Best REITs to Buy Now

In this guide, we cover the top REITs to buy now…

Updated: May 21, 2024
Matt Crabtree

Written By

Matt Crabtree

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Particularly for growing a stocks and shares ISA in the following year, commercial REITs may be a solid, steady income source.

As compared to where it was a year ago, the real estate market is in a very different spot now. With increasing mortgage rates and the cost-of-living problem, the housing market is feeling like it's on the verge of collapse.

Yet, many believe the commercial sector is much stronger and may benefit from this by purchasing REITs (REITs). These are a few of my top selections that I'm considering adding to my Stocks and Shares ISA because of the tax advantages.

Top REITs to buy now: Combining with ISAs… 

  • REITs and ISAs are a good match.
  • To avoid paying dividend tax on your ISA distributions, you can invest in real estate investment trusts. 
  • In some situations, REITs may benefit from preferential treatment. One is the need to distribute a portion of the property portfolio's profits to the company's investors.
  • As a result, this can make the dividend yield, similar to an index fund, more important than with the short-term fluctuations in share price.

In this detailed comparison of top REITS to buy now, we go over what you should know before taking out cash from your digital bank. 

1. ARR — Armour Residential REIT for High Dividends

When it comes to residential real estate investments, ARR is well-known for its substantial REIT dividend and so one of the best REITS to buy now.

To ensure the long-term viability and profitability of its properties, ARR prefers to invest in fixed-rate mortgage residences guaranteed by a government agency.  The REIT's parent business, Armour, had its start in the midst of the financial crisis brought on by irresponsible real estate investing in 2008. 

This is reflected in several Armour policies, such as the firm's deliberate avoidance of the kind of high-risk real estate that contributed to the financial crisis of the early 2000s. As things stand, ARR is able to pay a dividend to shareholders because of the diversity of its property holdings and the relatively low level of overhead expenses it maintains.

  • Payout ratio: 22.22%
  • Depending on your broker, a minimum investment of £2,000 is required
  • Typical investments: Luxury Homes
  • US markets
  • Best REITS to buy now for: Situations with a high potential for cumulative cash-flow returns

2. VNQ — Vanguard Real Estate ETF 

Rather than having a person make the significant, day-to-day choices, this Vanguard ETF uses an automated manager to make stock purchases in the real estate industry, therefore increasing returns on investment from year to year. In addition to managing a wide variety of ETFs and mutual funds, Vanguard is also a well-known advisory firm in its own right.

Established 47 years ago, they were an early adopter of the ETF idea, resulting in some of the most lucrative index funds available to the general public. Vanguard now manages over £5 trillion in assets, with around £18 billion held in real estate ETF equities. 

Hence, the VNQ fund provides investors with exposure to real estate via a diverse group of firms dependent on real estate for income, rather than providing direct linkages to real estate itself.

  • A return on investment of 3.75 per cent
  • A one pound investment is required at minimum
  • Stocks in commercial and residential real estate developments are examples of the types of investments available
  • Ideal REITS to buy now for: Spreading risk across many asset types

3. BRG — Bluerock Residential Growth

Owing to external factors, BRG is one of the most popular REITS to buy now and one of the few real estate businesses stopping payouts; however, they specialise in industrial buildings.

With the closure of the customer-favourite Tesco Bank, and many more banks, together with de-industrialisation across the collective west, it is unclear what the future of this sector is. There may be opportunities. After the REIT's announcement that Blackstone would be acquiring the firm at year's end, the stock price of the company plummeted as it was taken private.

This action enabled Blackstone to effectively consolidate its Bluerock assets with its existing portfolio.

Bluerock's share price had increased annually over the preceding decade prior to the purchase, mostly owing to rising property values in its industrial and residential segments.

Even though we don't know what changes Blackstone will make, having access to Bluerock's properties should provide Blackstone's real estate holdings a firm base for the foreseeable future.

  • No longer paying a dividend (was 2.52%)
  • Low minimum
  • Investments are often made in commercial and residential properties
  • Ideal REITS to buy now for: Achieving stable prices

4. BREIX — Baron Real Estate Mutual Fund

Unlike the other top REITS to buy now, BREIX focuses on its share price over dividends thanks to being a mutual fund. Its holdings have a broad diversification across all real estate sectors.

