REITs: What they are and How to Invest 2026

Real estate investment, once reserved for large capital, has become widespread thanks to Real Estate Investment Trusts, or REITs. These vehicles allow all types of investors to participate in large commercial real estate projects. 

What are Real Estate Investment Trusts (REITs)?

REITs are business organizations that own, finance, and operate real estate that generates income. In this sense, they operate like an investment fund, but not with company shares, but with properties such as warehouses, hospitals, shopping centers, or offices.

Due to their tax structure, to qualify as a REIT, the company must distribute at least 90% of its income as dividends to its shareholders. In return, the company will not pay corporate taxes, so taxation only occurs at the investor level. 

Origin

This concept originated in the United States in 1960 under President Eisenhower's administration. With it, the law aimed to allow anyone to invest in commercial real estate. 

The model became popular in the 80s and 90s with reforms that allowed these funds to actively manage their properties. Today, this model is used in over 40 countries worldwide.

Types

There are many offerings of this type of fund, which allows investment to be focused on specific sectors:

• Equity REIT. These directly own and manage physical properties, and their income primarily comes from rents. They are the most common types.
• Mortgage REIT. In this case, they do not own properties, as they focus on financing their purchase through mortgages and loans. The income they generate comes from interest, and while they often offer high dividends, they carry greater risk.
• Public and Non-Public REITs. The former are publicly traded, offering liquidity and greater transparency. Non-public REITs, on the other hand, are not as liquid but allow access to specific projects. 

In addition to the above classification, they are also categorized by the underlying property type, such as office, retail, residential, healthcare, industrial, or infrastructure.

Advantages

Real estate investment trusts offer numerous advantages for those looking to participate in these types of operations. The most notable ones are listed below:

• Accessibility and Diversification. This means you can own a portion of a high-value property portfolio for the price of a single share.
• Dividend Yield. You can benefit from attractive and solid returns due to the earnings distribution mandate.
• Liquidity. A public REIT can be bought and sold on the stock exchange instantly, in contrast to physical properties.
• Inflation Protection. Because many rental contracts are adjusted for inflation, income and dividends could grow.

Each of these characteristics allows investors to fully capitalize on the real estate market without the common drawbacks. 

How do they work?

A REIT raises capital by issuing shares, then uses that money to acquire or develop properties, which generate income by renting them out or buying to rent. Once expenses and debts are covered, most of the profits are distributed as dividends (minimum 90%).

However, you should consider that the share price fluctuates according to the perceived value of its portfolio. It also depends on the REIT's management capabilities.

What is the difference between a REIT and a SOCIMI?

A Listed Real Estate Investment Company (Spanish SOCIMIs) is the Spanish version of a REIT. These companies were inspired by the US version and operate similarly.

However, they have key differences, mainly regarding regulatory aspects. For starters, a REIT's profit distribution is 90%, while a SOCIMI's is 80%.

On the other hand, SOCIMIs have much stricter rules regarding the liquidity of their shares and the percentage acquired by the public. So, they are similar instruments but in different jurisdictions, with the corresponding legal and tax details.

How to Invest in REITs: 2026 Guide

Investing in these types of funds is not a difficult process; you just need to complete each step. The first thing you should do is find a platform where you can access the exchanges where a REIT is listed. 

Next, you should analyze the fund's characteristics regarding property type, location, management team, debt level, and dividend history. Here, you should pay attention to the key metric for these funds, which are the Funds From Operations (FFO).

One of the aspects you should consider is an ETF (Exchange-Traded Fund or Exchange-Traded Fund). These funds allow you to replicate an entire sector index with a single transaction. What remains to be done is to buy shares in the REIT you trust most for these operations.

Examples of the most recognized REITs in the world

According to the Nareit website, there are 1,201 globally listed funds, with some of the most recognized being the following:

• American Tower. It is one of the largest in the infrastructure sector, operating and owning numerous communication towers and global antenna sites. 
• PROLOGIS, Inc. It is a global leader in logistics real estate, owning a vast portfolio of high-quality warehouses and distribution centers in global markets. 
• Equinix, Inc. owns interconnection data centers and provides the physical infrastructure that houses critical enterprise servers.
• Simon Property Group. It is one of the largest in the world; it owns shopping malls, outlets premium outlets, and retail centers in the United States, Europe, and Asia.

The diversity is wide; the important thing is that if you wish to invest in one of these funds, you check its track record and the security they offer.

You may also like: Real estate ROI.

Which REITs offer the best dividends?

In this case, mortgage REITs commonly offer the highest market returns. However, high dividends are not always sustainable. Therefore, it is essential to assess whether the cash flow is sufficient to cover the dividend payment.

How are they taxed?

Taxation for an international REIT is based on the investor's ordinary income tax rate. In contrast, SOCIMs in Spain are taxed on savings income (19% - 28%) without withholding tax at source.

Risks and disadvantages

Rising interest rates can make these funds less attractive compared to fixed income and increase their debt costs. Also there is real estate market risk due to their value being tied to the economic cycle. This means that a recession, though unlikely, could lead to lower income.

Tips and strategies for successful investing

Receiving dividends when investing in a REIT depends on many factors. Despite this, you can follow some of the tips below for greater security:

• Prioritize dividend sustainability. Research to ensure that FFO comfortably covers the payment (An FFO payout ratio below 90% is robust).
• Diversify within the sector. Ideally, don't invest everything in a single type of REIT; instead, combine different subsectors to mitigate risks.
• Analyze debt levels. A REIT with a lot of debt is more vulnerable, so you should look for prudent debt ratios.

Success in these cases is more likely if you apply these strategies to the appropriate REIT.

Overview of REITs in Spain and Latin America

In Spain, you have the second largest market of this type in Europe, with solid SOCIMIs. You can find some very important ones, specifically with players holding portfolios of office and logistics assets.

On the other hand, in Latin America, these types of models are still under development, mainly in Brazil, Mexico, Chile, and Peru. The appeal is the great growth potential, albeit with higher political and economic risks.

Frequently Asked Questions (FAQ)

What type of REIT is the safest?

The best-positioned ones are those in infrastructure and healthcare, as they provide essential services with stable demand.

Where can I invest in REITs?

To do this, you can use an online broker (local or international) with access to the relevant exchanges.

What returns do REITs offer?

History has shown that long-term returns are very competitive. Depending on the interest rate, yields can range between 3% and 6%.

What is the 90% rule for REITs?

This legal requirement obliges these funds to distribute at least 90% of their taxable income to shareholders.

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Leverage the opportunities a REIT offers

The REITs are an accessible tool for you to generate recurring income and diversify your portfolio with real estate assets. Additionally, although they have their risks, with the right strategy you can benefit from the opportunities in this sector.