Top 7 Best Real Estate ETFs to Buy in 2024

Investing in real estate has traditionally been seen as a great way to diversify your portfolio and secure long-term wealth. However, owning physical property can come with significant challenges—such as large upfront costs, maintenance, and property management. This is where real estate ETFs (Exchange-Traded Funds) come in as a low-cost, diversified, and accessible alternative to direct real estate ownership.

With the growing demand for real estate ETFs in 2024, investors are increasingly turning to this asset class to take advantage of the rising real estate market while minimizing risk. But which real estate ETFs should you consider for your portfolio this year? This guide explores the top 7 best real estate ETFs in 2024.

What Are Real Estate ETFs?

Real estate ETFs are funds that pool money from multiple investors to buy shares of companies operating in the real estate sector. These typically include Real Estate Investment Trusts (REITs), which own and operate income-producing properties. Instead of owning physical property, you own a portion of a fund that invests in various real estate types—such as commercial, residential, or industrial properties.

ETFs offer a diversified way to invest in real estate, including multiple real estate assets from different sectors and geographic locations. They are also traded on stock exchanges, making them highly liquid and easier to manage than direct property investments, allowing investors to pay for REIT shares conveniently.

Why Invest in Real Estate ETFs in 2024?

The year 2024 presents unique opportunities in the real estate market, driven by economic conditions, rising property values, and inflation hedging. As real estate continues to show resilience, real estate ETFs that track the performance of shares of REITs are poised to benefit from these trends.

According to market analysis, the demand for commercial properties is likely to surge, while residential real estate could experience moderate growth. Real estate ETFs can capitalize on these trends while offering diversification and liquidity. Investors can gain broad exposure to various real estate sectors without being locked into individual property purchases.

Benefits of Investing in Real Estate ETFs

1. Diversification

One of the most appealing features of real estate ETFs is the ability to diversify your investment portfolio. A single real estate ETF might include commercial buildings, residential properties, industrial facilities, and even REITs from various geographic locations. This diversification helps reduce the overall risk of your investment because the performance of one sector or region can offset another’s losses.

By holding shares in a real estate ETF, you get exposure to a broad range of real estate assets without the need to buy and manage physical properties.

2. Accessibility & Liquidity

Investing in real estate directly can be challenging due to high upfront costs and ongoing responsibilities like property management. Real estate ETFs eliminate these barriers, offering you access to real estate investments with much lower entry costs. Additionally, because ETFs are traded on stock exchanges, they are highly liquid. You can easily buy and sell shares throughout the trading day, unlike physical property investments, which can take months to transact.

3. Professional Management & Lower Costs

Real estate ETFs are managed by experienced professionals who have deep knowledge of the real estate market. They make informed decisions on which assets to include in the fund to maximize returns while mitigating risks. Additionally, ETFs typically come with lower expense ratios compared to mutual funds, meaning you retain more of your investment returns, especially when investing in REIT ETFs.

Top 7 Best Real Estate ETFs to Buy Now

Below are seven top-performing real estate ETFs for 2024, offering a combination of yield, growth potential, and strategic focus on various real estate securities.

ETF Name	Fund Size	NAV Price	Yield	Expense Ratio	Index
Vanguard Real Estate ETF (VNQ)	$70.5 billion	$98.25	13.60%	0.13%	MSCI US Investable Market Real Estate 25/50 Index
Schwab U.S. REIT ETF (SCHH)	$7.3 billion	$23.35	3.69%	0.07%	Dow Jones Equity All REIT Capped Index
iShares Core U.S. REIT ETF (USRT)	$2.4 billion	$62.10	1.95%	0.08%	FTSE NAREIT Equity REITs Index
Real Estate Select Sector SPDR Fund (XLRE)	$5.93 billion	$44.97	3.97%	0.09%	Real Estate Select Sector Index
Invesco Active U.S. Real Estate Fund (PSR)	$59.88 million	$99.31	6.34%	0.35%	FTSE NAREIT All Equity REITs Index
Fidelity MSCI Real Estate Index ETF (FREL)	$1 billion	$14.25	7.20%	0.58%	MSCI USA IMI Real Estate 25/25 Index
iShares Mortgage Real Estate Capped ETF (REM)	$590 million	$24.41	3.18%	0.48%	FTSE NAREIT All Mortgage Capped Index

Data is current as of September 17, 2024.

1. Vanguard Real Estate ETF (VNQ)

The investment’s goal is to offer substantial income and reasonable long-term capital growth by mirroring the MSCI US Investable Market Real Estate 25/50 Index’s performance. This index assesses the performance of publicly traded equity REITs and other real estate-related investments. The fund is not diversified and invests in the stocks included in the index, holding each stock in a proportion similar to its weighting in the index.

• Fund Size: $70.5 billion
• NAV Price: $98.25
• Yield: 13.60%
• Expense Ratio: 0.13%

2. Schwab U.S. REIT ETF (SCHH)

The investment’s objective is to closely follow the overall performance of the Dow Jones Equity All REIT Capped Index, which consists of U.S. real estate investment trusts categorized as equities. Mortgage REITs and hybrid REITs are not included in the index. Under normal circumstances, the fund’s guidelines require it to allocate at least 90% of its net assets to securities that are part of the index.

• Fund Size: $7.3 billion
• NAV: $23.35
• Yield: 3.69%
• Expense Ratio: 0.007%

3. iShares Core U.S. REIT ETF (USRT)

The fund aims to replicate the FTSE NAREIT Equity REITs Index, which comprises U.S. real estate stocks. At least 80% of the fund’s assets are typically invested in the index’s component securities and comparable holdings. This index evaluates the performance of U.S.-listed equity real estate investment trusts, with certain types of REITs being excluded.

