How to Invest in REITs Australia – Investing in REITs for Beginners

Fact Checked by Gary McFarlane

Property is a great investment – but usually an expensive one. An economical way to expose your portfolio to property is to buy into a Real Estate Investment Trust (REIT). REITs invest in commercial property and allow investors to reap high dividends from rental yields, as well as truly diversify their portfolio with an asset class that tends to buck stock market trends.

The best way for beginners to invest in REITs is to either buy stock direct or buy into an Exchange Traded Fund (ETF) that invests in REITs. For more advanced investors, you can trade off REIT stocks and ETFs using Contracts-For-Difference (CFDs).

Below we review some brokers that accept Australian clients looking to get stuck into Real Estate Investment Trusts (REITs) with Australian Dollars (AUD) and other currencies. We also check out how REITs work and what their advantages are.

#1 Broker to Invest in REITs Australia – eToro

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How to Invest in REITs Australia – Step-by-Step Guide 2021

To invest in Real Estate Investment Trusts (REITs), you will need to use an online broker. With its transparent fee structure and easy-to-use interface, eToro is a safe and friendly place for beginners to start investing.

  • Step 1: Open an eToro account: This does not take long! Head to eToro.com. Press the ‘Join Now’ button to get started. Type in a username, email and password. Tick the boxes that show you have read the legal documents. Press the ‘Create Account’ button.
  • Step 2: Verify your identity: New regulation means that all decent brokers will ask you that you verify your account. This means proving who you are and where you live. The system prevents people getting onto the broker’s site who are bent on ripping others off. Use a decent scan of your passport for quickest verification. You will receive an email when you are good to go.
  • Step 3: Fund your account: Once you are verified you can deposit some funds. Check out eToro’s virtual demo account first if you want to test the water before live investing. When you are ready, press the blue ‘Deposit Funds’ button. With a simple dialogue box, you can then choose how much to commit and what payment method you prefer. eToro takes AUD via bank transfer (POLi), credit card and PayPal. Note that, when you come to withdraw funds, eToro will transfer them via the payment method you use now. So plan ahead.
  • Step 4: Invest in REITs: You can search for individual REIT stocks using eToro’s toolbar. Or you can browse through eToro’s selection of ETFs. Either way, you will not be charged on buy orders for stock and ETFs, although – as with all brokers – a spread fee will apply. Buying takes seconds, and eToro will hold your stock for you.

Where to Invest in REITs – Top REITs Brokers Australia

A key consideration for investors of any country is to find a broker that takes their favoured currency. For most Australian investors, that means Australian Dollars (AUD) – the world’s fifth-most traded fiat currency. Many brokers are limited in the geographical scope they can serve. But the following three brokers – eToro, AvaTrade and Capital.com – are fully set up for Australian clients.

1. eToro – Best Overall REITs Broker Australia

Founded in 2006 and boasting 20 million users, eToro has a reputation as a broker where newbies can learn the ropes of investing safely. The eToro user interface is super simple to use. There’s a massive amount of help provided with articles and FAQs. Best of all, any fees are spelled out clearly.

eToro has clients in 120+ countries including Australia, as well as regulation (amongst others) by the Australian Securities & Investment Commission (ASIC).

REITs Investment with eToro

With eToro, you can invest in REITs in two ways:

  1. You can buy REIT stock directly without commission.
  2. You can buy into REIT ETFs that invest in a basket of different REITs.

Buy REIT stock with eToro

You can search for individual REIT stocks by pressing ‘Discover Markets’ and searching by industry under ‘Financial’:

Or, if you know the name of a REIT stock, you can enter it into the top search bar and click to review your buying options. Here is Realty Income Corp (O), a popular REIT listed on the New York Stock Exchange with almost 6,000 commercial properties in the US and Puerto Rico and tenants such as 7-Eleven, FedEx and LA Fitness:

Realty Income Corp is unusual because its stock ticker is a single letter ‘O’. What’s more, it pays out dividends on a monthly rather than quarterly basis. You can invest in shares in this REIT without commission, or you can go short on it. Going short means setting up the transaction so you will benefit if the price falls, rather than rises. eToro provides this shorting facility as a Contract-For-Difference (CFD). This means you will not get to own actual stock, but rather expose yourself to the change in the stock price. (Shorting is not available for all stocks).

