I’m a Finance Expert: Here’s What the Upper Middle Class Needs To Know About Investing in REITs in 2026
Written by
Dawn Allcot
Edited by
Jenna Klaverweiden
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For retail investors, 2025 could be considered the year of tech stocks. But real estate investment trusts (REITs) show promise in today’s market, particularly as a way to stabilize a portfolio and add dividend-earning assets.
Here’s some background on REITs and some things you need to know if you’re considering adding REITs to your portfolio this year.
REITs Background and 2025 Performance
“Commercial real estate is critical for any investor to own because it provides essential benefits, including a steady stream of income in the form of dividends, competitive performance, and meaningful diversification from stock and bonds,” said John Worth, the executive vice president for research and investor outreach of Nareit. “REITs offer investors the opportunity to receive all the benefits of commercial real estate without the hassle of buying, managing, or financing a building.”
The Nareit 2026 REIT Outlook revealed that REITs delivered “strong operational performance throughout 2025,” with continually high interest rates, sound fundamentals and high dividends.
“By law, REITs must pay out at least 90% of their taxable income to shareholders and many pay out 100%, which often results in higher and more consistent dividends than many traditional stocks,” Worth explained.
That being said, here are a few other things to know if you’re considering investing in REITs this year.
You May Already Have Exposure to REITs
Most people don’t realize the large role REITs play in the investment market. More than 70% of U.S. pensions incorporate REITs into their real estate strategies, according to Nareit’s report, and more than 75% of pension plans with more than $25 billion in assets hold REITs.
If your retirement savings included a defined contribution plan like a 401(k), you may want to look for REIT funds and ask for them to be included as part of your holdings. “Retirement accounts are a practical, tax-efficient way for investors to increase exposure to REITs and capture income and diversification benefits over the long term,” Worth said.
International REITs Can Add Resilience to Your Portfolio
In the past 10 years, U.S. REITs have outperformed European and Asian REITs, but this shifted in 2025. North and South America REITs delivered a return of 5.5%, compared with 28% for REITs in Asia and 19.9% in Europe, according to the Nareit report.
“U.S. REITs are a strong foundation,” Worth said. “They’re familiar, transparent, offer competitive performance, and have a long track record of providing income. But adding some international REIT exposure can make a portfolio more resilient.”
Property Types Matter When Choosing REITs
When you’re buying real estate of any kind, location matters. So does the property class. “Real estate fundamentals matter,” Worth pointed out. “Different property types — such as offices, apartments, or data centers — can perform very differently depending on economic conditions.”
REIT funds or exchange-traded funds (ETFs) can offer diversification, which means you don’t have to be a real estate expert, or even have extensive knowledge of the various markets, to invest successfully.
“REITs make it easy for investors to diversify across property sectors and regions,” Worth said.
US REITs Have Been Undervalued in Recent Years
In spite of net operating income increases of 4.7% and dividend increases of 6.3% since 2024, the report shared that REITs are undervalued compared with both equity markets and private real estate.
“U.S. REIT stock market valuations have been stuck in neutral as generalist investors have bid up the valuations of tech stocks,” Worth said. “This dynamic — reminiscent of the late 1990s tech boom — has resulted in a gap between REIT and broader equity valuations. History tells us that it’s not a question of if, but when that gap closes.”
Like Any Investment, REITs Have Some Risks
If REITs sound appealing, it’s still important to understand the risk involved. “Because REITs trade on stock exchanges, their prices can move up and down in the short term,” Worth said.
Sometimes, these fluctuations aren’t related to the property’s performance. Nonetheless, REITs tend to respond to different economic forces than traditional stocks, which can help balance a portfolio through economic cycles.
“By combining stocks and REITs, investors gain exposure to multiple sources of growth and income,” Worth said.
Editor’s note: This article is for informational purposes only and does not constitute financial advice. Investing involves risk, including the possible loss of principal. Always consider your individual circumstances and consult with a qualified financial advisor before making investment decisions.
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