1. Residential Rental Property 

Looking for the top investments that pay monthly income, UK or otherwise?

Perhaps one of the best investments for monthly income is residential rental property.

A must-have for any serious investment portfolio, residential rental property investment has exploded in popularity over the last year and is a top contender for those looking at investing for income. UK property, in particular, is a hot item – thanks to its massive growth in income potential.

With residential real estate, investors will buy a property and rent it out to a tenant. This means that residential real estate delivers two forms of income.

1. Rental income – A regular monthly income stream that reached a record-high in the UK rental market in 2023, hitting £1,199 per month in April 2023, according to HomeLet.
2. Capital growth – Otherwise known as capital gains or capital appreciation, capital growth is the increase in a property’s value over time.

This makes property an effective solution for those looking towards investing for retirement, as they can earn regular rental income and secure a huge profit when they sell their assets later down the line.

While this asset class can deliver an effective monthly income stream, you need to know that there are ongoing costs with real estate, including property management fees and interest payments if you use a buy to let mortgage.

Overall, we estimate that you’ll likely need a minimum initial investment of around £40k, including; property taxes, a BTL mortgage initial deposit, and a down payment of 25% if you want to secure an effective residential property.

You can learn more about property investment by reading our ultimate guide for 2023. You can also see if now is a good time to invest in property by reading our brand-new property guide.

2. Dividend Paying Stocks on the Stock Market 

One of the riskier investments on this list but still incredibly popular amongst investors, the stock market is an excellent asset to invest in to get monthly passive income.

However, we’ve specified dividend-paying stocks here as not all stocks pay monthly income.

A dividend is a portion of a company’s profits that is paid out to shareholders based on how many shares they have. Depending on the company, it can be paid out monthly, quarterly, or every year.

Not all companies pay out dividends to their shareholders and can instead re-invest these profits.

Finding the right dividend stock can be pretty tricky, and it isn’t as simple as investing in the big FTSE 100 or FTSE 500 on the stock market.

You need to keep an eye on the earnings and revenues of a company and ensure that the company is not in debt to secure a sustainable dividend.

Likewise, you need to avoid being caught in “dividend traps“, which refers to shares that, on the surface, offer very high dividends but aren’t a good investment.

This is usually because a rise in a share’s yield can mean that share prices are falling, which could mean that dividend pay-outs are set to drop.

However, if you can find the right blend, dividend income can be sizeable for securing a regular monthly income, but you should be wary. Stocks aren’t historically known as safe investments, with 2020 seeing the stock market’s worst crash since 1987.

Check out our guide to property vs stocks to learn more.

3. Student Rental Property 

Another way of securing passive income by making an investment in real estate is through student rental property.

You can buy student rental property in the UK in two main ways.

1. You can buy purpose-built student accommodation: Likely one of the top choices in 2023, with Knight Frank’s recent Student Property report revealing that rental growth for PBSA is expected to exceed 5% in 2023 – following the 2.6% growth seen in the 2021/2022 academic year.
2. You can buy a house of multiple occupancy, otherwise known as HMOs: Historically a popular choice, with various tenants paying rent and increasing the income generated.

Like residential real estate, student property is a top passive income investment, allowing investors to earn both rent on a monthly basis and long-term capital appreciation.

Student property can potentially offer some of the best monthly income funds out of all real estate assets thanks to high rental income and low property prices typically below £100k – In fact, our student property, City Point, was available for purchase from only £59,995 and offered 8% NET rental yields.

While the minimum investment for student property is less, it also offers less capital appreciation potential than residential property, which is something to keep in mind for investors looking at retirement.

You will also need to pay additional fees, such as property management fees, when buying a purpose-built student apartment.

Overall, if you’re a buy to let investor looking for dependable income and want to invest money in real estate, student property is a top choice. You can learn more by reading our complete guide to student property investment in 2023.

4. Mutual Funds 

As a way of investing in stocks or bonds, investing in a mutual fund can be a smart choice for beginner investors in 2023.

A mutual fund is an investment vehicle that uses money pooled from investors to invest in assets like stocks and bonds.

Mutual funds are managed by fund managers and professional money managers who allocate the funding gained from investors into the right assets to generate income for their investors.

By investing in mutual funds such as exchange-traded funds (ETFs), investors have access to a professionally managed investment portfolio far cheaper than expected, with the potential to earn three forms of income.

They are:

1. Investors can earn income from dividends or interest depending on what type of asset the mutual fund invests in. The fund will usually give the investors the choice of receiving their income or re-investing for more shares.
2. Investors can earn capital gains when the fund manager sells assets that increase in price.
3. Investors could see their shares increase in price, which they can then sell on.

With plenty of mutual funds to choose from, such as the prior mentioned exchange-traded fund, fixed-income funds, index funds, equity funds and more, investors have plenty of choices to determine what option is right for them.

As mutual funds offer so much choice for investors, it’s undoubtedly a top choice for the best monthly income investments.

