The 10 Best REIT ETFs on the Market

Kyle Woodley

Real estate investing made easy.

If you want a simpler way to invest in real estate than owning rental properties or flipping houses, investors should look to real estate investment trusts, or REITs. These trusts invest in real estate either via direct ownership of properties or through buying mortgages and other mortgage-related securities. However, REITs play in a number of areas -- from retail to health care to residential -- so investors are best served buying the sector broadly. But what blend makes the most sense? We'll explore this by looking at the top 10 REIT ETFs according to U.S. News & World Report.

#10: VanEck Vectors Mortgage REIT Income ETF (ticker: MORT)

MORT invests in mortgage REITs. These REITs borrow money to invest in mortgages or mortgage-backed securities, and make money off the spread in interest rates. MORT invests in 26 such mREITs, with a heavy overweight in Annaly Capital Management (NLY) and American Capital Agency (AGNC), which make up a combined 22 percent of the fund. Like all REITs, mREITs must pay out at least 90 percent of their taxable income in dividends.

Expenses: 0.41 percent, or $41 annually per $10,000 invested
Dividend yield: 9.4 percent

#9: iShares Residential Real Estate Capped ETF (REZ)

REZ invests in equity REITs -- trusts that actually own and operate real estate properties. REZ's name would indicate that it invests in residential-focused REITs, and it does, but it also holds health care and self-storage trusts as well. In fact, self-storage REIT Public Storage (PSA) is the top holding at 12.27 percent of the fund, followed by a pair of apartment REITs -- Equity Residential (EQR) and AvalonBay Communities (AVB) -- at just more than 8 percent each.

Expenses: 0.48 percent
Dividend yield: 4.03 percent

#8: iShares U.S. Real Estate ETF (IYR)

IYR invests in a wide blend of 117 U.S.-based REITs. Not only does IYR have more holdings than MORT and REZ, but it also covers more areas of the REIT world -- including retail, residential, office, health care and even some mREITs -- and it's less top-heavy than the other two funds. Mall operator Simon Property Group (SPG) is the top holding at just less than 7 percent, followed by communications REIT American Tower Corp. (AMT) and Public Storage at 5.06 and 4.23 percent, respectively.

Expenses: 0.43 percent
Dividend yield: 4.17 percent

#7: PowerShares KBW Premium Yield Equity REIT Portfolio (KBWY)

While REITs in general are a high-yielding asset class, the KBWY looks to maximize that by investing in some of the market's highest-yielding equity REITs. This is the best of the best. The top holdings among the mere 29 stocks in KBWY include Government Properties Income Trust (GOV) at 5.50 percent, Independence Realty Trust at 4.91 percent and WP Glimcher (WPG) at 4.87 percent.

Expenses: 0.35 percent
Dividend yield: 5.83 percent

#6: iShares Cohen & Steers REIT ETF (ICF)

ICF is a diversified REIT ETF that invests in 30 trusts considered to be the largest and most dominant in their respective property sectors. Nearly 25 percent of the fund is dedicated toward retail, with nearly 20 percent each in specialized and residential trusts. Top holdings aren't too surprising, featuring big REIT names Public Storage and Simon Property, as well as data center REIT Equinix (EQIX), but the yield is one of the lowest in this space.

Expenses: 0.35 percent
Dividend yield: 3.67 percent

#5: Vanguard REIT ETF (VNQ)

Vanguard brings its special brand of low-cost diversified exposure to the REIT world via the VNQ, which immediately stands out with its dirt-cheap expenses and exposure to 150 U.S. REITs that cover a wide swath of the real estate space. Retail REITs make up nearly 25 percent of the fund, with residential, office, specialized and health care trusts all receiving double-digit weightings. Top holdings include SPG, PSA and EQR.

Expenses: 0.12 percent
Dividend yield: 3.8 percent

#4: SPDR Dow Jones REIT ETF (RWR)

The RWR is yet another broad-based U.S. REIT ETF, though this one bets a little bit more heavily on its top holdings. SPG makes up nearly 10 percent of the fund, Public Storage just a little more than 6 percent and Equity Residential and Prologis (PLD) each more than 4 percent. Here, apartments have more than 17 percent exposure, regional malls are second at 15.21 percent and health care also gets double-digit exposure at 11.67 percent.

Expenses: 0.25 percent
Dividend yield: 3.6 percent

#3: First Trust S&P REIT Index Fund (FRI)

The FRI is built in a similar vein to VNQ, holding a fairly diversified blend of real estate investment trusts and featuring retail at nearly a quarter of the fund. FRI is slightly more diverse at 156 holdings, and its top 10 holdings are slightly lighter than VNQ by a few basis points. Top holdings will sound familiar -- Simon Property, Public Storage and Equity Residential.

Expenses: 0.48 percent
Dividend yield: 2.94 percent

#2: iShares Global REIT ETF (REET)

If you're looking for international exposure, REET is one of the most popular options -- though it's not heavily global considering U.S. REITs still make up more than 63 percent of the fund. The rest of REET's geography weight is thick in developed markets, with Japan and Australia at 7 percent weightings and the U.K. at 6 percent. Top holdings are dominated by U.S. REITs, too, including SPG and PSA. The only internationals in the top 10 are France's Unibail-Rodamco and Australia's Scentre Group.

Expenses: 0.14 percent
Dividend yield: 3.7 percent

#1: Schwab U.S. REIT ETF (SCHH)

In many ways, Schwab's SCHH isn't terribly different from many of the other blended REIT offerings on this list, stacking SPG, PSA and EQR up at the top, and offering large weights in retail, residential and specialty real estate. However, SCHH has all other REIT ETFs beat in one respect -- expenses that would win any limbo contest.

Expenses: 0.07 percent
Dividend yield: 2.45 percent

Kyle Woodley is managing editor of InvestorPlace.com. Investing is his second love, with Ohio sports teams as his first. Naturally, this has warped his general perception of love, sparking (among other things) an unnatural affection for the Haddaway hit, "What Is Love?" Follow him on Twitter @kylewoodley.