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1. Identify the REIT structure before comparing yields
REITs are not interchangeable. Their structure affects how you buy and sell, how clearly you can assess their value, what information is available, and which fees and conflicts may apply. The SEC outlines these differences in its REIT investor bulletin and guidance on real estate investment trusts.
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| Structure | Pricing and liquidity | Reporting and considerations |
|---|---|---|
| Publicly traded REIT | Exchange-listed shares have a visible market price and can generally be bought and sold with relative ease. | Review SEC filings and consider how the market price compares with operating performance. |
| Non-traded REIT | Not exchange-listed; pricing is less transparent, and resale may be limited. Redemption programs may have limits, holding periods, or suspension rights and can be discontinued. | Read the prospectus and supplements for fees, redemption terms, and exit assumptions. You may have to wait for a listing or liquidation to exit. |
| Private REIT | Not exchange-listed; liquidity and pricing may be limited. | Regular SEC reports may not be available. Confirm what financial and portfolio information you will receive and what eligibility requirements apply. |
A non-traded REIT redemption program is not equivalent to being able to sell on an exchange. Read the actual terms rather than assuming you can withdraw on demand.
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Find out whether the REIT owns income-producing real property or invests in real-estate-related debt, such as mortgages. Property-owning equity REITs may specialize in apartments, offices, retail, healthcare, industrial property, or another sector. Each property type has distinct risks; assess the issuer’s current portfolio rather than relying on its label.
Equity REITs
For a property-owning REIT, examine where its properties are, how concentrated they are by property type or geography, and what the latest reports say about revenue, expenses, occupancy, leasing, acquisitions, and asset sales. Concentration can make results especially sensitive to conditions in a particular market or sector.
Mortgage REITs
A mortgage REIT’s results depend on real-estate debt and its financing, leverage, and hedging strategy—not simply on tenants paying rent. Review its specific exposures in current filings. The SEC cautions that mortgage REIT leverage and hedging can create additional risks.
3. Read operating performance measures in context
Start with GAAP financial statements, then use real-estate-specific supplemental measures to understand operating performance. Nareit says it created funds from operations (FFO) in 1991 to address the effect of historical-cost depreciation and amortization of real estate under GAAP.
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What FFO does—and does not—show
Nareit FFO starts with GAAP net income and adjusts for real-estate depreciation and amortization, gains or losses from certain property sales and changes in control, and specified impairment write-downs. It can help assess a property-owning REIT’s operating performance, but it is supplemental: it is not cash flow, a measure of all cash needs, or proof that a distribution is sustainable. Read it alongside GAAP results and the company’s cash requirements.
Check the company’s AFFO definition
Adjusted FFO (AFFO) is not standardized. Companies commonly adjust FFO for items such as recurring capitalized property expenditures and straight-line rent, but the adjustments vary. Nareit says users should understand how each company defines the measure. Read the issuer’s reconciliation and compare its AFFO across periods or with peers only after checking that the calculations are comparable.
Look for what changed over time
Compare per-share measures over multiple reporting periods, not just one quarter. Use the company’s disclosures to investigate changes in property revenue and expenses, occupancy or leasing, financing costs, asset sales, share issuance, and management’s adjustments. A rising total FFO alongside a falling per-share figure, for example, calls for examining share issuance and other drivers rather than assuming the business improved for each investor.
4. Test whether the distribution is supported
Compare declared distributions with operating measures, their trend, and the disclosed source of the cash. A high distribution rate does not establish that property operations or financing activities can sustain it.
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The SEC says REITs generally distribute at least 90 percent of taxable income to shareholders to qualify for the tax treatment described in its investor guidance. Taxable income and FFO are different measures; meeting that distribution requirement does not by itself show that a particular payout is financially sustainable.
5. Examine debt, interest-rate exposure, and management
Review borrowing and refinancing needs
Use current filings to check debt maturities, interest expense, fixed- versus floating-rate exposure, refinancing needs, and hedges. Interest-rate changes can affect REITs in different ways: financing and acquisition costs may rise, while rents or mortgage rates may also change. For a mortgage REIT, pay particular attention to leverage and hedging disclosures.
Check who manages the REIT and how they are paid
Find out whether the REIT is internally or externally managed, and review related-party arrangements and fees for acquisitions, property management, and assets under management. The SEC cautions that acquisition or asset-based fees may not align with shareholders’ interests, particularly at externally managed non-traded REITs. Consider whether the fee structure rewards decisions that benefit investors over time.
6. Assess valuation, liquidity, fees, and taxes
Use more than the headline yield
For a listed REIT, compare market price and total return with operating performance and relevant peers. Yield captures distributions relative to price, not the full return or the condition of the business. Consider changes in share price as well as distributions.
Best Value
For a non-traded REIT, the absence of exchange pricing makes the value of shares harder to assess. Do not treat a stated share value or redemption feature as equivalent to an independent, continuously available market price.
Verify current fees in the offering documents
Non-traded REITs can have substantial upfront costs. The SEC’s 2015 bulletin said fees could represent up to 15 percent of an offering price; a separate SEC REIT bulletin, accessed in 2026, describes sales commissions and upfront offering fees as usually totaling approximately 9 to 10 percent in its context. These are source-specific general or historical figures, not the terms of a particular current offering. Use the current prospectus and supplements to determine the actual fees, including ongoing charges.
Understand tax treatment for your circumstances
The SEC says REIT dividends generally do not qualify for the favorable rate applicable to qualified dividends, and shareholders are responsible for taxes on dividends and capital gains. Actual results depend on your circumstances and account type. Review current tax documents and consult a qualified tax professional for personalized guidance.
7. Verify the claims in primary documents
Use the SEC’s EDGAR search to find the latest Form 10-K and Form 10-Q for a reporting REIT. For an offering, read the prospectus and supplements as well. The SEC notes that non-traded REIT registered offerings commonly use Form 424B3 prospectus filings.
Work through these documents in a consistent order:
- Business description: confirm the property or debt strategy, portfolio concentration, and how the REIT earns revenue.
- Risk factors: identify the risks that apply to its sector, geography, financing, and structure.
- Financial statements and reconciliations: review GAAP results, FFO, and the company’s definition and reconciliation of AFFO, if reported.
- Distribution disclosures: check the declared payout, its trend, and any explanation of funding sources.
- Debt and hedging: examine maturities, rates, refinancing exposure, leverage, and hedging strategy.
- Fees and related parties: look for manager compensation, acquisition and property-management fees, and related-party transactions.
- Exit terms: for non-traded offerings, review redemption limits, suspension rights, holding periods, and the conditions under which a listing or liquidation might occur.
- Changes since prior reports: compare the latest filing with earlier periods to spot changes in strategy, performance, financing, or terms.
For an offering, also verify the issuer and, where applicable, the selling professional’s registration. SEC filings and offering documents provide evidence to evaluate; they do not make an investment suitable for every investor.
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