The iShares Real Estate Perma-Bull ETF Portfolio

Are you priced out of the housing market after decades of monetary debasement, wage stagnation, and skyrocketing home prices? Don’t worry - according to renowned financial advisors, renting and “investing the difference” in a tax-sheltered account like a Roth IRA is just as good… or so I’m told.

Either way, there are actually quite a few methods to get real estate exposure with more liquidity and lower friction than owning property. You can’t live in any of these real estate ETFs, but you can stare at your account balance ticking upwards from potential price appreciation and distributions.

Here’s how I’d combine four iShares ETFs to build a portfolio that goes all-in on real estate as a substitute for never being able to afford a home in America.

iShares Residential and Multisector Real Estate ETF (REZ)

This portfolio starts with a 40% allocation to REZ, which offers a more targeted approach to real estate than most broad REIT ETFs. While many real estate funds include everything from office buildings to shopping malls, REZ excludes those categories.

It focuses instead on residential real estate, such as multifamily apartments, single-family rental homes, and manufactured housing communities (think trailer parks). These sectors have become increasingly important as housing affordability continues to deteriorate, especially in major metro areas where renting is often the only viable option.

However, despite the name, REZ isn’t a pure residential play. That would make the index too narrow, so it includes some additional sectors to provide balance. These include healthcare REITs—operators of senior living and medical facilities—and self-storage companies, which often perform well during economic transitions.

Overall, the ETF provides exposure to the demand-driven side of real estate: people always need somewhere to live and store their stuff, even if office space sits empty. REZ currently yields 2.57% on a 30-day SEC basis and charges a 0.48% expense ratio. That combination of yield and specificity makes it a solid foundational holding for a real estate-focused portfolio.

iShares U.S. Home Construction ETF (ITB)

The next 30% of this portfolio goes to ITB, an ETF that tracks the Dow Jones U.S. Select Home Construction Index. It offers pure-play exposure to companies that actually build homes, including well-known names like D.R. Horton, Lennar, PulteGroup, NVR, and Toll Brothers. It also includes building supply chains such as Sherwin-Williams, Home Depot, and Lowe’s, which all benefit when home construction and renovation activity picks up.

Warren Buffett recently added significant positions in both D.R. Horton and Lennar, indicating he sees long-term potential in the sector. Given his investment horizon and history of success, it’s worth paying attention.

Buffett likely anticipates a more accommodative rate environment in the near future, which would be a tailwind for homebuilders. Home construction stocks tend to be highly cyclical, with performance tied closely to interest rate expectations, mortgage affordability, and household formation trends.

Unlike REZ, ITB is not a yield play. The current 30-day SEC yield is only 0.54%, meaning most of the return potential comes from capital gains as housing activity rebounds. Still, it’s more tax-efficient than REZ, which distributes more income. ITB’s 0.38% expense ratio is also slightly lower, making it a cost-effective way to bet on the future of American housing.

iShares Mortgage Real Estate ETF (REM)

Next, we allocate 20% to REM, which brings income firepower and a different kind of real estate exposure. While REZ and ITB focus on equity ownership of properties or construction companies, REM targets mortgage REITs.

These firms don’t own real estate directly. Instead, they operate more like banks, borrowing short-term and lending long-term by investing in mortgage-backed securities (MBS). The difference between their borrowing cost and the yield they earn is the profit margin.

This structure can be highly profitable in the right conditions, especially when interest rates are falling or stable. However, because mortgage REITs typically use leverage, they are more sensitive to interest rate volatility. REM reflects that: it has a 3-year beta of 1.51, meaning it moves about 50% more than the broader market. It’s a more volatile and risky holding, but the reward is a hefty 9.93% 30-day SEC yield.

That yield makes REM the high-octane income engine of this portfolio. Like REZ, it charges a 0.48% expense ratio. Investors should be aware that this ETF may experience sharp drawdowns in turbulent rate environments, but if you believe rates are peaking or heading lower, it can rebound quickly.

iShares MBS ETF (MBB)

Finally, we round out the portfolio with a 10% allocation to MBB, which brings a level of safety and stability. While the other ETFs are tied to cyclical and higher-risk parts of real estate, MBB invests in government-backed mortgage-backed securities issued by entities like Fannie Mae, Freddie Mac, and Ginnie Mae.

These are high-quality, investment-grade bonds with an average AA credit rating, providing exposure to the housing market’s debt side without the volatility of mortgage REITs. With an average duration of 5.6 years, MBB is also moderately sensitive to interest rate changes.

MBB won’t provide spectacular returns, but it’s designed to preserve capital and generate consistent income. The current 30-day SEC yield is 4.25%, and distributions are paid monthly. Because it’s backed by government-sponsored entities, there’s a level of credit safety that makes this ETF a good ballast in a real estate-heavy portfolio.

MBB is also extremely affordable, with a low 0.04% expense ratio, and is widely used with over $40 billion in assets under management. While it may not move the needle dramatically, it helps cushion the portfolio during drawdowns and serves as a reliable fixed-income anchor.