The company first got its start in 1982, meaning that Baron Real Estate is familiar with real estate woes and recession. This lifespan also gives the company a long-term mindset, leading to its focus on reinvestment and portfolio growth over massive dividend payouts.

In total, the fund manages $1.25 billion in properties, with most of its top holdings being shares of real estate companies.

  • Dividend yield: None
  • Minimum investment: £1
  • Types of investments: Various
  • Markets: United States and minor international holdings
  • Top REITS to purchase now: Commercial real estate exposure

5. PLD — Prologis REIT 

PLD specialises on logistics-related commercial properties including data centres. San Francisco's thriving technology and distribution industries over the last decade provide the startup a solid foundation from which to expand.

This incredible fund oversees about 4,900 properties and over £140 billion in assets. These investments are either completely owned by Prologis or are joint ventures with other major real estate investment trusts.

High-barrier properties are a key component of Prologis's investing strategy. Prologis has become a dominant player in the real estate investment trust industry by targeting high-priced assets that its competitors simply cannot afford. Making it one of the best REITS to buy now.

  • Gain on investment: 2.61 per cent
  • Distribution: The USA and 17 other countries
  • Ideal REITS to buy today for: Sustainable development

6. MAA — Mid-America Apartment Firms  

MAA is a residential real estate investment firm listed on the NYSE that focuses on high-performing apartment complexes.

The majority of the firm's assets are located in the affluent Sun Belt area of the United States, which includes the likes of Silicon Valley and the South Florida metropolis of Miami.

As a whole, the corporation oversees 278 properties in 16 different states and the District of Columbia. Investors in MAA have been paid dividends annually since 1994, making this REIT a good choice for individuals seeking passive income.

  • Yield on investments: 3.41%
  • Favourite REITS to purchase today for: Residential apartment buildings as investment options

7. LSI — Life Storage  

This self-storage business is structured and traded like a real estate investment trust, making it a dividend stock with excellent returns. The REIT's stock price has declined by a lesser proportion than the overall stock market during the last year, giving it a strong hedge against inflation and general market downturns.

The exceptional standing of Life Storage as a business is much to blame. It is not a traditional real estate investment trust, although it does franchise self-storage units. Ultimately, this management and Life Storage's usefulness to the broader public help maintain the stock price high, even when macroeconomic pressures drag things down.

  • Yield on investment: 4.17%
  • Self-storage facilities are one kind of investment
  • Excellent REITS to buy now for: Creating a buffer against inflation

8. AMT — American Tower Corp

Specifically, AMT invests in communications REITs with strong occupancy rates. By specialising in telecommunications, AMT is better able to weather economic storms.

Since the global economy and population both benefit from technological advancements, more bandwidth is required to ensure that information and communication may flow unhindered and without interruption.

American Tower Corp invests in real estate associated with communications in order to produce value for its investors as these communication enterprises develop and increase in value.

AMT should not worry too much about short-term recessions dragging their properties down because of the necessity of communication in today's culture and the fact that communication technology needs specialist interiors to maintain it.

In addition, the firm has investments in twenty different nations across four different continents. Hence, the company's portfolio is diversified throughout four major markets, increasing the likelihood of steady revenue and future expansion.

  • Yield on investment: 3.02%
  • Telecom hubs, international markets
  • Ideal REITS to purchase now for: Making safe investments in property

9. LON:0KUE — Realty Income Corporation 

Realty Income is one of the few REITs that pay a dividend every month, providing a steady stream of passive income that may be invested in a Roth IRA to build the account's value via compound interest.

While Realty Income does own a small number of homes, the bulk of its portfolio is commercial buildings used by businesses providing services and goods that the vast majority of people use, such as supermarkets, drugstores, and gyms.

The company's interests are mostly in the United States, however it also has some real estate in the United Kingdom (about 9%).

Despite these two markets being distinct, the Western world shares many economic tendencies, particularly in recent years, so this diversification is pleasant but not spectacular. 

