Real estate investment trusts, or REITs, are popular long-term investments for their attractive yields. Some investors own REITs as a way to diversify their investment portfolios, too.

Rather than buy one or more REITs individually, investors can get exposure to a collection of REITs through a real estate exchange-traded fund.

What Is a Real Estate ETF?

Real estate ETFs are managed products that invest in a basket of real estate operating companies, or REOCs, and/or REITs.

The biggest difference between the two: REOCs typically reinvest profits back into their businesses, while REITs must pay out 90% of their taxable income to shareholders as dividends. As a result of their legal structure, REITs typically offer attractive yields—and that has made REITs the investment of choice for most real estate ETFs.

Exchange-traded funds that invest in real estate stocks can be simple one-stop solutions for a few reasons:

• REIT ETFs maintain a portfolio of real estate stocks and thereby provide instant diversification within the sector.
• REIT ETFs are, in general, low-cost.
• Real estate ETFs are easy to buy and sell; many of the best REIT ETFs are managed by popular asset managers with brokerage platforms.

Those investors who’d like to get exposure to real estate stocks through an ETF have several highly rated REIT ETFs to choose from.

The 5 Best REIT ETFs to Buy in 2025

The best REIT ETFs all land in one of Morningstar’s two real estate categories and earn Morningstar Medalist Ratings of Bronze or higher with 100% analyst coverage. All data is as of June 2, 2025.

1. Dimensional US Real Estate ETF DFAR
2. Schwab US REIT ETF SCHH
3. SPDR Dow Jones Global Real Estate ETF RWO
4. Vanguard Global ex-US Real Estate ETF VNQI
5. Vanguard Real Estate ETF VNQ

Morningstar expects the highly rated real estate ETFs on this list to outperform their peers over a full market cycle. But even though the funds on our list of the top REIT ETFs all focus on real estate, they practice very different strategies, and as a result, they can behave very differently from each other. Investors need to do some homework to understand exactly what a particular REIT ETF invests in before buying.

Key Factors to Consider When Choosing a REIT ETF

Here are a couple of things for investors to think about as they research the funds on our list of top-rated REIT ETFs to buy.

Do I want an active REIT ETF or a passive REIT ETF? Most real estate ETFs are passive investments, which means they’re tracking a particular index; there’s no manager actively picking stocks. In fact, just one of the names on our list of top REIT ETFs is actively managed.

Do I want an ETF that sticks with US REITs or one that includes non-US real estate stocks?Three of the funds on our list of top real estate ETFs focus on US real estate, one invests in US and non-US real estate, and one focuses exclusively on non-US real estate stocks. Why go international with a real estate ETF? Geographical diversification, for one. And non-US real estate stocks often provide higher yields than their US counterparts, too.

Here’s a look at each of the best REIT ETFs, along with a commentary from the Morningstar analyst who covers the fund.

Dimensional US Real Estate ETF

• Morningstar Medalist Rating: Gold
• Morningstar Category: Real Estate
• Active or Index? Active
• Index Tracked: N/A
• Yield: 2.83%

The only Gold-rated fund on our list of the best REIT ETFs to invest in, Dimensional US Real Estate ETF follows an active rules-based strategy that provides exposure to a broad swath of US REITs.

A sound investment process and strong management team underpin Dimensional US Real Estate ETF’s Morningstar Medalist Rating of Gold.

This strategy doesn’t track an index, but it confers the benefits of a traditional passive fund. It sweeps in a broad collection of US REITs and weights them by market capitalization. That approach channels the market’s collective view on the relative value of each REIT and promotes low turnover.

While Dimensional builds this portfolio systematically, the team that manages it actively trades with the goal of minimizing turnover and market impact costs.

The US real estate securities market is somewhat narrow, but this fund diversifies risk effectively.

This share class lands in the cheapest quintile of its Morningstar Category. Its competitive expense ratio, in conjunction with the fund’s People, Process, and Parent Pillars, indicates that this share class has the ability to deliver positive alpha versus its category benchmark, explaining its Morningstar Medalist Rating of Gold.

Read Morningstar’s full report on Dimensional US Real Estate ETF.

Schwab US REIT ETF

• Morningstar Medalist Rating: Bronze
• Morningstar Category: Real Estate
• Active or Index? Index
• Index Tracked: Dow Jones Equity All REIT Capped Index
• Yield: 3.15%

The first of several index funds on our list of the best real estate ETFs, Schwab US REIT provides pure exposure to domestic REITs

Schwab US REIT ETF is a very cheap, well-constructed fund that offers access to the public US real estate market.

