🏢 VNQ vs SCHH vs IYR · REIT ETF Comparison
VNQ vs SCHH vs IYR: Best REIT ETF in 2026?
Three funds, all holding US REITs, with very different price tags. SCHH charges 0.07% — nearly half of VNQ's 0.13%. IYR charges 0.40% for fewer holdings. Cost matters a lot when returns are moderate.
VNQ: 0.13% · 165+ REITs
SCHH: 0.07% · 135 REITs
IYR: 0.40% · 90 REITs
VNQ vs SCHH vs IYR: Side-by-Side
|
VNQ |
SCHH Lowest cost |
IYR |
| Full name | Vanguard Real Estate ETF | Schwab US REIT ETF | iShares US Real Estate ETF |
| Issuer | Vanguard | Schwab | iShares |
| Expense ratio |
0.13% |
0.07% |
0.40% |
| AUM | $36B | $7B | $4B |
| Holdings | 165+ REITs | 135 REITs | 90 REITs |
| Inception | 2004 | 2011 | 2000 |
| 1-year return | +7.4% | +7.6% | +7.2% |
| 5-year return | +4.9% | +5.0% | +4.5% |
Past performance does not guarantee future results.
The BFF Take
SCHH on cost, VNQ on breadth — IYR is hard to justify for most investors. SCHH's 0.07% fee is the lowest of the three and nearly half of VNQ's 0.13%. On $100,000 invested in REITs, that 6 basis point gap saves $60/year — meaningful for an asset class whose total returns have averaged 4-7% annually. SCHH tracks the Dow Jones US Select REIT Index (135 stocks). VNQ tracks the MSCI US IMI Real Estate 25/50 Index (165+ stocks), which includes more mid-cap REITs and a broader range of sub-sectors. Both are reasonable choices. VNQ is preferred when you want the broadest exposure; SCHH is preferred when minimizing cost. IYR costs 0.40% for 90 holdings — the oldest REIT ETF (2000) but no longer competitive on cost or holdings breadth. Unless you specifically need IYR's longer track record for backtesting purposes, VNQ or SCHH is the better choice. All three are highly interest rate sensitive and paid ordinary income distributions — ideal for tax-advantaged accounts. Past performance does not guarantee future results.
Who Each Fund Is Built For
VNQ
Best for
- Broadest REIT exposure (165+ holdings)
- Vanguard brokerage account holders
- Largest REIT ETF by AUM ($36B)
- Widest range of REIT sub-sectors
SCHH
Best for
- Lowest cost REIT ETF at 0.07%
- Schwab brokerage account holders
- Commission-free at Schwab
- Cost-minimizing REIT allocation
IYR
Best for
- Longest REIT ETF track record (since 2000)
- Backtesting purposes requiring history pre-2004
- Options traders (options market exists)
- Institutional use where IYR liquidity is needed
Frequently Asked Questions
Is SCHH better than VNQ?
On cost, yes. SCHH charges 0.07% versus VNQ's 0.13%. For investors who are cost-minimizing, SCHH is the better choice. VNQ holds more REITs (165+ versus SCHH's 135) across a broader range of sub-sectors. For investors who prioritize comprehensive REIT coverage, VNQ is the better choice. Both have produced similar total returns over their overlapping history. The decision comes down to whether you care more about cost (SCHH wins) or breadth (VNQ wins).
Why is IYR so much more expensive than VNQ and SCHH?
IYR launched in 2000 when ETF fees were significantly higher. iShares has not reduced its fee despite competitive pressure from Vanguard and Schwab. IYR retains $4B in AUM largely from investors who bought it years ago and have not switched. At 0.40%, IYR costs $330/year more per $100,000 than SCHH. Unless you have a specific reason to use IYR (brokerage commission structure, options needs, or you simply inherited the position), switching to SCHH or VNQ makes financial sense for new money.
Are REIT ETF dividends taxed as ordinary income?
Mostly yes. REITs are required to distribute at least 90% of taxable income to shareholders. Most REIT distributions are ordinary income (not qualifying dividends), taxed at your marginal income tax rate rather than the lower 15%/20% qualified dividend rate. This makes REIT ETFs tax-inefficient in taxable brokerage accounts — holding VNQ, SCHH, or IYR in an IRA or Roth IRA avoids annual ordinary income tax on distributions. The Roth IRA is particularly advantageous because qualifying withdrawals are entirely tax-free.
How did VNQ, SCHH, and IYR perform in 2022?
All three fell roughly 25-28% in 2022 as the Federal Reserve raised rates by 425 basis points. REITs are highly interest rate sensitive — they carry significant debt loads, and higher rates both increase borrowing costs and reduce the present value of future cash flows. The 2022 REIT decline was one of the steepest since the 2008-2009 financial crisis. All three recovered significantly in 2023-2024 as rate expectations stabilized. Past performance does not guarantee future results.
Past performance does not guarantee future results. Fund data is approximate. Nothing on ETF BFF is personalized financial advice.