But, many of Realty's assets are necessities in today's world, making them excellent investments for retirement. In addition to the high reinvestment potential of its payouts, Realty Income shows no signs of disappearing any time soon.

  • Payout ratio: 22.22%
  • Depending on your broker, a minimum investment of £2,000 is required
  • Typical investments: Luxury Homes
  • Ideal REITS to buy now for: High potential for cumulative cash-flow returns

10. CPT — Camden Property Trust 

As opposed to certain real estate investment trusts, CPT is more interested in multi-family dwellings. CPT's stock price skyrocketed in the years preceding up to the current recession as the company's assets grew rapidly.

The value of the 171 properties managed by CPT is over £7 billion. Their properties have increased in value as a result of booms in home prices and rent price increases, contributing significantly to the almost doubling of the stock price over the last decade.

Even though times have been tough in recent years, this expansion nonetheless took place. When market sentiment shifts to the upside, this may be a precursor of CPT's meteoric rise. Despite the dynamics of the market, real estate has always been a good investment, therefore CPT should continue for some time.

  • Yield on investment: 3.18%
  • A one dollar investment is required at minimum
  • Apartment complexes are a good option for investors
  • In the Markets, the USA
  • Top REITS to buy now for: A rise in residential UK prices

11. AEWU.L — AEW UK

The AEW UK REIT, which focuses on industrial buildings, is one option to explore if you're looking to invest in the real estate market.

More than half of its assets are classified as industrial, while the rest are a mix of office and retail space. As its average lease term is under four years, AEW focuses on purchasing buildings with short remaining leases. This is done in order to boost rental prices and generate revenue.

The dividend yield for 2022 was expected to be 7.1%, according to the company's announcement that it would pay an annual dividend of 8 pence. One share of AEW UK REIT was valued at 98 pence when the market opened on November 24, 2022.

  • Best REITS to buy now for: Industrial properties

12. CREI.L — Custodian 

The Custodian REIT (CREI.L) is an option to explore if you want to invest in a UK REIT with a diverse portfolio. Custodian's assets are varied both in terms of location and property type; it has properties in many different industries and in many different parts of the nation. Custodian has a diverse portfolio that includes, but is not limited to the following:

  • Industrial
  • Storage Facilities for Retail
  • Structures housing workplaces
  • Street level

Its share price declined by just 7% during the first nine months of 2022, which is less than the declines seen by other REITs.

Custodian has just purchased Drum, a rival UK REIT. Drum was the landlord for ten buildings housing seventy-nine tenants, bringing in £3.3 million in rent each year as per the terms of their rental contracts. If you're looking to increase your portfolio's potential for growth, this kind of development may be of interest to you.

As of 18 November 2022, Custodian provided a dividend return to stockholders of 8.1% and had a yearly contractual rental roll of £40.5 million. When markets opened on November 24th, 2022, one share of Custodian REIT was worth 93 pence.

  • Strong REITS to buy now for: Diverse properties

13. EPIC.L — Ediston Property Investment Company

The Ediston Property Investment Corporation (EPIC.L) is a commercial real estate firm that focuses on shopping centres and other retail real estate.

Although retail parks and other shopping centres likely took a hit when consumers stopped visiting in person due to the Covid-19 outbreak, they may soon see a resurgence in commerce as shoppers make up for lost time.

The increasing popularity of “click and collect” solutions among consumers bodes well for the future of the industry.

This is happening as researchers at the Motley Fool suggest that the low pricing of commercial REITs may already include concerns about slowing consumer spending at shopping centres.

Price-to-earnings growth (PEG) is one metric that analysts use to judge whether a company is over or overvalued, and Ediston Property Investment Company has a PEG of 0.3.

If you're looking to supplement your income with your investments, the 8.3% dividend yield the firm is offering may also be appealing to you. One share of Ediston Property Investment Company REIT was worth 66 pence when trading began on November 24th, 2022.

