REITs returned over 10% to investors in 2023 alone. That’s impressive – but chasing returns without a strategy can be risky. Everyone wants to know: what are the best REITs to invest in? But before you pick one, there are critical missteps to avoid.
At Prosperity Partners, we work with business owners, family offices, and legal professionals who rely on more than luck or headlines. We help our clients evaluate and structure REIT investments based on their financial position, entity structure, and long-term goals. Here’s how it works – and what to watch for.
What Are REITs and Why Do They Matter?
REITs, or Real Estate Investment Trusts, are companies that own or finance income-producing real estate. They’re legally required to distribute at least 90% of taxable income to shareholders – making them attractive for investors seeking regular income and real estate exposure without directly owning property.
But not all REITs are created equal. The best ones are strategically aligned with your risk profile and financial plan. And before you invest, it’s smart to avoid three common traps we often see.
3 Mistakes to Avoid Before Investing in REITs
1. Chasing Yield Without Understanding Risk
High dividend REITs can seem like a no-brainer. But that 8–10% yield isn’t always sustainable. Some REITs increase payouts by taking on excessive debt or selling off assets. That can lead to serious instability when markets tighten.
Instead, we recommend evaluating the payout ratio, historical dividend consistency, and sector stability. If you’re asking what are the best REITs to invest in, your answer should go beyond the yield column.
2. Ignoring Tax Implications
Many investors forget that REIT dividends are usually taxed as ordinary income, not qualified dividends. That difference can materially affect your return – especially in higher tax brackets.
As a CPA-led advisory firm, we evaluate how each REIT interacts with your broader tax strategy. Whether you’re managing trust assets, business cash reserves, or retirement accounts, we look for opportunities to maximize after-tax yield. We’ve even helped clients navigate QSBS redemptions and reinvestments to preserve tax benefits during REIT reallocations.
3. Overlooking REIT Sector Fundamentals
Not all real estate performs the same. Office REITs, for example, face continued headwinds due to remote work. But industrial REITs – especially those supporting logistics and e-commerce – remain strong. Similarly, healthcare REITs benefit from aging demographics and consistent demand.
We evaluate where each REIT fits into your portfolio based on growth potential, occupancy rates, and long-term industry drivers – not just today’s market narrative. This is especially important when making strategic changes like S corp to LLC transitions or rebalancing trust-held assets.
So… What Are the Best REITs to Invest In?
The answer is: it depends. For income-focused investors, high dividend REITs in stable sectors might make sense. For those seeking growth, data center or logistics REITs offer upside. The key is selecting REITs that match your timeline, tax profile, and overall asset allocation.
At Prosperity Partners, we don’t recommend tickers – we build strategies. That includes advising on REIT selection, managing partnership allocations, and ensuring all investments fit within your entity structure.
Are REITs a Good Investment for You?
Are REITs a good investment? For many, yes. They offer diversification, predictable income, and exposure to physical assets. But the details matter. Without proper planning, REITs can create unintended tax consequences, poor liquidity, or exposure to underperforming sectors.
That’s why we provide forensic-level analysis and real-world application – whether you’re calculating economic damages or allocating across entities.
Work With Prosperity Partners to Make Smarter REIT Decisions
If you’re seriously evaluating what are the best REITs to invest in, don’t go it alone. At Prosperity Partners Advisors, we work at the intersection of finance, structure, and strategy. From entity transitions to litigation support, our firm helps ensure every move supports your long-term financial goals.
Explore our expertise in fraud examination, real estate partnerships, and meet our team of experts. Make smarter, tax-efficient investment decisions – contact us here at Prosperity Partners Advisors and let our experts guide your next move.
Frequently Asked Questions
What are the best REITs to invest in?
The best REITs to invest in are those that align with your financial goals, risk tolerance, and tax structure – often in sectors like industrial, healthcare, or data infrastructure.
What is a REIT?
A REIT is a Real Estate Investment Trust – a company that owns or finances income-producing real estate and distributes most of its earnings to shareholders.
Are REITs a good investment?
REITs are a good investment for those seeking passive income, real estate exposure, and diversification. However, careful tax and risk planning is essential.
What are high dividend REITs?
High dividend REITs are trusts that consistently distribute a large portion of their earnings – typically in sectors with stable, predictable income like healthcare or triple-net leases.
How are REITs taxed?
REIT dividends are generally taxed as ordinary income, though some portions may be treated differently. Strategic tax planning can reduce your liability.
Can I hold REITs in a retirement account?
Yes. REITs can be held in tax-advantaged accounts like IRAs, where dividends grow tax-deferred or tax-free depending on the account type.