Passive Income
Discussion
Not sure whether this is more suited to the Business section or here...
Anyways, keen to discuss what people view as viable options to build passive income streams over time (not looking to get rich quick) for those in reasonably well renumerated but full time jobs...
Usual suspects
Buy to Let
Commercial property
Equities
Index Trackers (Vanguard etc)
Anyways, keen to discuss what people view as viable options to build passive income streams over time (not looking to get rich quick) for those in reasonably well renumerated but full time jobs...
Usual suspects
Buy to Let
Commercial property
Equities
Index Trackers (Vanguard etc)
Kudos said:
As per profile, I own some companies that people run for me and I dip in and out if for board meetings.
My main job is consultancy, I have some specialist IT skills which are luckily in demand. This pays for my toys and cash flows a lot of things.
No miracles, just been lucky. Setup a company and sold it to a Nasdaq listed company which kicked off things for me
Interesting and good for you Kudos, always good to hear of people doing well. If you don't mind which area of IT are you're skills in and what did the company do that you sold? My main job is consultancy, I have some specialist IT skills which are luckily in demand. This pays for my toys and cash flows a lot of things.
No miracles, just been lucky. Setup a company and sold it to a Nasdaq listed company which kicked off things for me
sideways sid said:
Interesting thread.
I've been trading futures and options for years with the aim of building a reliable & growing income. I've made many expensive mistakes along the way, not managing risk &/or cash properly, but as I've learned how to do so, its been doing very well for the last couple of years.
Now I'm trying to find a way to legally do the same for other people's money in return for a share of their profits.
Ironically, a currently-passive income could become my sole source of income!
Interesting reply Sid and great username choice! ;-) I tinker with equities, can you give me an idiots guide to Options and Futures and how you make money? I've been trading futures and options for years with the aim of building a reliable & growing income. I've made many expensive mistakes along the way, not managing risk &/or cash properly, but as I've learned how to do so, its been doing very well for the last couple of years.
Now I'm trying to find a way to legally do the same for other people's money in return for a share of their profits.
Ironically, a currently-passive income could become my sole source of income!
Eleven said:
Okay well in that case I don't necessarily agree with the advice you've been given to buy yield.
At the risk of insulting your intelligence, yield is the annual rent divided by capital value x 100. Generally speaking higher yield is associated with riskier, low value properties which tend to have weaker capital growth. What you'll have when you've paid off the mortgage is an unencumbered but not particularly desirable property. As an example, post-war ex-council houses tend to yield well but perform poorly capital value wise when compared to similar sized Victorian properties.
What you seem to want is a property that will be worth as much as possible when it is paid off, and for someone else to be effectively paying the mortgage for you, right? So I would be looking for the best property you can find (location is important) that will allow you to achieve that.
Bear in mind though that only mortgage interest is tax deductible, capital repayments are not. Most running costs and repairs are tax deductible against income, capital improvements such as an extension are not. But you can claim the cost against the capital gain when you sell.
Don't rule out buying a property that doesn't quite cover its own costs and into which you need to drop some cash, if it's in a historically good area and as a consequence likely to increase in value well over the time you own it.
Good advice.At the risk of insulting your intelligence, yield is the annual rent divided by capital value x 100. Generally speaking higher yield is associated with riskier, low value properties which tend to have weaker capital growth. What you'll have when you've paid off the mortgage is an unencumbered but not particularly desirable property. As an example, post-war ex-council houses tend to yield well but perform poorly capital value wise when compared to similar sized Victorian properties.
What you seem to want is a property that will be worth as much as possible when it is paid off, and for someone else to be effectively paying the mortgage for you, right? So I would be looking for the best property you can find (location is important) that will allow you to achieve that.
Bear in mind though that only mortgage interest is tax deductible, capital repayments are not. Most running costs and repairs are tax deductible against income, capital improvements such as an extension are not. But you can claim the cost against the capital gain when you sell.
Don't rule out buying a property that doesn't quite cover its own costs and into which you need to drop some cash, if it's in a historically good area and as a consequence likely to increase in value well over the time you own it.
Folks, let's assume you had a capital investment pot of £200k available to invest, desired outcome is £3k per month income. Let's also assume you decide to focus on Property in the UK to invest, how and where would people look to invest?
The £200k can be leveraged ie used as deposits for mortgage/mortgages...
Discuss....
