3 Best High-Yield REITs to Buy in 2025 for Rising Rate Survival (Yields Up to 19%)
Understanding the REIT Landscape in 2025
Real Estate Investment Trusts (REITs) in 2025 are navigating a landscape shaped by persistently high interest rates, tighter lending conditions, and heightened economic uncertainty. Unlike previous years, where lower rates boosted property values and income streams, this environment demands sharper scrutiny.
Certain REIT sectors are under pressure—especially those with floating-rate debt, cyclical tenant bases, or heavy exposure to office space. Yet, not all REITs are suffering. Investors can still find opportunities in high-yield REITs that focus on essential services, offer fixed-rate debt, and maintain conservative financial structures.
Why Rising Rates Threaten Most REITs
When interest rates rise, REITs face two major challenges:
- Higher Borrowing Costs: REITs often rely on debt to finance property acquisitions and development. As rates rise, refinancing or issuing new debt becomes more expensive, squeezing margins.
- Valuation Pressure: Investors demand higher yields when risk-free rates go up. This forces REIT share prices downward, especially those in over-leveraged or low-growth sectors.
As a result, only the most strategically positioned REITs can thrive in this climate.
What Makes a REIT Resilient in 2025
Here are key traits of recession-resistant and high-performing REITs in 2025:
- Fixed-Rate Debt: Shields the REIT from rate shocks.
- Low Payout Ratios: Provides room to sustain or grow dividends.
- Stable Sectors: Properties in healthcare, logistics, or residential sectors have enduring demand.
- Geographic Diversity: Reduces risk from localized downturns.
- Tenant Quality: Long-term leases with creditworthy tenants offer security.
Monthly Dividends and DRIP Strategies
One standout strategy for long-term income investors is combining monthly dividend REITs with DRIP (Dividend Reinvestment Plan) participation.
Benefits of Monthly Dividends:
- More frequent cash flow
- Smoother income for budgeting
- Better alignment with compounding intervals
Advantages of DRIP:
- Reinvest dividends automatically into more shares
- Dollar-cost averaging smooths out price volatility
- Accelerates growth, especially during market downturns
3 High-Yield REIT Picks to Survive 2025
1. Community Healthcare Trust (CHCT)
- Yield: 10.3%
- Sector: Healthcare
- Why It Works: CHCT focuses on outpatient medical facilities, rehabilitation centers, and specialty clinics. These are mission-critical properties with tenants unlikely to default, regardless of macroeconomic conditions.
- Strengths:
- Long-term leases
- High occupancy rates
- Expansion into secondary markets with less competition
- Recession Resistance: Healthcare services are essential in any economy.
2. Pennymac Mortgage Investment Trust (PMT)
- Yield: 10.9%
- Sector: Residential Mortgage REIT
- Why It Works: PMT invests in mortgage-backed securities and correspondent lending, benefiting from a diversified income stream. Despite higher volatility, it's managed to maintain solid net investment income and preserve book value.
- Strengths:
- Strong hedging mechanisms
- Opportunistic capital deployment
- Experienced management team
- Caveat: Higher volatility—best suited for risk-tolerant income investors.
3. Orchid Island Capital (ORC)
- Yield: 19.3%
- Sector: Mortgage REIT (Agency RMBS)
- Why It Works: ORC operates within the residential MBS space using agency-backed assets. While it carries higher leverage, its asset base offers implied government guarantees that buffer against catastrophic losses.
- Strengths:
- Monthly dividends
- Government-backed securities
- Aggressive income generation
- Caveat: High yield comes with substantial price volatility.
Key Sectors to Avoid in 2025
Not all REITs are equal. Here’s where to tread carefully:
- Office REITs: Still reeling from remote work trends and rising vacancies.
- Traditional Retail: Struggles persist due to e-commerce dominance and shifting consumer behavior.
These sectors carry higher risk due to structural shifts that predate the interest rate environment.
REIT ETF Face-Off: VNQ vs. SCHH
| ETF | Yield (2025) | Expense Ratio | Sector Focus |
|---|---|---|---|
| Vanguard Real Estate ETF (VNQ) | ~4.2% | 0.12% | Broad, includes office |
| Schwab U.S. REIT ETF (SCHH) | ~3.3% | 0.07% | Broad, excludes office |
- Best for Defensive Investors: SCHH, with lower office exposure.
- More Diversified Option: VNQ, but with added risk from cyclical sectors.
DRIP Strategy in Action: A Long-Term Growth Tool
Let’s consider an investor reinvesting dividends in ORC.
| Initial Investment | Monthly Dividend Yield | Reinvested Each Month | Shares After 1 Year |
|---|---|---|---|
| $10,000 | 1.6% | $160 | +18.2% share growth |
The power of DRIP lies in its compounding, especially when prices are volatile—every dip becomes a buying opportunity.
How to Pick the Right REIT for Your Goals
Ask yourself:
- Do I want steady income or aggressive growth?
- Can I tolerate volatility for higher yield?
- Should I diversify across sectors?
Match your answers to REITs that align with your strategy—healthcare for stability, mortgage for yield, and DRIPs for long-term wealth.
Comparing Healthcare vs. Industrial REITs
| Aspect | Healthcare REITs | Industrial REITs |
|---|---|---|
| Yield | Higher (8–10%) | Moderate (4–6%) |
| Stability | Very high | High |
| Growth Potential | Moderate | High (e-commerce tailwinds) |
Industrial REITs are growing but tend to offer lower yields compared to healthcare, which shines in downturns.
How Mortgage REITs Manage Rising Rate Risk
Mortgage REITs use a few tools to manage interest rate risk:
- Interest Rate Swaps: Lock in rates to manage cost of funds.
- Hedging Instruments: Protect book value from volatility.
- Asset Diversification: Blend agency and non-agency loans.
Smart management is crucial here. Risk is real, but so is reward.
Summary Table: Best High-Yield, Recession-Resistant REITs in 2025
| REIT Name | Yield | Sector | Why It’s Strong |
|---|---|---|---|
| Community Healthcare Trust | 10.3% | Healthcare | Stable sector, long-term leases |
| Pennymac Mortgage Trust | 10.9% | Mortgage | Income growth, hedged exposure |
| Orchid Island Capital | 19.3% | Mortgage RMBS | Monthly dividends, government-backed securities |
FAQs on REIT Investing in 2025
Q1: What are REITs most affected by high interest rates?
A1: Office and retail REITs suffer most due to low demand and rising vacancies.
Q2: Are mortgage REITs too risky?
A2: They carry more volatility but offer higher returns with careful selection.
Q3: How do I start using a DRIP with my REIT?
A3: Many brokerages allow automatic reinvestment—just opt in via your account settings.
Q4: What’s better in 2025: SCHH or VNQ?
A4: SCHH is more defensive; VNQ is broader but includes more cyclical risk.
Q5: Why choose monthly dividend REITs?
A5: They improve cash flow and compounding frequency, enhancing returns over time.
Q6: Can REITs still grow in a flat economy?
A6: Yes, especially those in essential sectors like healthcare or logistics.
Final Thoughts: Building a REIT Strategy for 2025
Rising interest rates don’t have to derail your income strategy. By focusing on REITs in healthcare and mortgage sectors, leveraging monthly dividends, and compounding via DRIPs, you can build a resilient and rewarding portfolio.