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As interest rates plummet, more and more Britons are considering buy-to-let as a way to build wealth. Falling borrowing costs and healthy rental growth mean the numbers are looking increasingly attractive for landlords. Personally speaking, I’d rather try to build wealth from property using a Stocks and Shares ISA.
Real estate investment trusts (REITs) allow investors to avoid the high upfront costs and day-to-day management that typically comes with buy-to-let. What’s more, thanks to rules on dividends, these trusts can also be a better way to target a large and stable second income.
What’s more, if purchased within an ISA, investors don’t pay tax on any of their passive income or capital gains. It’s a perk that buy-to-let landlords would love to have.
With all this in mind, which REIT stocks should investors consider buying today?
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.
Investing in an ISA
The beauty of REITs is that I can have a range of sectors to choose from. Unlike buy-to-let, where investment is restricted to residential property, in the UK I can choose to invest in, for instance:
- Medical centres
- Shopping malls
- Data centres
- Care homes
- Office blocks
- Warehouses and distribution centres
For residential property investment, Grainger (LSE:GRI) is a top trust to consider in my book. It has 11,078 homes spanning the country on its books, and a committed pipeline of 954 more homes to supercharge rental earnings.
Having a wide range of properties like this reduces the impact of rent defaults and empty properties on overall returns. For the last financial year (to September 2025), Grainger’s occupancy averaged an impressive 98.1%.
For buy-to-let investors owning maybe one or just a handful of homes, these dangers are much more severe.
There are risks at Grainger, of course. Government plans to build 300,000 new homes a year might harm future rent growth as supply increases. Rising regulation — such as the Rent Reform Bill this year that limits rent increases and bans no-fault evictions — is another threat to future earnings.
Yet these are threats facing private landlords too.
REIT benefits
I like the idea of investing in residential real estate right now. Rent growth has slowed in the UK, but with Grainger targeting a rise of 3% to 3.5% this year, investors can still expect a solid return on their cash.
I also like the excellent defensive characteristics of residential property. Rental income and occupancy remains steady across the economic cycle, providing excellent long-term dividend stability.
With REITs paying 90% of rental profits out in dividends each year, too, they’re one of the best ways to target passive income in my view.
Targeting a million
By investing in an ISA, individuals can combine buying REITs like this with other shares to target better returns that they could otherwise expect by just buying property.
Since 2015, the average Stocks and Shares ISA has delivered an average annual return of 9.64%. If this continues, someone investing just £500 a month could make more than a million (£1.05m to be exact) in 30 years.
I hold a wide range of REITs and stocks in my own portfolio. I’m confident this strategy will help me build significant wealth over time.
