ETFs and indices · updated October 21, 2026
What is a REIT and how do you earn from real estate on the stock market
A REIT is a company listed on the stock market that owns and rents out buildings: offices, shopping centres, warehouses, homes, hospitals, data centres. In exchange for tax breaks, the law requires it to pay most of its profit to shareholders, usually at least 90%.
How it works
You buy the REIT's shares on the exchange, like any other company, and get part of the rent it collects as dividends. The REIT regime exists in the US, in several EU countries (for example SIIC in France, SOCIMI in Spain, G-REIT in Germany) and in the UK. Where no REIT regime exists, the closest options are listed real estate companies and ETFs on real estate indices.
Worked example
A REIT's shares trade at $100 and it has distributable profit of $6 per share. It pays out 90% of it.
Yields of 4-7% are normal for REITs, above the market average, because almost all the profit goes to shareholders.
Worth knowing
With REITs, accounting profit is heavily reduced by depreciation on the buildings. That is why analysts use their own figure, FFO (funds from operations): net profit plus depreciation, excluding gains from selling buildings.
When REIT can fool you
Sensitive to interest rates: when rates rise, REITs often fall, because they borrow heavily and because their dividend competes with the interest on bonds. Payout ratio against profit often looks above 100%; with REITs, compare the dividend with FFO, not with profit.
Related terms
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Questions about REIT
Can I buy REITs from Europe?
Yes, through brokers that give access to US or European exchanges, or through UCITS ETFs on real estate indices.
Why do REITs fall when interest rates rise?
Because their loans get more expensive and because investors can find good yields in bonds, without real estate risk.
These explanations are for information only. They are not a recommendation to buy or sell.
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