  • Lucrative REITS to buy now for: Shopping centres and retail properties

14. IUKP.L — iShares UK Property ETF

Being one of the few UK REIT exchange-traded funds, the iShares UK property fund follows the performance of an index of UK-listed real estate businesses and REITs funds. It’s composed of mostly of but not limited to:

  • British land
  • Segro
  • Investment trusts

If you want diversified exposure to the UK real estate industry and REIT equities in general, this iShares ETF might be a good option. Reason being, an ETF efficiently diversifies your investment across all members of the fund rather than investing in individual estate firms. 

Many subsets make up the real estate industry. Investing in real estate might lead you in many different paths, such as the commercial, residential, or land markets. Hence, this iShares ETF might be a good option to consider if you want to diversify your portfolio without focusing on a certain market segment. 

When markets opened on November 24th, 2022, one unit of the iShares UK Property UCITS ETF was worth £4.70. The ETF distributes a dividend of 1.77% every quarter.

  • Well-established REITS to buy now for: ETF REITs

15. KCR.L — KCR Residential 

As the UK's population rises and the countrywide lack of rental houses worsens, KCR Residential may be in a prime position to meet the rising demand for homes to rent.

Privately owned rental properties were the first focus for the trust's establishment in 2014. Rents in the UK may continue to rise due to a scarcity of available rental homes and a dearth of new construction.

KCR's business strategy, which focuses on private rental residences in London and the south of England, might benefit from this. These places have numerous wealthy neighbourhoods that, if rents continue to climb, would be able to absorb the additional expense.

Furthermore, KCR hopes to expand into a new market by constructing flats for those aged 55 and above. With the opening of markets on November 21, 2022, one unit of KCR Residential REIT was valued over £1.

  • Excellent REITS to buy now for: Private rentals

16. LAND.L — Landsec

Landsec was established in 1944 and is now the biggest Real Estate Investment Trust in the United Kingdom. When real estate investment trusts were established in 2007, it transitioned into that form.

According to data from the London Stock Exchange, Landsec has an astounding market capitalization (market cap) of £4.7 billion. Landsec's varied property portfolio includes investments in the retail, leisure, and office space markets. As a whole, Landsec's portfolio in various real estate markets is 24 million square feet.

It has just bought the well-known MediaCityUK and has ambitious ambitions to further develop the surrounding region. There is hope for the future of Landsec's 7.2% dividend yield, according to experts at Moneyweek. Landsec's stock opened at £6.29 on the 24th of November, 2022.

  • Underrated REITS to buy now for: High cap

17. NRR.L — NewRiver 

Established in 2009, NewRiver REIT invests mainly in commercial and leisure properties in the United Kingdom. As of 30 May 2022, the total value of its varied portfolio of properties is over £1.4 billion.

Restaurants, Bars, and Malls and Storage Facilities for Retail are all included. At the end of the first half of 2022, just 3% of NewRiver's portfolio remained unoccupied, with an occupancy rate of 97%. If the success of your company depends on rental money, the fact that you've almost reached your maximum tenancy capacity is excellent news.

NewRiver's cash flow may be stable and robust if this is the case. A share of NewRiver REIT was worth 73 pence when trading began on November 24th, 2022.

  • Top REITS to buy now for: Commercial and leisure

18. THRL.L — Target Healthcare 

The healthcare division of Target Fund Managers Ltd is worth £730 million. Its REIT began operations in 2013, and since then, it has focused mostly on assets used in healthcare. The company's 79 care facilities in the United Kingdom were its most prominent asset as of January 5, 2022.

The average remaining lease on its properties is about 29 years. Positively for its bottom line, this probably implies it will be quite some time before any of its buildings go empty.

The Target Healthcare REIT's management may be able to pursue growth opportunities, including the diversification of the company's holdings, if they can rest certain that its income would be stable. Nonetheless, such long-term leases are an advantageous trend for REITs in general.

The firm invested £173 million by the end of Q4 2021, having purchased 18 additional care homes and a new-build site. One Target Healthcare REIT unit was valued 84 pence at market open on November 24, 2022.

  • Best REITS to buy now for: Healthcare

19. SHED.L — Urban Logistics

Urban Logistics, a real estate investment trust founded in 2016, is dedicated to facilitating the smooth operation of logistics networks.

Big box stores are in high demand due to the growth of online shopping. Distribution centres are essential for further processing of things as they near their final destinations, and Urban Logistics is well-versed in the acquisition and management of such facilities.