Also provided by eToro as a CFD is the ability to leverage your sale/purchase up to 5x. This is risky. Thankfully eToro allows you to set a stop loss which will terminate the trade in the event of the price falling or rising past a point which you determine beforehand.

eToro allows you to buy shares in Australia (500+) from global markets. Some are REITs. Examples are Vonovia SE (VNA.DE), Deutsche Wohnen (DWNI.DE), New York Mortgage Trust (NYMT), Invesco Mortgage Capital (IVR) and NewRiver REIT PLC (NRR.L). Do your research. Check out what dividends a REIT pays: the higher tenant occupancy rates a REIT boast, the more likely they are to be producing high dividends by passing on a fat rental income.

For long-term security, choose REITs with high Net Asset Values (NAVs). The Net Asset Value is the value of the property held minus any debt. Compare the NAVs of different REITs. Arranging debt to finance property acquisition is a standard part of the REIT business model. But debt always comes with risk. Bear that in mind. A REIT with big plans to grow fast might take on too much debt and then find it expensive to pay it off if interest rates rise.

Buy into REIT ETFs

eToro has a selection of 250+ ETFs (Exchange-Traded-Funds). Many are REIT ETFs.

The iShares Core US REIT ETF (USRT) takes a broad approach. USRT invests in a basket of REITs across sectors: retail, residential, office and specialised REITs.

The majority of REIT ETFs tend to track an existing real estate index specifically. The iShares Global REIT ETF (REET), for example, tracks the seminal FTSE EPRA/NAREIT Global REIT Index. This index is the definitive index of the global commercial REIT market. It covers 490 real estate companies based in 39 countries amounting to a market capitalisation of around $1.7 trillion USD.

The VanEck Vectors Mortgage REIT Income ETF (MORT) tracks the performance of the MVIS US Mortgage REITs Index.

ETFs allow you to spread risk by investing in many REITs at once.The idea is that, if one REIT runs into trouble, it should not dent the performance of the ETF too badly.

ETFs are particularly well-suited to REIT investment because they are designed for long-term holds. So are REITs. The longer you hold an ETF REIT, the more dividends you will accrue, and the more chance the REIT’s owned commercial property will have to rise in value. That is not to say that the value of REITs cannot drop, and dividend yields diminish. But to allow property investment to work for your portfolio, you must give it time – so ETFs make sense.

Features

eToro offers two innovative ways for beginners to inject their portfolio with investing expertise: CopyTrader and CopyPortfolios.

CopyTrader allows you to allocate some funds which will be used to copy the trades of more experienced investors, free of charge.

CopyPortfolios are a way of buying into an eToro dynamic portfolio based around a particular theme. You will need $1000 USD to invest. Currently, eToro does not offer a real estate CopyPortfolio, but the portfolios are well worth checking out for their ready-made diversification of risk across many other sectors:

Both CopyTrader and CopyPortfolio are free services. With both, you can choose which trader or portfolio to copy based on a risk rating as well as 12 month performance stats. Choose a trader or portfolio which matches your own attitude towards risk. Note that you will pay fees relating to any transactions made on your behalf. You can leave a copied trading position or copied portfolio at any time.

Regulation

  • Cyprus Securities & Exchange Commission (CySEC).
  • Australian Securities and Investments Commission (ASIC).
  • Financial Conduct Authority (FCA).

eToro Fees

You can buy into REITs as stocks or ETFs. ETFs are classified technically as stocks. With eToro, you do not pay commission on stocks. As with most brokers, though, you will pay a spread fee. The ‘spread’ is how brokers cover their costs. The price you can buy at is slightly higher than the list price; and the price you can sell at is slowly lower than the list price. The difference is the spread. You can check out the spread for any eToro stock by comparing the buy price (b) and the sell price (s). In the screenshot below, you can see the spread for popular UK REIT NewRiver REIT PLC (NRR) which owns UK pubs, shopping centres and warehouses worth £1.4 billion:

The buying price is $73.97. The selling price is $73.43.

At any point in time, the spread = (buying price – selling price)/buying price.

The spread therefore equals ($73.97-$73.43)/$73.97 = 0.7%.

You  need to know what the spread % is so you can plan your transaction. When you come to close your position, the price of the share will have had to have moved by over 0.7% in this example for you to make a profit.

 

Fee Type Fee Amount
Commission Fee 0% (for UK and European investors)
Spread Fee Variable dependent on asset
Deposit Fee $0
Withdrawal Fee $5
Inactivity Fee $10 monthly fee applies after 1 year of inactivity 

 

Pros

  • Buy into REIT stock direct, or buy into one of many REIT ETFs.
  • Takes AUD as a deposit currency.
  • 20 million users in 120+ countries.
  • Regulated by CySEC, FCA and ASIC.
  • CopyTrader – copy successful traders free of charge.
  • CopyPortfolios – invest in dynamic portfolios.
  • Simple user interface.
  • Plenty of online FAQ and clear help articles.

