The 10.84% Yield REIT ETF That Pays Monthly Like a Rental Property, Without the Tenants

One of the first numbers a real estate investor usually looks at is the capitalization rate, or cap rate. The calculation is straightforward: take a property’s annual net operating income (NOI) and divide it by its purchase price or current market value. For example, a property producing $60,000 of NOI and valued at $1 million, for example, has a 6% cap rate.

That gives us a useful reference point for today’s market. Nareit’s latest Q2 2026 data puts the implied cap rate for publicly traded REITs at 5.7%. Meanwhile, CBRE’s latest U.S. survey found that the average commercial real estate cap rate was essentially unchanged during the first half of 2026, despite considerable variation by property type, quality and geography

But a cap rate doesn’t tell you what it’s actually like to own the property. It doesn’t quantify calls from tenants, vacancies, evictions, screening new renters, collecting late payments, emergency plumbing repairs, replacing appliances, property management, insurance claims, renovations, maintenance, or the time and transaction costs involved in eventually selling the property. It also doesn’t incorporate financing or capital structure, which Nareit specifically identifies as a limitation of the metric.

For investors who primarily want real estate exposure and income, I think the easier route is obvious: buy a real estate ETF through a brokerage account. Given the tax characteristics of REIT distributions, I’d preferably hold one in a tax-advantaged account such as a Roth IRA when appropriate.

And if you’re willing to introduce derivatives, an options overlay can potentially push the distribution rate considerably higher than what the underlying real estate holdings generate on their own. That’s where the NEOS Real Estate High Income ETF (IYRI) comes in. It currently has a 10.84% distribution rate and pays monthly.

How IYRI Turns Real Estate Into a 10% Yield

IYRI provides exposure to the Dow Jones U.S. Real Estate Capped Index, so you’re getting a diversified publicly traded real estate portfolio rather than buying and managing individual properties yourself. Importantly, that universe isn’t limited strictly to traditional equity REITs. It can also include real estate operating companies, or REOCs, as well as mortgage REITs. That broadens the sources of real estate exposure beyond companies directly owning and operating portfolios of physical properties.

On top of that exposure, IYRI uses an actively managed options strategy designed to generate additional income. The fund can use call spreads rather than simply writing covered calls across the entire portfolio. Selling calls generates option premium, while purchasing calls at higher strike prices can restore some participation if the real estate market rallies substantially.

That’s an important distinction from a mechanical covered call strategy. A basic overwrite collects premium but places a ceiling on gains above the call’s strike price. A call-spread structure costs some of that premium to purchase the higher-strike option, but in exchange it can reopen upside beyond that second strike.

Put the real estate portfolio and options strategy together, and IYRI currently has a 10.84% distribution rate paid monthly. That’s substantially higher than the income you’d typically receive from owning a broad portfolio of REITs alone. The trade-off is cost, as IYRI charges a 0.68% expense ratio.

IYRI Has Also Been Surprisingly Tax Efficient

Taxes are another reason I generally prefer holding conventional REIT ETFs in tax-advantaged accounts when possible. REIT distributions don’t necessarily receive the same qualified-dividend treatment investors may be accustomed to with ordinary U.S. stocks, although the exact tax treatment depends on the character of each distribution and an investor’s circumstances.

IYRI has so far produced an interesting wrinkle. According to the fund’s most recent distribution estimate, approximately 63% of its payout was classified as return of capital (ROC). ROC generally isn’t immediately taxable as ordinary income. Instead, it reduces your adjusted cost basis in the ETF. That defers the potential tax liability until you eventually sell the shares, or until your basis reaches zero, after which additional ROC is generally treated as capital gain.

That can make IYRI’s distributions considerably more tax efficient than they initially appear, particularly compared with a real estate ETF whose distributions are predominantly currently taxable. The estimate is preliminary, however. Distribution classifications can change, and investors should rely on their final Form 1099-DIV rather than an interim Section 19(a)-1 notice for tax reporting.

The bigger question with any ETF paying more than 10% is whether the distribution is being supported by sufficient economic returns. A high payout isn’t particularly useful if the NAV steadily declines to fund it. So far, IYRI has held up reasonably well on that front. Through Aug. 31, 2026, the ETF had generated a 16.76% cumulative total return since inception, compared with 16.55% for the Dow Jones U.S. Real Estate Capped Index.

I wouldn’t treat IYRI as a literal substitute for owning rental property. Physical real estate offers leverage, direct control, depreciation deductions and other characteristics an ETF doesn’t replicate. But if the objective is simply diversified real estate exposure and monthly cash flow without becoming a landlord, IYRI offers a much simpler way to get both.

Contact [email protected] for any questions or corrections.