Passive Income and Buy to Let Properties
We have some investment properties, also known as buy to let properties, so we think its worthwhile highlighting that the two main ways to make money when investing in buy to let properties:
- You earn a surplus from the rental income verses the monthly mortgage repayments you have to pay on the buy to let mortgage secured against the property.
- Your Buy to Let Investment Property increases in capital value over a period of time
Both of these types of income are of value to an investor and can happen independently from each other.
Our Passive Income property Portfolio has two main aims:
- It is a long term investment. We expect the properties to increase in capital value over 20 to 25 years, so a small drop in value in the short term isn’t a problem as long as we don’t have to quickly liquidate our assets..
- The annual rental should cover the annual costs. Effectively the tenant’s rent is paying the purchase cost of the property. Positive income from surplus rent compared to the monthly buy to let mortgage costs may continue ad infinitum.
With Buy to Let investing, it is possible to experience infrequent rental void periods with no income, but assuming your buy to let property is in a good location, with good tenants and high demand, then likelihood of rental voids will be very few.
It is imperative to understand that as in any business, there may be short to medium term problems, but these should not distract from your longer term aims.
So if you experience problems with your letting agent or your first few tenants, don’t be distracted from your overall goals.
Please don’t stop at just a single Buy to Let investment property. With a single property you may not make a huge amount of money. If you lose cash on an earlier investment, but have learnt valuable lessons from that experience, then please apply those lessons you have learnt in your future property investments.
Remember, buy to let property investing should be treated as a business. Re-examine your investments regularly, measure the growth of your business each year and determine what re-investment is required in the following year.