5. Government Bonds 

Government bonds can be an interesting solution for those looking for safe investments and wanting to know how to invest for monthly income.

A government bond is a debt issued by a government to raise funding for projects and government spending.

Sometimes known as sovereign debt, investors can buy bonds that can be sold via auction and will then receive interest payments based on the bond’s debt.

As a way to generate monthly income, government bonds can be a top choice as there is little chance of the government defaulting on payments.

However, if you secure a fixed-rate government bond, you could run the risk of interest rate risk, which is when an interest rate is higher than the fixed rate, meaning you’ll be earning less than you normally would on a variable rate.

But while fixed income can fall behind rising inflation and interest rates, and the rate of return is lower than assets like property, bonds will pay a regular income and are incredibly liquid if you want to re-sell.

6. Commercial Rental Property  

Our third real estate option on this list, commercial rental property, is another investment offering consistent income every month.

Investors can buy a unit in a commercial building, like an office block, retail space, or industrial space, and can then rent out the premises to companies or businesses.

The main benefit of commercial real estate over other rental properties is longer lease lengths, which means you’ll have access to tenants for longer and can, therefore, consistently see returns without running the risk of void periods.

However, these investments can get tricky, making it far harder to find business tenants. Likewise, if you’re looking to finance your deal, buy to let mortgages are also harder to find and can often incur higher deposits and interest payments.

As such, while this can be a good choice for a real estate investor, it may not be the best way to invest for monthly income.

However, these investments can get tricky, with it far harder to actually find business tenants. Likewise, if you’re looking to finance your deal, buy to let mortgages are also harder to find and can often incur higher deposits and interest payments.  

As such, while this can be a good choice for a real estate investor, it may not be the best way to invest for monthly income. 

7. Holiday Real Estate 

A top choice if you want to buy real estate you can live in, holiday homes allow investors to rent out a home on a short-term basis to a holiday goer or tourist.

Typically listed on websites like Airbnb, those owning a holiday home, whether based in the UK or abroad, can live in their holiday home while travelling and rent it out when not in use.

Although, if you wish to do this, keep in mind that it won’t be possible to live in a home purchased with a buy to let mortgage. Likewise, if you buy it with a residential mortgage, you won’t be able to let out the property.

Investors can produce monthly income from a holiday home, which could be considerable depending on its size and quality. However, securing a BTL mortgage can be tricky, and you could encounter large void periods if the area’s tourism is based on seasonal demand.

Check out our recent guide to learn more about buying properties for Airbnb 2023.

8.Real Estate Investment Trusts 

Want to invest in real estate but don’t have the cash required to own property directly?

Well, a top choice for you could be a real estate investment trust.

Real estate investment trusts, often abbreviated as REITs, are companies that own, finance, and manage properties on behalf of investors.

Similar to mutual funds, a REIT will pool cash gained from investors and use it to purchase real estate investments.

Most REITs are typically traded like stocks, making them an incredibly liquid asset, unlike traditional real estate investments.

This can be a far easier way to invest money in property, but keep in mind that due to the lower entry fee, returns will be far below that of buy to let property.

You can learn more about investing in real estate by checking out our 2023 guide to the best property investment strategies.

9. Cryptocurrency 

Booming in popularity across 2021, cryptocurrency is fast becoming one of the most popular ways of investing for younger generations.

Cryptocurrency is a digital form of money that can be purchased and traded online.

Often hailed as one of the most confusing investment concepts like NFTs, a unit of cryptocurrency is worth the same amount as a traditional currency. For instance, one bitcoin is worth £21,867.63 as of May 2023.

Although most investors hold onto cryptocurrency and sell it at a later date for capital growth, there are ways to use this contemporary asset to generate monthly income.

Firstly, investors can lend cryptocurrency to others and earn interest. Secondly, buyers can also place their cryptocurrency into an interest-bearing account and earn a fixed interest rate.

You need to be cautious when investing in cryptocurrency as it’s a very new and unregulated medium.

One minute you’re rolling around in a bed covered in your investment’s monthly income; the next, you could be selling your bed to pay the bills – the bottom line is, it’s a risky business.

As Time magazine put it: “You have a high chance of losing it all, but a small chance of winning it big.”

10. Cash ISA and Stocks and Shares ISA 

A safer investment than many on this list, a cash ISA is a savings account that you don’t pay tax on.

Everyone in the UK over the age of 16 is allowed an ISA allowance each tax year of up to £20,000, and you can only open one cash ISA per year.

Perfect for those looking to save some cash and earn interest, there are plenty of different types of Cash ISAs that offer varying levels of interest rates.

These include easy access and fixed rate, which currently offer highs of 3.5% and 4.4% AER, respectively, depending on how long you’re willing to store your cash.

You could also consider investing in an investment ISA, otherwise known as stocks and shares ISA, which allows you to invest in funds, or research and find your own shares.

