How to earn a passive income with property

First time investors are often hesitant to buy rental property. Their main concern is the fact that the rental income is, at least initially, lower than the monthly instalment. It may be as low as 50% of the instalment. Taxes and duties may make it look even worse, keeping many people out of the market.

It remains a good method to create wealth though, even if it doesn't look so at the outset. The secret is twofold.

Firstly, even if your rental income is a mere 50% of the instalment, it means that you are only paying for half the property, but you may one day sell it for the full price. Or, think of it this way, you are getting the property for half the price.

Secondly, there are annual rental increases. This may be small and it may take years before the income exceeds the expenses, but it will happen. Remember, property is a long term investment. When the property starts paying for itself you are in a better position that you may think - especially if you are about to retire. You have created a passive income, which is the basic foundation of wealth, but you also created equity. In other words, you have the best of both worlds - cash in an investment that appreciates over time, and an income that increase on an annual basis.

Property loses some of its value during a recession but normally not as much as other asset types, and it is also quick to recover. Interest rates are low during a recession which means that the property costs you less during troubled times. Ironically, rental prices sometimes go up during a recession because people can't get loans - but they still need to live somewhere, so they rent.

If you have a good credit rating, and you are young, you may retire wealthy even if your salary isn't that great. Start with one flat or apartment, rent it out, see what happens. A year or two later you may want to buy another one. As time goes by, the old properties start paying for the new ones.

Needless to say, the less you pay for a good rental property, the sooner you will start making money. It certainly pays to do some research about an area before jumping in. Some areas are better suited for buy-to-let properties than others. There are many books and articles about getting the best possible deal, everyone can do it. Here is an article with useful advice from wealthy people.

The first step is yours - take it!