REIT ETF Comparison: VNQ vs SCHH vs IYR
Direct answer: REIT ETFs provide real estate exposure without direct property ownership. Vanguard Real Estate ETF (VNQ, 0.12%) is the largest with over $70 billion in AUM. Schwab U.S. REIT ETF (SCHH, 0.07%) is the cheapest option. iShares U.S. Real Estate ETF (IYR, 0.40%) is the most actively traded but most expensive. REITs must distribute 90% of taxable income, making them high-dividend instruments.
REIT ETF Comparison
| Ticker | Name | Expense Ratio | Yield (approx) | AUM | Holdings |
|---|---|---|---|---|---|
| VNQ | Vanguard Real Estate | 0.12% | ~4.0% | ~$70B | ~160 REITs |
| SCHH | Schwab US REIT | 0.07% | ~3.8% | ~$6B | ~120 REITs |
| IYR | iShares US Real Estate | 0.40% | ~3.5% | ~$5B | ~80 REITs + real estate companies |
| XLRE | SPDR S&P Real Estate Sector | 0.09% | ~3.5% | ~$5B | S&P 500 real estate stocks only |
| VNQI | Vanguard Global ex-US Real Estate | 0.12% | ~4.5% | ~$6B | International REITs |
| REET | iShares Global REIT | 0.14% | ~4.2% | ~$3B | Global REITs |
Source: Vanguard: VNQ ETF. Last verified: September 2026.
Frequently asked questions
Are REITs a good investment?
REITs have historically provided competitive total returns (approximately 10-11% annually, similar to equities) with above-average income (yields of 3-5%). They offer diversification from traditional stocks and bonds, as real estate returns depend on different factors (rental income, property values, interest rates). The main risks: REITs are sensitive to interest rate changes (higher rates reduce REIT valuations and increase their borrowing costs); they have high correlation with equities during market crashes; and they have tax disadvantages in taxable accounts (REIT dividends are ordinary income, not qualified dividends). Most financial plans allocate 5-15% to real estate.
How do REITs make money?
REITs (Real Estate Investment Trusts) own income-producing real estate and must distribute at least 90% of taxable income as dividends. They earn income from: (1) rent from tenants (commercial, residential, industrial, healthcare, data centers, cell towers); (2) mortgage interest (mortgage REITs); (3) capital gains from property sales. REITs come in many flavors: equity REITs own physical properties; mortgage REITs (mREITs) own mortgages and MBS; hybrid REITs own both. Equity REITs dominate VNQ and are more stable; mREITs (like AGNC, NLY) are higher-yield but much more volatile.
What happened to REITs in 2022?
VNQ fell approximately 26% in 2022, worse than the overall S&P 500 (-18%). Rising interest rates hurt REITs on multiple fronts: higher rates make bonds relatively more attractive versus REIT dividend yields (reducing REIT valuations); higher rates increase REIT financing costs on floating-rate debt; and recession fears reduced outlook for commercial real estate. Office REITs were additionally hurt by post-pandemic work-from-home trends reducing office demand. REIT recovery in 2023 was mixed: industrial, residential, and data center REITs recovered faster than office and retail.