The Dow Jones Equity All REIT Capped Index, which this fund fully replicates, takes a sensible, no-frills approach. The index sweeps in liquid US REITs with market caps above $200 million and weights them by market capitalization. Linking REITs’ price and portfolio weighting channels the market’s consensus view on each holding’s relative value. Indexing has not historically worked as well in real estate as broader stock markets, but it’s cost-efficient and should do more good than harm.

Market-cap-weighting can breed concentration, but a series of constraints keeps this fund diversified. Holdings must weigh less than 10% of the portfolio, and all holdings that weigh more than 4.5% cannot collectively exceed 22.5% of the portfolio. The fund inevitably encounters some firm-specific risk because the US real estate securities market is somewhat narrow, but it diversifies better than most peers.

The fund spreads its bets across property types, too. Its 40% allocation to specialized REITs seems heavy, but the differentiated nature of the specialized label eases concentration concerns. Holdings that own and operate timberland, cell towers, data centers, and casinos all share the “specialized” moniker. These properties will respond differently to interest rates and industry factors, ensuring this fund’s diversification.

The outlines of this portfolio look a lot like the real estate Morningstar Category average, proof that it draws on the full opportunity set available to active investors in this space. It periodically over- or underweights certain property types, but it never drifts far from the status quo. That amplifies the impact of this fund’s pronounced cost advantage and positions it for strong category-relative performance.

Read Morningstar’s full report on Schwab US REIT ETF.

SPDR Dow Jones Global Real Estate ETF

• Morningstar Medalist Rating: Bronze
• Morningstar Category: Global Real Estate
• Active or Index? Index
• Index Tracked: Dow Jones Global Select Real Estate Securities Index
• Yield: 3.62%

The first global real estate fund on our list of REIT ETFs to buy, SPDR Dow Jones Global Real Estate ETF holds about 28% of its portfolio in non-US real estate. More than 90% of the index this ETF tracks consists of REITs.

SPDR Dow Jones Global Real Estate ETF invests in US real estate more heavily than most but otherwise represents the global real estate market accurately, turning its low fee into a performance edge.

The Dow Jones Global Select Real Estate Securities Index that underpins this fund reflects the composition of the global public real estate market. It sweeps in large, liquid REITs and real estate operating companies from around the world. Securities are weighted by market capitalization, a sensible and cost-efficient approach. Market-cap-weighting channels the market’s collective view of each holding’s relative value. It also curbs turnover and the associated trading costs, with help from the index’s turnover buffers.

Cap-weighted index funds must capture the full opportunity set available to their active peers for their low fees to work their magic, and this fund generally checks that box. Its value-growth and market-cap orientations mirror the global real estate Morningstar Category average. Specialized REITs that focus on the likes of timber and cell towers are off limits for this strategy, but it favors many of the same property types as its average peer. By mimicking the contours of the category average, this fund enhances the impact of its competitive fee and positions itself for strong category-relative performance.

The fund’s country allocation is a bit lopsided, though. US real estate accounted for an average of 63% of the portfolio over the past decade, exceeding its average peer by 16 percentage points. This zealous stake means that fluctuations in the US market acutely affect category-relative performance.

While this concentration bears monitoring, the fund diversifies well elsewhere. It has grown more top-heavy of late but still carries less firm-specific risk than most peers. The portfolio contains a range of property types that respond to differentiated industry factors and vary in interest-rate sensitivity.

REITs tend to be more sensitive to interest rates than most sectors, in part because interest rates have a direct impact on property values. Also, their cash flows are fixed from regular rent collections, making them more bondlike than most other sectors.

Read Morningstar’s full report on SPDR Dow Jones Global Real Estate ETF.

Vanguard Global ex-US Real Estate ETF

• Morningstar Medalist Rating: Bronze
• Morningstar Category: Global Real Estate
• Active or Index? Index
• Index Tracked: S&P Global ex-U.S. Property Index
• Yield: 4.62%

The highest-yielding ETF on our list of the top real estate ETFs to buy, Vanguard Global ex-US Real Estate ETF excludes US REITs from its portfolio. Also notably, its portfolio is skewed more toward real estate stocks instead of REITs.

Vanguard Global ex-U.S. Real Estate is a solid foreign real estate offering that boasts a very low fee, though excluding US securities makes it a strange fit in the global real estate Morningstar Category.

The S&P Global ex-U.S. Property Index, which this fund fully replicates, has a narrower scope than its global real estate peers. It features real estate investment trusts and real estate stocks from everywhere, except the United States. Excluding domestic real estate restricts the fund’s opportunity set and differentiates itself from its peers, diminishing the impact of its cost advantage.