The £200k can be leveraged ie used as deposits for mortgage/mortgages...
Discuss....
zuby84 said:
£200k cash to invest
LTV of 66% would give you £600k to invest in UK BTL property
Property purchase price on average - £35k for a 2 bedroom ex council flat/house
Total rent: £5k pa
Net rent received - let's say £4k (after insurance, voids, repairs etc...)
£600k would give you 17 properties so net rent = 17 x £4k = £68k per year
Interest only mortgage at 5% of £400k (if wanting to maximise cashflow) = £20k pa
Income = Net rent (68k) - interest (20k) = £48k per year (£4k per month) = 24% Return on invested capital.
Risks:
- House prices fall = so what if you're concentrating on income and can service the debt
- Rents fall = would have to fall a LONG way for you to be in trouble (about 12% net rental yield)
- Interest rates rise = would have to rise by a LOT for you to be in any trouble
- Interest rates rise AND rents fall AND house prices fall = depends how risk averse you are
Attractive maths and proposition, not sure id want the hassle of dealing with this end of the market, but I guess you can outsource it to a letting agency.. LTV of 66% would give you £600k to invest in UK BTL property
Property purchase price on average - £35k for a 2 bedroom ex council flat/house
Total rent: £5k pa
Net rent received - let's say £4k (after insurance, voids, repairs etc...)
£600k would give you 17 properties so net rent = 17 x £4k = £68k per year
Interest only mortgage at 5% of £400k (if wanting to maximise cashflow) = £20k pa
Income = Net rent (68k) - interest (20k) = £48k per year (£4k per month) = 24% Return on invested capital.
Risks:
- House prices fall = so what if you're concentrating on income and can service the debt
- Rents fall = would have to fall a LONG way for you to be in trouble (about 12% net rental yield)
- Interest rates rise = would have to rise by a LOT for you to be in any trouble
- Interest rates rise AND rents fall AND house prices fall = depends how risk averse you are
Edited by zuby84 on Wednesday 5th March 16:04
Which location is this, Glasgow?
Siscar said:
He says:
it can be a pain dealing with the feckless (but my staff does that for me.)
Which highlights the big snag. Even if you can achieve those figures you are either learning and deploying all the skills you need yourself to be a slum landlord, or you are paying someone else. But either way that dents the profit margin somewhat.
(Apologies if anyone takes offence at the 'slum landlord' description but that has to be what this is at those price levels, surely)
Should have added I'm a Scot born 10 miles away from Glasgow so wasn't being a snob, just aware you can pick up flats there very cheaply that rent for £3-400 per month. it can be a pain dealing with the feckless (but my staff does that for me.)
Which highlights the big snag. Even if you can achieve those figures you are either learning and deploying all the skills you need yourself to be a slum landlord, or you are paying someone else. But either way that dents the profit margin somewhat.
(Apologies if anyone takes offence at the 'slum landlord' description but that has to be what this is at those price levels, surely)
Steve7777 said:
I think internet affiliate work takes too much time to be classed as passive income. You have to be continually generating content and managing links unless you get really lucky. The best internet-related thing I know of that can be truly passive once you've done the upfront work is stock photography
What I've been doing for the last few years is saving everything I can into the lowest cost index trackers I can find. There's been a good return and where I live in Switzerland there's no capital gains tax so I've got to keep all of it. The market may not keep going up but for now it's doing well and allows me to focus all my 'work' time on my main career and salary which leads to being able to save more.
I have friends who have bought a holiday rental and are doing well renting it our on airbnb but it sounds like a second job with the amount of time they have to put into it. I'm not sure people who do well out of BTL are always honest with themselves about the amount of time and extra investment it takes whilst they own it.
Thanks Steve, a very simple but smart plan, something I intend to start doing, are you investing via Vanguard and one of their low cost trackers? Which indexes are you focussing on? What I've been doing for the last few years is saving everything I can into the lowest cost index trackers I can find. There's been a good return and where I live in Switzerland there's no capital gains tax so I've got to keep all of it. The market may not keep going up but for now it's doing well and allows me to focus all my 'work' time on my main career and salary which leads to being able to save more.
I have friends who have bought a holiday rental and are doing well renting it our on airbnb but it sounds like a second job with the amount of time they have to put into it. I'm not sure people who do well out of BTL are always honest with themselves about the amount of time and extra investment it takes whilst they own it.
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