Cons

  • MT4 or MT5 platforms not supported.
  • Online ticket help only (no phone).

67% of retail investor accounts lose money when trading CFDs with this provider.

2. AvaTrade — Best MT4 & MT5 CFD Broker for REITs Australia

With 200,000 traders and regulation across 7 sovereign jurisdictions, AvaTrade offers a safe pair of hands for CFD (Contract-For-Difference) trading across financial instruments:

What’s particularly useful about AvaTrade is that it accepts AUD via bank transfer and credit card, and hosts a dedicated Australian AvaTrade website.

REITs Investment

Investing in a REIT with a CFD is for more advanced traders. That is because your account must run on a margin basis, and leverage rates for trades are preset. This means you can make a great deal of money relative to how much money you initially stake. Of course, the drawback is that you can lose too, and even drain your entire allocated funds in one fell swoop if the markets go against you. That’s leveraged trading for you.

On the plus side, the REIT sector is nowhere near as volatile as others. And, even in the event of a stock market crash, the price of REITs offer some chance of acting in a contrarian fashion because of their grounding in bricks-and-mortar.

AvaTrade is particularly strong in US stocks, and offers 60+ ETFs to trade off via CFDs. One such ETF is the Dow Jones US Real Estate Index ETF (DJUSRE).

As you can see from the image above, AvaTrade offers here an economical spread fee of only 0.13%. Leverage is set at 5:1. And overnight fees apply for positions held on a 24hr basis, thus CFDs are suitable for jumping in and out of positions. If you want to benefit from the slow-burn effect of REITs, investing conventionally with eToro might make more sense.

Features

AvaTrade are famous for their connectivity. You can access loads of platforms:

  • AvaOptions: AvaTrade’s own platform for trading options (not for newbies!).
  • MT4/MT5: well-established trading platforms.
  • ZuluTrade: copy trading giant – many signal providers to copy.
  • DupliTrade: copy trading giant – a few, vetted signal providers to copy.
  • AvaSocial: social and copy trading on AvaTrade’s mobile only trading app.

Regulation

AvaTrade is regulated by the the British Virgin Islands Financial Services Commission, the  Israeli Securities Authority, the Financial Sector Conduct Authority in South Africa, the Central Bank of Ireland, the Australian Securities and Investments Commission, and the Financial Services Agency of Japan.

AvaTrade fees

Fee Type Fee Amount
Commission Fee NA
Spread Fee Variable dependent on asset
Deposit Fee $0
Withdrawal Fee $0
Inactivity Fee $50 per quarter after 3 months inactivity

 

Pros

  • Trade in CFDs relating to REIT stocks or ETFs from Australia.
  • Accepts AUD.
  • Super-responsive help via integrated phone/email/ticket.
  • All fees clearly displayed.
  • Access many platforms like DupliTrade, ZuluTrade, MT4/MT5.
  • Swift (but stringent) verification procedure.
  • Buy cryptocurrency in Australia.

 

Cons 

  • Users must a margin account.
  • Non-activity fees apply after 3 months.
  • CFD trading only.

71% of retail investor accounts lose money when trading CFDs with this provider.

3. Capital.com — Established CFD Broker for REITs Australia

Like AvaTrade, Capital.com is a reputable and regulated CFD broker with a good name. A Capital.com office was opened in Melbourne, Australia in September 2021, and AUD is accepted via credit card, bank transfer and Apple Pay. Capital.com is regulated by the Australian Securities and Investments Commission (ASIC).

Capital.com offers access to over 3,800 markets, and features a number of REITs.

REITs Investment

Capital.com allows you to trade off REIT stocks via CFDs, thus allowing you to gain at a leveraged rate to the money you put down. As with Avatrade, this way of trading offers a higher level of risk/reward than the conventional trading offered by eToro – but can suit savvy investors.

For REITs, check out Crown Castle International (CCI) which specialises in communications cabling for properties, Simon Property Group (SPG) which is the US’s largest shopping mall operator, and Prologis (PLD) which owns almost 4,000 logistics centres worldwide. There are others: so get stuck in, and do your research.

A good selection of ETFs is provided by Capital.com.

Features

Capital.com offers a broad selection of instruments and markets and is particularly strong in the area of forex.

