When Ken Ozeki decided to invest in real estate, the media relations director knew that buying a house was not in the cards, since home prices where he lives in San Francisco average $1.3 million. Luckily, he had a more affordable plan B.
Ozeki funneled about $10,000 into real estate investment trusts (REITs), which are stock-like shares in companies that own property. Although buying a REIT may not come with the thrill of hosting a housewarming party, it offers an easy entry point into real estate investing—Ozeki recently bought a REIT share for 12 bucks.
“Purchasing real estate as an investment didn’t seem as accessible as gradually buying REITs,” Ozeki explains. He also finds REITs more sensible than pouncing on every stock craze: “While most retail investors are drawn to trending stocks like the meme stock craze, I feel having a portion of my portfolio in REITs is a good alternative to hard real estate.”
And it’s paid off: Over the past seven years, Ozeki’s REIT investments have doubled in value, providing “a sense of security in my diversified holdings that I’ve been confident in holding throughout the past few years of economic ups and downs.”
Ozeki is hardly the only investor hailing REITs as a rock in his portfolio. In today’s turbulent stock market, a growing number of investors have turned their attention to REITs, wondering: Might they provide a port in this storm?
“Wall Street’s jitters over Trump’s tariffs have investors eyeing REITs as a profitable alternative,” says Jeep Kline, professor of finance at UC Berkeley Haas School of Business and managing partner at Raisewell Ventures. “The shift toward REITs provides an option investors can place more confidence in when everything else feels like a coin toss.”
REIT renaissance
Congress created REITs back in 1960 to offer all Americans the opportunity to invest in real estate. Today, about half of US households have REITS in their brokerage accounts or retirement plans. Unlike stocks, REITs are legally required to distribute at least 90% of their taxable income to shareholders—which may limit their growth but provides a steady income stream that can serve as a buffer during rocky periods on Wall Street.
Although REITs have a reputation of being the boring-but-reliable cousin to melodramatic stocks, they aren’t immune to what’s going on in the world. As with equities, REIT values plunged after global-spanning tariffs were announced on April 2, then bounced back once a three-month pause on levies was declared on April 9. Here’s how returns on REITs in different sectors have fared since “Liberation Day” (see the full list here):
- Data centers: +7.1%
- Telecommunications: +3.8%
- Retail: -3.1%
- Residential: -3.7%
- Office: -6.9%
- Timberland: -11.7%
Overall, REITs have made a stronger recovery than stocks, at least through the end of April.
“Year to date, REITs have outperformed the S&P 500 by 5.6%,” says Edward Pierzak, SVP of research at the National Association of Real Estate Investment Trusts (Nareit). “As of April 30, total returns for the FTSE Nareit All Equity Index were up by 0.7%, while the S&P 500 was down 4.9%. This outperformance is underpinned by REITs’ strong balance sheets and solid operational performance, which should be resilient to a slower growth environment.”
Plus, REITs are a bargain, with prices near their lowest valuations since 2009.
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“It is not uncommon to find even high-quality REITs trading at 30, 40, or even 50% discounts relative to the value of the real estate they own, net of debt,” according to Jussi Askola, president of boutique REIT investment firm Leonberg Capital. “After a long bear market, REITs are getting ready to recover … we think that they are offering a once-in-a-decade opportunity to win big.”
But not everyone agrees that REITs are the deal of the decade.
“REITs have outperformed the S&P 500 so far in 2025, but that outperformance came before the trade war heated up,” points out Matt Frankel, CFP, contributing real estate analyst at The Motley Fool.
“REITs are slightly underperforming stocks over the past month or so. This is likely due to interest rate uncertainty. REITs generally do best in a falling-rate environment, and with the Fed expecting tariffs to cause at least some inflation, the path of interest rates for 2025 has become more uncertain. If we get more clarity around the future direction of the Fed’s interest rate moves, REITs could certainly become more of a safe haven for investors.”
How to invest in REITs
If you’re interested in REITs, keep in mind that they function best as part of a diversified portfolio (Nareit recommends an allocation of 5%–15%) and that, in today’s economic climate, certain REITs are better positioned to flourish than others.
“REITs focused on multifamily [dwellings] are seeing the most demand,” says Jeff Holzmann, COO of RREAF Holdings. “That’s because the current market conditions and uncertainties about trade, tariffs, and regulation impact them the least or not at all. Residents still need to pay rent, owners don’t have to import any goods or services, and if the sponsor secured a reasonable loan rate, then even Fed decisions have minimal impact on the ability to service the debt and continue distributions to investors.”
“The REITs that are best positioned to produce low-volatility cash flow no matter what the economy does are outperforming,” says Frankel. “For example, net-lease REITs, which use a long-term lease structure and whose tenants cover variable expenses like taxes and insurance, are significantly outperforming. Realty Income and Vici Properties are good examples. Data center REITs like Digital Realty Trust and Equinix are outperforming, as strong demand for AI infrastructure is overpowering any economic uncertainty, at least for the time being.”
“Healthcare buildings housing doctors’ offices and senior facilities are holding their own,” adds Kline. “The real pain is concentrated in shopping malls and downtown office towers, where vacancy signs tell the story.”
One easy way to size up a REIT is to calculate its yield by dividing its annual dividends by its share price. This is what convinced Ozeki to purchase a mortgage servicing REIT, Two Harbors Investment. “At around $12 a share, the dividend payout has been 45 cents a share,” he says. “This felt like a low-risk holding to weather the current storm.”
Until the clouds surrounding the economy clear up, Ozeki is content knowing that even though he doesn’t own “hard” real estate, his REITs are providing a similar sense of stability. “Maybe if my REIT portfolio and other investments rise to the point where I can buy [a house] in whole, I’d consider it.”