Urban Logistics now owns 133 “mid-box urban logistics properties” around the UK and has planned projects worth a further £53 million. As the firm has a high occupancy rate, the management worries that rental prices may increase as businesses compete for distribution centres. As a result, this can boost sales and earnings.

According to data provided by Hargreaves Lansdown, Urban Logistics now offers a dividend yield of 5.19%, making it an attractive option for anyone seeking a steady stream of income over the investment term.

If dividend payouts are a significant element of your investing strategy, you may want to think about this. The price per share of Urban Logistics stock was £1.43 when trading began on November 24th, 2022.

  • Top REITS to buy now for: Logistics warehouse networks

Beginners guide to REITS — Buying Steps

Investing in property via a trust Investments in real estate may provide steady income. It's good that you've devised your own method for selecting REITs that fits your needs and risk tolerance. 

Typical filters used by REIT investors include these criteria: REIT type, business strategy, dividend history, cash flow generation, leverage.

There are certain guidelines for each of them that will help you choose what works best for you.

Applying these principles to the REITs shown above will help you come up to speed fast before connecting your credit/debit card and making an investment.

★ 1. Know your choices

Several distinct types of real estate investment trusts for trading exist. There are primarily 3 categories of REITs:

  • Real estate investment trusts that are owned by shareholders have equity.
  • MREITs, or mortgage real estate investment trusts, are a kind of property financier.
  • Hybrid real estate investment trusts take in and invest in property while also providing financing for it.

Properties that are specialised in by equity REITs, mortgage REITs, and hybrid REITs include:

  • Places of business
  • Commercial establishments, such as shops and malls
  • Warehouses and factories are examples of industrial properties
  • Buildings used for living
  • Medical centres and hospitals
  • Structures designed specifically for the use of self-storage
  • Timberland
  • Farmland
  • Cell towers, data centres, and other forms of infrastructure

For those just starting out in the market, choosing the most basic investment strategy like mutual funds is usually the best bet. Starting with a retail or residential real estate investment trust might be a good option. Unlike mortgage REITs and infrastructure REITs, that's more likely to be something you can relate to.

★ 2. Embrace the business model (FFOs)

You need to know how the REIT generates income now and how it plans to increase that income in the future. Analyse the typical lease term, occupancy rates, and tenant makeup. Learn about the REIT's expansion and buying habits by reading its financial statements and other official documents.

There are a number of key considerations that you should make before putting your money into a real estate investment trust (REIT), and many of them are the same as those you would make before investing in any other company.

Yet, we must not forget to discuss why these considerations are so vital to real estate investment trusts.

The annual income of a real estate investment trust is referred to as the FFO. In speaking, a REIT's ability to weather a bad market is proportional to the amount of income and liquidity it has at its disposal.

A high FFO also indicates that the REIT has enough of cash on hand for further investments. One way real estate investment trusts (REITs) add to their worth is by buying new investments with their surplus cash.

A greater FFO means the REIT's gross funds available for reinvestment in properties are greater.

Many real estate investment trusts use debt financing to acquire properties. A real estate investment trust's ability to make a long-term profit may be determined by comparing the trust's income against its expenses, such as debt repayments.

Furthermore, a savings or runway section will often be included in financial statements. This sum symbolises the REIT's reserves and emergency fund, which helps it through tough times. A higher rating here indicates that the REIT is forward thinking and appreciates contingency planning.

★ 3. Look at past dividend payments

Real estate investment trusts that have consistently given dividend payments and increased those dividends over time are among the finest options. 

As dividends go up, so does your net worth and your portfolio's efficiency. Also, growing dividends are an indication that the REIT is progressing. Dividend increase that can be maintained over the long term is tied to the success of the underlying company.

Most people who invest in REITs do so because of the dividends they pay out. If you want to be sure your money is safe from a REIT's bankruptcy, you should verify that the dividend is not just substantial but also reasonable in relation to the income the REIT generates.

To recap, REITs are required by law to distribute at least 90% of their income to investors in the form of dividends. Because of this mandate, the REIT will have to spend 10% of its income on operations.

