Being a landlord can be a great way to earn passive income. You could potentially capitalise on rising house prices and make your money work for you. However, it’s not as simple as it sounds. It can be a never-ending headache of hassle, maintenance and worry. Is being a landlord worth it? Can it really be categorised as passive income?
According to Investopedia, passive income is “earnings an individual derives from a rental property, limited partnership or other enterprise which he or she is not actively involved.” Essentially, no matter how much (or little) work you put into it, it should continue to give you some money. It’s money you can earn in your sleep from an investment you don’t need to manage. The premise is that you go about your day and have some investment churning away in the background that doesn’t need your attention to succeed.
In an ideal world, and as Investopedia suggests, the income you earn from your property portfolio would be passive. After the initial purchase and tenancy sourcing, you can rent it out and enjoy a steady stream of monthly income. If, and when you decide to capitalise on rising house prices, you can list your property for sale and make a nifty profit.
But that’s not how it works. Chances are, it’s far from the truth. There’s so much more to the story, and often, it isn’t pretty picture. Let’s say you were able to get past the initial hurdle: you had enough cash to get started in the first place. The steps which follow might prove to be incredibly stressful.
Where should I buy my property?
What should I look for? How many bedrooms? What areas have a promising rental demand? Have I found a bargain or is this under-priced for a hidden reason? Will the north offer me a better rental yield than the south? Should I choose a garden or a parking space? The questions are endless. And unless you’re a UK property investment guru, you might feel a little lost.
Home improvements
Once you’ve chosen a house, you’ll want it to look its best. Even fresh-off-the-market properties need a bit of love sometimes. And even if they don’t, you might want to spruce it up a little to get the best rental price. Good news is, once you’ve done that, you might stand a better chance of attracting a tenant sooner. Bad news is, it’s unlikely that your tenant will stick around forever. If and when they decide to leave, you might need to spruce the house up. Again. Even the best tenants will leave their share of wear and tear. And whilst a spring clean, some minor repairs and a fresh lick of paint doesn’t sound too bad, you might have to do it more often than you think. With the average length of tenancy now sitting around 18 months; revamps can be frequent and time-consuming.
Getting the property rented out
On the topic of tenants, you’ve got to find them. Finding the right tenant can be a scary task. After all, you’re trusting them to pay rent on time, be kind to your property and be cooperative. It can be a mammoth of a task and a leap of faith. And in the same regard to home improvements, find a tenant isn’t a one-off job. If you want to maintain your monthly income, every time you lose a tenant you’ll have to find a new one.
No tenant means no income
But what happens when you can’t? Successful buy-to-let property is dependent on successful tenancy. If you haven’t found a tenant, you won’t be receiving rent. With the average rent across the UK being £800, a property that remains empty for 3 months could set you back by £2,400. If you planned for your rental income to cover a chunk of your mortgage repayments, your buy-to-let dream could end up burning a hole in your own pocket.
Dealing with doubt
In your search for a tenant, you could spend days figuring out why your property isn’t renting. You might spend a lump sum on refurbishments and you might chase up lettings agents only to find that the property simply isn’t receiving much attention. Uh-oh. Have you bought the wrong house? Have you chosen the wrong area?
The day to day headache
On the flip side, even dream tenants will call you at midnight to tell you about a broken boiler or a leaking sink. Being a landlord might feel like being on call 24/7 and never getting paid for overtime. Admittedly, you can hire a management company to take care of these tasks, but their fees could bite a chunk out of your monthly profits. You’ll also have to stay on top of landlord tax changes and various other legalities.
So, what should be passive income is actually a mountain of work. Hassle, stress, upkeep and a lot of research will need to go in to it. Being a landlord might feel like a full-time job, not something which earns you extra cash in your sleep. You might be wondering, is being a landlord even worth it then? Well, 63% of people seem to think so. But, the remaining 37% have avoided it because of the stress.
So, in towhat’s the solution? Property might be too promising an asset class to miss out on. It really shouldn’t have to be so complicated. In fact, it no longer is. Property crowdfunding is a way for you to invest in different properties all over the country (from just £10) and never have to change a light bulb. You’ll then receive any rental income proportionate to your shareholding and we will take care of the rest.
How does it work?
We will handpick properties which we believe will work, source tenants, complete repairs and deal with the general headache. Not only does property crowdfunding (with Property Moose) allow you to wave goodbye to all the hassle, it also splits the cost. With current asking prices, landlords might be limited to building small property portfolios. With property crowdfunding, you can diversify your capital across a variety of properties.
You could say that, whilst traditional property investment seems to run on an invitation-only basis, property crowdfunding operates an open-door policy; everyone’s invited. You don’t have to be a millionaire, you don’t have to be an expert in the UK housing market and more importantly, you don’t need to think about it after you’ve invested. We’re putting passive into passive property investment. Once you drop your investment into any of our listed opportunities, you can sit back and let your money work for you.
By Jenna Kamal
Disclaimer and Legals
Property Moose does not provide any advice in relation to investments and you must rely on your own due diligence before investing. Please remember that property prices can go down as well as up and that all figures, rates and yields are projections only and should not be relied on. If in doubt, please seek the advice of a financial adviser. Your capital is at risk if you invest. This post has been approved as a financial promotion by Resolution Compliance Limited.
Property Moose is a trading name of Crowd Fin Limited which is an Appointed Representative of Resolution Compliance Limited which is authorised and regulated by the Financial Conduct Authority (no: 574048).
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