Asian real estate securities dominate the portfolio. Consequently, the fund’s category-relative performance can fluctuate with the broad Asia-Pacific market. Many of these securities joined the index because of the index’s relatively lax market cap and real estate revenue requirements. That feature also sweeps in more emerging-markets securities than average.

The index weights stocks by market capitalization, which is a sensible approach. It channels the market’s collective view on the relative value of each holding. Market-cap-weighting also curbs turnover and the associated transaction costs.

Market-cap-weighting can induce concentration, but this fund’s broad reach makes it a well-diversified offering. Its 700-plus holdings, reliably one of the most in the global real estate category, invite little firm-specific risks. The fund spreads investment across an array of property types and countries, too.

Unlike many of its peers, real estate stocks—not REITs—shape most of this portfolio. Geography explains why. Real estate securities tend to come in the form of development companies in markets like China and Hong Kong, while REITs are more popular in markets like the United Kingdom and Australia. The two different structures should provide similar exposure.

Read Morningstar’s full report on Vanguard Global ex-US Real Estate ETF.

Vanguard Real Estate ETF

• Morningstar Medalist Rating: Silver
• Morningstar Category: Real Estate
• Active or Index? Index
• Index Tracked: MSCI US Investable Market Real Estate 25/50 Index
• Yield: 4.06%

Vanguard Real Estate ETF is by far the most popular and largest name on our list of top REIT ETFs to buy. Its portfolio features REITs as well as real estate management and development firms.

Vanguard Real Estate Index is a good real estate fund because it diversifies well, channels the market’s collective wisdom with its market-cap weighting, and charges a very low fee.

The MSCI US Investable Market Real Estate 25/50 Index, which this fund fully replicates, mostly consists of equity real estate investment trusts. Equity REITs own and operate income-producing real estate, so this portfolio is a good proxy for the US real estate market. Some real estate management companies squeeze into the index as well, but they represented just 8% of the portfolio as of December 2024 and rarely crack the 10% threshold.

This index strategy weights securities by their market capitalization, a cost-efficient approach that leverages the market’s collective view of each holding’s relative value. Most portfolio additions attract significant investor attention, so they tend to be priced accurately. Market-cap-weighting also helps mitigate turnover and the associated trading costs, along with buffers designed explicitly for that purpose.

Market-cap-weighting can prompt concentration in focused sector funds, but index constraints and a broad reach keep this one out of trouble. The 10 largest holdings constituted between 40% and 50% of assets over the past five years, compared with 45% to 65% for its average peer. The portfolio is balanced across property types, reducing its exposure to one industry and keeping interest-rate sensitivity under wraps. The fund occupies the blended third of the Morningstar Style Box.

The dimensions of this portfolio mimic the average US real estate Morningstar Category fund. The portfolios lean into different property types on occasion, but their market-cap and value-growth orientations are similar. Mimicking the complexion of the category average enhances the impact of the fund’s low-cost edge and should translate into strong category-relative performance over the long term.

Read Morningstar’s full report on Vanguard Real Estate ETF.

Pros and Cons of Investing in REIT ETFs

REIT ETFs provide investors with access to a diversified portfolio of real estate securities, thereby reducing per-issue risk. Real estate ETFs also tend to be low-cost and offer attractive yields.

But given their income focus, REIT ETFs aren’t as tax-efficient as other types of ETFs that do not invest in dividend-paying stocks.

Real estate ETFs typically perform best when interest rates are falling or when the economy is strengthening. They often underperform when interest rates rise or the economy weakens.

Although real estate is often touted as a diversifier in an investment portfolio, recent research from Morningstar suggests that the asset class has been a less effective diversifier lately.

“In the past, real estate has had relatively low correlations with the broader US equity market,” explains Morningstar portfolio strategist Amy Arnott. “In recent years, however, real estate has generally moved more in tandem with the broader US equity market.”

How to Find More Top REIT ETFs to Buy

Use these Morningstar resources to help find more REIT ETFs to research further:

• Review Morningstar’s list of Real Estate Medalist Funds, which includes top-rated ETFs and mutual funds.
• Research real estate ETFs based on your personal selection criteria by using our Morningstar Investor Screener. The tool, which is available to Morningstar Investor members, allows investors to screen and rank REIT ETFs based on various criteria.
• Interested in assembling your own basket of REITs instead of buying a REIT ETF? Review Morningstar’s list of The Best REITs to Buy.
• Visit Morningstar’s real estate sector page for the latest articles and videos about REITs.