By Harry Prabandham · Updated September 27, 2026
Investing & Markets
Public REITs: Real Estate You Can Buy on an Exchange
Public REITs own or finance income property and trade like stocks: daily liquidity, but stock-like swings and mostly ordinary-income dividends.
Public REITs: Real Estate You Can Buy on an Exchange
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What is a public REIT?
- A real estate investment trust is a company that owns or finances income-producing property and trades on a stock exchange.
- To keep REIT status, it must distribute at least 90% of taxable income and earn most income from, and hold most assets in, real estate.
- In return, it generally avoids corporate income tax on the income it pays out.
- Some listed real estate companies skip REIT status and are taxed like ordinary corporations.
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Full Guide
What is a public REIT?
- A real estate investment trust is a company that owns or finances income-producing property and trades on a stock exchange.
- To keep REIT status, it must distribute at least 90% of taxable income and earn most income from, and hold most assets in, real estate.
- In return, it generally avoids corporate income tax on the income it pays out.
- Some listed real estate companies skip REIT status and are taxed like ordinary corporations.
What kinds of REITs are there?
- Equity REITs own properties such as apartments, warehouses, data centers, cell towers, self-storage, healthcare facilities, offices, and retail.
- Mortgage REITs hold real estate loans or mortgage-backed securities and tend to be more sensitive to rates and leverage.
- Non-traded REITs are registered but not listed, with limited liquidity and different fee structures.
How are REIT dividends taxed?
- Most REIT dividends are taxed as ordinary income rather than at lower qualified-dividend rates.
- Individuals can generally deduct 20% of qualified REIT dividends under Section 199A, a break the 2025 tax law made permanent.
- Some payouts are capital gain distributions or return of capital, which lowers your cost basis.
- Because of this, many investors consider holding REITs in IRAs or other tax-advantaged accounts.
What are the benefits and limits of public REITs?
- They offer daily liquidity, low minimums, and diversification across many properties and managers.
- Short-term prices often move with the stock market, and correlation with stocks can rise in sell-offs.
- Rising interest rates can pressure valuations and borrowing costs.
- Dividends are not fixed and can be cut when occupancy, rents, or financing conditions weaken.
How do public REITs compare with private real estate?
- Private real estate is appraised periodically, so its values look smoother, but that does not mean lower underlying risk.
- Private vehicles typically involve lockups, higher fees, and K-1s; public REITs usually issue 1099s.
- Public REITs can trade at premiums or discounts to the estimated value of their properties.
- For many households, a primary residence is already a large real estate position to consider first.
Key takeaways
- Public REITs provide liquid access to commercial real estate with stock-market-like volatility.
- Their dividends are mostly ordinary income, softened by the permanent 20% Section 199A deduction.
- Sector mix and interest-rate sensitivity drive much of the risk.
- REITs can lose value, and past income or returns do not guarantee future results.
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