Investing in REITs: What Kind of Returns Can I Expect?

According to the National Association of Real Estate Investment Trusts (Nareit), an estimated 145 million Americans invest in some form of REIT, whether directly or indirectly. This investment option provides a less volatile investment option over stocks and bonds and offers low correlation to help balance out your investment portfolio. But what kinds of returns can you expect from a REIT?

Historical Returns

Nareit compiles and maintains a list of indices to help investors better understand the potential returns for their investments. As part of this research, the association includes data on historical returns. The FTSE Nareit All REITs index records an annualized average total return of approximately 9.6% based on performance over the last 30 years. But this return includes all REIT offerings, including equity and mortgage REITs. 

When taking just equity REITs into consideration, the FTSE Nareit All-Equity REITs index presents an annualized average return of approximately 10.1%. If you compare these returns to the stock market, REITs have consistently outperformed the market 56% of the time.

Sector Performance

The All-Equity REITs index uses every REIT sector to establish annualized rates of return. However, the association also goes a step further and provides annualized average total returns for each subsector as a separate index. Keep in mind, this rate only goes back over the past 27 years, as the practice began in 1994. Residential REITs — like DiversyFund’s Growth REIT II — show a historical annualized average return of 11.2%.

DiversyFund

At DiversyFund, we utilize a value-add strategy to help grow your investment and maximize potential returns. While we can’t predict or promise returns, we conduct thorough research on every property added to the portfolio for optimal growth potential. Only those that meet our strict standards are acquired for the fund. We aim to target an IRR in the double digits to make the most of every acquisition.