As a result, investors should look for stable dividend payments with no or minimal declines. Management or maintenance issues may be to blame for such declines.

Not all real estate investment trusts invest in affordable housing. Some companies specialise on a particular kind of real estate, such as hospitals or commercial complexes.

You may find more value in your investment if the REIT's emphasis is in a field in which you have some expertise. Consider the occupancy rates of the properties in which a REIT has invested, in addition to the types of properties in which it has invested.

Even though a REIT is responsible for collecting rent from the residents of an apartment building, it does not guarantee that every unit is occupied. As a result, a high portfolio average occupancy rate is a good indicator of a REIT's ability to sustain its income stream.

★ 4. Observe current patterns 

An increasing dividend payout history should be accompanied by a similar increase in revenue and cash flow. See if you can draw any conclusions from such tendencies. How much and during what time period has the income increased? How does that expansion stack up against that of similar REITs? Is there a corresponding increase in long-term debt?

Funds from operations, or FFO, is a common indicator of cash flow. Earnings from operations plus depreciation and amortisation are the components of FFO.

FFO is a useful metric for gauging operational efficiency since it excludes the effects of interest income and the sale of assets. For this reason, FFO per share is used by REITs and their analysts rather than the more generic earnings per share.

Current and past FFO figures for a REIT may be found in the entity's publicly available financial statements.

★ 5. Review the income and expenditures statement

Due to the fact that REITs might be highly leveraged, it is important to analyse their financial statements. Analysing the debt-to-equity and debt ratios can help you evaluate a REIT's leverage in relation to those of its rivals.

The debt-to-equity ratio reveals the proportion of debt to equity used to finance the REIT's operations. Debt to equity is determined by dividing total liabilities by total equity. The debt-to-equity ratio of a company is defined as 3:1. High debt-to-equity ratios of 2.5:1 to 3.5:1 are acceptable for real estate investment trusts.

Solvency may be quantified using the debt ratio by dividing total assets by total liabilities. If the REIT has a debt-to-equity ratio of above 60%, it may be unable to get future financing. According to Nareit, the average debt ratio for equity REITs trading on public exchanges was 34.5 percent.

The average term of the REIT's fixed-rate borrowings and the ratio of fixed-rate to variable-rate debt are additional relevant pieces of information.

Why invest in REITS?

Investors may get both liquidity and diversity from REITs, which are two main benefits. Throughout time, real estate investments have shown to have a low level of volatility and a positive risk/return profile. 

Yet, real estate is an exceedingly illiquid asset type, since completing agreements may take weeks or months. By having their shares listed on major stock exchanges, REITs make it easier for investors to acquire and sell their holdings.

An extensive amount of money is often necessary to invest in real estate, which restricts potential purchasers to a narrow range of markets or types of properties.

One way to avoid this risk is to purchase shares in a real estate investment trust (REIT), which often owns a diversified portfolio of properties. These properties may include apartments, stores, hospitals, or even telecommunications equipment.

Top REITS to buy now — Summary

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The ideal real estate investment trust for you is one that invests in property types you're familiar with and has a solid financial track record.

Knowing where your money is going is essential before making any kind of investment. Gaining knowledge increases your self-assurance and the likelihood of your investment paying off.

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Real estate investment trusts are useful for investors when the quarterly dividend distribution is consistent, well-defined, and likely to last for years. It's much more important now that you know what you're doing when it comes to financial investments.

Unlike the short-term bets made by traders on commodities and paper assets, investors play the long game with their investments. Even with a REIT, investing in real estate is a long-term proposition. 

If you want to invest in REITs for income, you need first choose where on the yield-reliability continuum you want to be. Whenever in doubt, err on the side of caution. Look for dividend-paying REITs with a solid track record and an easy-to-understand business plan.

Don't put all of your eggs in one basket, as the saying goes. Together with equities and bonds, high yield real estate investment trusts are a solid addition to any portfolio. The secret to stock market success is striking a balance between growth potential and stability.

Related Guides:

FAQs

What are REITs?

How do REITs work?

What is the easiest way to invest in REITs?

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Is it the right time to put money into a REIT?

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