1. Residential Rental Property
Perhaps one of the first passive income ideas that comes to mind for earning 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 thanks to its huge 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.
- Rental income – A regular monthly income stream that reached a record-high in the UK rental market in 2021, hitting £1,061 per month in September 2021 according to HomeLet.
- Capital growth – Otherwise known as capital gains or capital appreciation, capital growth is the increase in a properties value over time. UK property prices increased at their highest rate in 2021 since 2004, reaching an average of £250k for the first time ever.
This is what makes property an effective solution for those thinking ahead to retirement, as investors can earn regular rental income and can also 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 be aware 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 £30k, which includes property taxes and a BTL mortgage initial deposit and down payment of 25% if you want to secure an effective residential property.