Stocks and shares ISAs allow investors to earn more than a cash ISA, but you run the risk of losing out on income as the value of investments can go down. Also, remember that both ISAs share the same tax allowance, so you won’t be able to invest £20k in both.

11. Real Estate Crowdfunding Websites  

Real estate crowdfunding is a more niche way to make a property investment in 2022 and is a rather interesting method of securing investments that pay monthly.

A property crowdfunding website is a platform that pools investors’ funds together to purchase a property.

Once the website generates enough cash, it will then form a limited company, with all investors given a share in the company representative of the amount of cash invested.

This can be a top choice to generate steady monthly income without having to spend the cash required for a full property investment.

12. Corporate Bonds 

Working in a similar way to government bonds but riskier, a corporate bond is a debt issued by a company to raise cash for operations.

By buying a corporate bond, an investor will be lending money to a company and will therefore receive a return on investment via interest payments. You could also re-sell the bond.

Due to the riskier nature of corporate bonds vs government bonds, you will encounter higher interest rates, with investment-grade bonds given a rating based on their risk, with Triple-A bonds offering the lowest yields but the highest safety.

You can buy a corporate bond from £1,000, meaning it requires less initial investment than an asset like property or cryptocurrency but with far less income potential.

The downside is, though, that you’ll have no control of how the property is managed or if it’s even kept or sold.

13. Peer to Peer Lending 

Allowing investors to lend money to other individuals by cutting out banks and other lenders, peer-to-peer lending has shot up in popularity since its introduction in 2005.

Using peer-to-peer lending platforms like Lending Club, Upstart, and Peerform, investors can choose to lend their cash to other individuals and earn interest in return.

By cutting out banks and the middleman, you will likely see better returns without your bank taking a cut.

P2P lending recently received its first UK government backing, with the first £1,000 tax-free for basic rate taxpayers. However, at the time of writing, any money actively invested in P2P loans is not covered by the Financial Services Compensation Scheme, so you could risk losing your capital.

Loanees could also default on their interest payments, so you may end up losing out on income. Be sure to speak to a trained financial expert to see if this strategy is the right way of investing for monthly income for you.

14. Savings Account 

Likely the best way to invest your hard-earned cash safely, a standard savings account is a top way to save money for the future.

However, with UK interest rates remaining low, savings accounts have been hit hard.

But that doesn’t mean savings accounts are no longer viable, with plenty of options out there to choose from.

There are three main types of savings accounts at your disposal, with easy access, notice, and fixed-rate accounts available in 2023.

1. Easy-access accounts allow investors to withdraw their cash at any time but will typically receive interest at a lower rate than the other accounts.
2. Notice savings are the ideal midpoint, with investors needing to provide notice before they make a cash withdrawal – typically between 30 to 120 days.
3. Fixed-rate accounts mean you’ll need to lock your cash away for a set time, ranging from one to five years. While you won’t get cash in the short term, locking your finances away will mean you get access to the highest interest rates available.

While you won’t earn monthly passive income anywhere near other options on this, it can be a top choice for those unwilling to risk their capital at this time.

15. Money Market Funds 

An increasingly popular type of mutual fund that deserves its own mention, money market funds are mutual funds that invest in highly liquid assets like corporate bonds, commercial paper, and overnight bank deposits.

By investing in these assets, return potential is far lower than funds that invest in shares, but the trade-off is that your capital will be far less at risk.

Due to the low risk, money market funds are a top alternative to savings accounts and can deliver a decent monthly income stream in addition to other investments.

16. Laundry Machines/ Washing Machines 

A strategy you may not have thought of, investors can buy laundry machines or a laundromat to generate a regular income stream from passive income.

Laundromats can be a surprisingly successful investment, allowing a flexible work-life balance and a top return on investment.

In fact, a poll from Gallup found that 95% of laundromats succeed over a five-year period.

While it may not be the obvious answer to “what is the best way to earn monthly income?” it can be an interesting solution for you in 2023.

17. Annuities 

Guaranteed retirement income, or annuities, are a strong choice for those planning for retirement.

An annuity converts your savings built up for a pension into an annual income guaranteed for life.

In the UK, if you’ve built up cash throughout your working life into a defined contribution pension scheme, you may be stumped with what to do with the cash as you enter retirement age.

But one choice is buying a lifetime annuity, which will pay you a regular income for the rest of your life.

There are several different types of annuities available, including short-term annuities, fixed-term annuities, joint life annuities, level annuities, and more.

You can learn more by reading the following guide from AgeUK, and our 2023 guide to pension investing.

18. Robo-Investing 

Robo investing allows investors to save some cash while spending money.

Using apps like Acorn or Moneybox, you can round up your spending and invest the difference. Say you’ve bought lunch for £2.50; an app like Acorn will round this fee up to £3.00 and invest the 50p into stocks.

This can be an interesting way to earn passive income, but keep in mind that some returns will likely be minimal and won’t be suited for those looking to earn huge income for retirement.