Regulation

Capital.com is regulated by:

  • Financial Conduct Authority (FCA).
  • Australian Securities and Investments Commission (ASIC).
  • Cyprus Security and Exchange Commission (CySEC).

Capital.com fees

Fee Type Fee Amount
Commission Fee 0%
Spread Fee Variable dependent on asset
Deposit Fee $0
Withdrawal Fee $0
Inactivity Fee $0

 

Pros

  • REIT stocks to trade as CFDs.
  • Takes AUD.
  • Powerful charting tools.
  • Learning app called Investmate.
  • Tight spreads.

 

Cons

  • User interface not as easy to grasp as eToro’s.

76.7% of retail investor accounts lose money when trading CFDs with this provider.

Invest in REITs from Australia – Broker Price Comparison

Broker Commission Deposit Fee Withdrawal Fee Inactivity Fee
eToro 0% $0 $5 $10 monthly (after a year of inactivity)
AvaTrade 0% $0 $0 $50 per quarter (after 3 months inactivity)
Capital.com 0% $0 $0 NA

 

Investing in REITs – What are the Risks?

REITs are susceptible to high-interest rates. This is because, to grow, they must take on debt to invest in commercial property. If interest rates are high, this debt becomes expensive.

REITs are also susceptible to variations in local property markets. REITs are not recession-proof: if they cannot get business tenants to occupy their commercial premises, dividends fall.

How to Invest in REITs with eToro

Here’s your four-step strategy to invest in REITs with eToro:

Step 1: Open an account with eToro

  • Head to eToro.com. Complete the form in the middle of the screen with a username, your email and a password. Read the legal info and tick the acknowledgement boxes. Press the blue ‘Create Account’ button.

67% of retail investor accounts lose money when trading CFDs with this provider.

Step 2: Verify your account

You will need to prepare a digital scan of proof of identity and proof of address. Use a scan of your passport for quickest verification.

 

To verify your place of residence, you can use a scan of:

  • Bank statement/credit card bill.
  • Phone/utility bill.
  • Letter from your local council/municipality.
  • Tax letter/bill.

eToro provides useful help pages to guide you through the verification process:

Step 3: Fund your account

Once verification is complete, you will be emailed and a green tick will appear beside your photo on your eToro profile. Click the blue ‘Deposit Funds’ button. This brings up a simple dialogue box. Here you can choose how much and how to pay into your eToro account.

AUD deposits can be made via bank transfer (POLi), credit card and PayPal. A minimum deposit of $50 USD equivalent ($66 AUD approx.) applies. To drill down to exactly what payment methods are available from each country, head to Depositing Funds into your account FAQ. Select the ‘Payment Methods and Limitations’ pull-down FAQ.

No deposit fee applies. A currency conversion fee applies on all non-USD deposits. Note that all eToro accounts and transactions are denominated in USD, but you can view your available funds as AUD if you wish.

Step 4: Invest in REITs

You can search for REIT stocks and ETFs using the toolbar at the top of your screen.

Or press the ‘Trade Markets’ button on your left toolbar to access investment instruments by type:

For REIT stocks, press the ‘Stocks’ button. To track down some REIT ETFs, press the ‘ETFs’ button.

Click on the logo of a stock/ETF to access its chart, chat feed and stats. To check out your transaction options, click the blue ‘Trade’ button.

Conclusion

REITs offer many advantages. Every REIT offers an inbuilt level of diversification because REITs invest in baskets of different commercial properties. For further diversification and lowering of risk, you can invest in REIT ETFs, which invest in baskets of REITs.

If you have some experience as an investor and are seeking high returns for minimal stakes, then the CFD trading options available with AvaTrade and Capital.com may be for you. Otherwise, eToro is the obvious choice to get started with REITs. eToro has won a well-deserved reputation for being a beginner-friendly space to invest in. You may be able to track down slightly tighter spreads on stocks with other brokers, but nowhere will you experience the same level of user-friendliness as with eToro. The eToro user interface is a cinch to get the hang of. The copious help pages and FAQs are very clearly written, and eToro’s ticketed help system is always on hand if you really get stuck.

Best Broker to Invest in REITs Australia – eToro

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$50Exclusive promotion
Our score10
  • Buy over 800 stocks with 0% commission
  • Social trading network
  • Copy over 12 million traders and investors
0% Commissionstart TradingOur score 10

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About Jules Blundell PRO INVESTOR

Jules is an experienced finance writer. He leverages his First Class degree from Cambridge University and his time at banks such as Goldman Sachs, Credit Suisse First Boston and Deutsche Bank to crunch complex financial topics for easy, educational reading.