the only way to participate in the market. Today, investors can gain exposure to real estate through two major types of publicly traded assets: REITs (Real Estate Investment Trusts) and real estate stocks. While they may appear similar at first glance, they operate differently, offer distinct benefits, and play unique roles in a diversified portfolio.

If you’re exploring real estate investing without becoming a landlord—or if you’re comparing REITs vs. real estate stocks—this guide breaks down everything you need to know.

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What Is a REIT?

A Real Estate Investment Trust (REIT) is a company that owns, operates, or finances income‑producing real estate. REITs allow everyday investors to buy shares in large‑scale real estate portfolios—similar to how you’d buy shares of a stock. According to Charles Schwab, a REIT typically owns or operates income‑producing real estate or related assets, and investors can participate in the gains and losses of these assets by purchasing shares on public exchanges.

Key Characteristics of REITs

REITs are unique because they are structured under special tax rules. To qualify as a REIT, a company must:

• Invest at least 75% of its assets in real estate.
• Generate at least 75% of its income from rents, mortgage interest, or real estate sales.
• Distribute at least 90% of taxable income to shareholders as dividends, a requirement highlighted by The Motley Fool.

This structure allows REITs to avoid corporate income tax, enabling them to pass more income directly to investors.

Types of REITs

REITs come in several categories, including:

• Equity REITs – Own and operate income‑producing properties such as apartments, office buildings, warehouses, and shopping centers.
• Mortgage REITs (mREITs) – Invest in mortgages or mortgage‑backed securities and earn income from interest.
• Hybrid REITs – Combine property ownership with mortgage investments.

Because REITs must pay out most of their income, they are known for offering high dividend yields, making them attractive to income‑focused investors.

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What Is a Real Estate Stock?

A real estate stock is any publicly traded company involved in the real estate industry but not structured as a REIT. These companies may develop properties, manage real estate services, build homes, or provide real estate technology.

Examples of real estate stocks include:

• Homebuilders
• Real estate brokerages
• Property developers
• Real estate technology companies (PropTech)
• Construction material suppliers

Unlike REITs, real estate stocks do not have special tax requirements or mandatory dividend payouts. They operate like traditional corporations and reinvest profits at their discretion.

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REITs vs. Real Estate Stocks: What’s the Difference?

Although both REITs and real estate stocks give investors exposure to the real estate market, they differ in structure, taxation, risk profile, and income potential.

Comparison Table

Feature	REITs	Real Estate Stocks
Structure	Trust-like entity focused on real estate	Traditional corporation
Income Requirement	Must distribute 90% of taxable income as dividends	No required dividend payout
Tax Treatment	Avoids corporate income tax	Pays corporate taxes
Income Potential	Typically high dividends	Dividends vary; often lower
Growth Potential	Moderate (limited reinvestment)	Higher potential due to reinvested profits
Volatility	Often lower due to stable rental income	Can be more volatile
Exposure	Direct exposure to real estate assets	Exposure to real estate business operations

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Why Investors Choose REITs

REITs offer several advantages that make them appealing to both beginners and experienced investors.

1. High Dividend Income

Because REITs must distribute most of their taxable income, they often provide steady, above‑average dividends. This makes them popular among retirees and income‑focused investors.

2. Diversification

Real estate behaves differently from stocks and bonds. Adding REITs to a portfolio can reduce overall volatility.

3. Liquidity

Unlike physical real estate, REIT shares trade on major stock exchanges, offering easy buying and selling. NerdWallet notes that REITs allow investors to invest in real estate without buying or managing properties themselves.

4. Access to Large‑Scale Real Estate

REITs own assets that individual investors typically cannot access—such as data centers, hospitals, industrial parks, and large apartment complexes.

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Why Investors Choose Real Estate Stocks

Real estate stocks offer a different set of advantages:

1. Higher Growth Potential

Because real estate companies can reinvest profits, they may grow faster than REITs.

2. Broader Industry Exposure

Real estate stocks include homebuilders, brokerages, and technology companies—offering exposure beyond property ownership.

3. Flexibility in Dividends

Companies can choose how much to reinvest or distribute, allowing for strategic growth.

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Which Is Better: REITs or Real Estate Stocks?

There is no universal “best” choice—only what fits your goals.

Choose REITs if you want:

• Reliable dividend income
• Lower volatility
• Direct exposure to real estate assets
• A hands‑off way to invest in property

Choose real estate stocks if you want:

• Higher growth potential
• Exposure to real estate services or development
• Companies that reinvest profits
• More diversification within the real estate industry

Many investors choose to hold both, balancing income and growth.

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How to Invest in REITs and Real Estate Stocks

Investing in either asset type is straightforward:

1. Buy Shares Through a Brokerage

Both REITs and real estate stocks trade on major exchanges like the NYSE and NASDAQ.

2. Use ETFs for Instant Diversification

Real estate ETFs bundle multiple REITs or real estate companies into a single investment.

3. Consider Your Risk Tolerance

REITs offer stability and income; real estate stocks offer growth and volatility.

4. Research Property Types

U.S. News highlights that REITs span residential, commercial, and specialty sectors. Understanding these categories helps you build a balanced portfolio.

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Final Thoughts

REITs and real estate stocks both offer powerful ways to invest in the real estate market without buying physical property. REITs provide steady income and direct exposure to real estate assets, while real estate stocks offer growth potential and broader industry exposure. By understanding the differences, benefits, and risks of each, you can choose the investment strategy that best aligns with your financial goals.