What is thebest passive income, is rental property a good investment?
I want to be able to have income which offsets my expenses, but have few business skills and really am not likely to buy a franchise as I am not a people person. If I bought property for income and possible resale what kind, or maybe wait on this?
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Comments
Rental property is a GREAT investment… while it’s rented. If you can pay cash for the rental without needing a loan, go for it. You can rent out or sell at will but if you owe on it and/or depend on income to pay for it, you are not really investing. You will pay income and taxes and be liable for repairs so take a look at your budget and you’ll be able to answer your own question about how practical the thought is. There are other ways to generate passive income without high risk like property… consider them. But, if you’ve got money people will always need places to live especially with so many foreclosures out there.
Rental property is a great investment if you are knowledgeable in home repairs and basic accounting and business functions. If you put in sweat equity and make sure that your rent far exceeds your mortgage cost (if you debt finance) its a great way to make pos. cash flow.
There are many drawbacks, such as laws that protect non-paying tenants from being evicted, tenants that destroy your properties, The repercussions if your unit goes vacant for months while you have a mortgage on it, etc.
If your talking about flipping houses be careful not to over extend yourself or overpay. Watch the “Flip that House show on TLC, and see how easy it is to screw up big time on this.
Except for fixed interest, I really don’t believe in passive income, but at least with shares or property you don’t have to worry about managing staff. There’s still work involved. The main advantage of property is tax offsets.
I don’t know too much about real estate, but my grandmother was a real estate agent. What she told me is that it’s not the property but rather the land that appreciates in value.
I think you have to decide what you’re priority is:
1. Capital Growth – buy an asset and sell at a higher price
2. Income – rental income, share dividends, bond yields
If all goes well, an investment loan can be you’re best friend with capital growth and worst enemy with income. A loan can leverage your return for when you sell for profit, but if it’s interest and fees are too high, that can offset your income. That may not seem like a problem now, but if you don’t fix your rate, it could be later.
The land of house will go up over time if you pick a quality property in the right location. This is better for capital growth.
An appartment in a high occupancy area might be better for income if it costs less than a house. You can pay the asset off sooner so you don’t have loan interest offseting your rental income stream. This may not be a good idea for capital growth. I’ve heard of people in Melbourne and Ackland who have made a loss selling appartments. I would buy one if I wanted a no-fuss ongoing income stream, but not for capital growth.
- Get a certified valuer to value properties you’re interest in so you don’t get ripped off and can set limits particularly at an auction.
- A financial advisor is also important.
- A property manager, you could claim their fees off tax on rental income.
You want to check the property doesn’t have problems like pests, electrical problems etc.
Property is a big investment. Arm yourself with knowledge and advice so you don’t get screwed.
I think now is a reasonable time to invest if you’re in the USA, but you may want to wait until mid-year to be certain. FIxing the current low interest rate for as long as possible would be very wise.
Here’s a couple books I found on Amazon:
http://www.amazon.com/Investing-Income-Properties-Formula-Achieving/dp/0470190833/ref=sr_1_3?ie=UTF8&s=books&qid=1234016588&sr=1-3
http://www.amazon.com/Master-Guide-Income-Property-Brokerage/dp/047174915X/ref=sr_1_2?ie=UTF8&s=books&qid=1234016588&sr=1-2
I think you might have worked out by now that property really isn’t passive. It’s hard work! It’s good if you think you would enjoy it, but be prepared to make the effort.
For the best passive income read this book:
http://www.amazon.com/Ultimate-Dividend-Playbook-Independence-Investor/dp/0470125128/ref=sr_1_4?ie=UTF8&s=books&qid=1234018498&sr=1-4
If you prefer stock market dividends income don’t borrow to invest.
Coca Cola is a good example of a dividend income stock.