• Fund Size: $2.4 billion
• NAV: $62.10
• Yield: 1.95%
• Expense Ratio: 0.08%

4. Real Estate Select Sector SPDR Fund (XLRE)

The aim is to mirror the performance of publicly traded real estate firms in the Real Estate Select Sector Index. The fund usually allocates at least 95% of its assets to index securities and is not diversified.

• Fund Size: $5.93 billion
• NAV: $44.97
• Yield: 3.97%
• Expense Ratio: 0.09%

5. Invesco Active U.S. Real Estate Fund (PSR)

The fund aims to achieve high overall returns through both capital growth and current income. It typically invests at least 80% of its assets in securities of U.S. real estate companies, including those listed in the FTSE NAREIT All Equity REITs Index, as well as real estate operating companies (“REOCs”) and other companies primarily involved in the U.S. real estate industry.

• Fund Size: $59.88 Million
• NAV: $99.31
• Yield: 6.34%
• Expense Ratio: 0.35%

6. Fidelity MSCI Real Estate Index ETF (FREL)

This investment aims to replicate the MSCI USA IMI Real Estate 25/25 Index’s performance before fees and expenses. At least 80% of its assets are invested in securities that are part of the index, reflecting the U.S. real estate sector’s performance in the stock market.

• Fund Size: $1 B

• NAV: $14.25
• Yield: 7.2%
• Expense Ratio: 0.58%

7. iShares Mortgage Real Estate Capped ETF (REM)

This investment aims to replicate the FTSE NAREIT All Mortgage Capped Index, which consists of U.S. REITs that hold U.S. residential and commercial mortgages. Typically, at least 80% of the fund’s assets are invested in the index’s component securities and similar investments. The index evaluates the performance of U.S. residential and commercial mortgage real estate, mortgage finance, and savings associations sectors. 

• Fund Size: $590 Million
• NAV: $24.41
• Yield: 3.18%
• Expense Ratio: 0.48%

Comparing Real Estate ETFs to Other Investments

Real Estate ETFs vs. Mutual Funds

Real estate ETFs are generally more liquid and have lower expense ratios compared to mutual funds. ETFs can be traded throughout the day, while mutual funds are priced once at the end of the day. Additionally, ETFs typically have more transparency regarding holdings, as they disclose their assets daily, while mutual funds may only do so quarterly.

“Our research has shown over the years that cost is one of the best predictors of future success. And ETFs are a lot cheaper than mutual funds”, says Bryan Armour, director of passive strategies research for North America at Morningstar.

This cost-effectiveness makes ETFs an attractive option for investors looking to maximize their returns while minimizing fees.

Real Estate ETFs vs. Direct Real Estate Investing

Owning property requires a significant capital investment, maintenance, and management. Real estate ETFs, on the other hand, offer a hassle-free way to gain exposure to the real estate market without the complexities of property ownership. They also offer diversification, reducing the risk compared to owning a single property.

How to Choose the Right Real Estate ETF for Your Portfolio

Here’s how to make an informed choice:

Consider Your Risk Tolerance

Different real estate ETFs come with varying levels of risk, so it’s essential to match your selection with your personal risk tolerance. For example:

• High-risk investors might prefer ETFs with exposure to more volatile sectors like mortgage REITs or funds focused on emerging markets. These funds may offer higher yields but are subject to more fluctuations.
• Low-risk investors might lean toward ETFs that focus on established, stable markets such as U.S. equity REITs, which generally offer more consistent performance and lower volatility.

By understanding your comfort level with risk, you can narrow down ETFs that align with your financial goals and investment strategy.

Analyze Geographic and Property Type Exposure

The performance of a real estate ETF is also influenced by the type of properties it holds and the geographic areas it covers:

• Commercial vs. Residential: ETFs may focus on commercial real estate (offices, malls, industrial properties) or residential real estate (apartment complexes, single-family homes). One sector may outperform the other at different times, depending on market trends.
• Geographic Focus: Some ETFs concentrate on U.S.-based properties, while others invest globally. U.S.-focused funds can be more stable, but international ETFs might offer higher growth potential if you’re looking to diversify your portfolio beyond the domestic market.

Make sure to review the fund’s underlying assets and geographic spread to ensure they align with your investment strategy.

Look at Expense Ratios

Expense ratios can significantly affect your long-term returns, as these fees are deducted from your earnings:

• Lower expense ratios help maximize your returns over time, making ETFs with a minimal fee structure more appealing, especially for long-term investors. For example, Schwab U.S. REIT ETF (SCHH) boasts a very low expense ratio of 0.07%, making it an efficient choice.
• Conversely, higher expense ratios, like Fidelity MSCI Real Estate Index ETF (FREL) at 0.58%, could eat into your profits. However, these funds might offer unique features or access to specific markets, which could justify the higher cost.

When choosing a real estate ETF, always compare the expense ratios to ensure you’re getting the best value for your investment.

FAQs: Best Real Estate ETFs to Buy in 2024

Final Thoughts: Are Real Estate ETFs Right for You in 2024?

Real estate ETFs present an excellent opportunity for investors to tap into the real estate market without the complexities of direct property ownership. Offering diversification, liquidity, and professional management, they are an accessible and cost-effective alternative to physical real estate investments. The top 7 ETFs highlighted for 2024 provide varying strategies to suit different investment goals, from income generation to long-term growth. Whether you’re a beginner or a seasoned investor, real estate ETFs can help you take advantage of market trends while minimizing risk, making them a solid addition to any portfolio this year.