Buy to let

This income is know as passive income in the book rich dad poor dad as you receive an income with very little time invested.


Pros

• A regular income, if things go well, without having to put much of your time in.
• Any increase in the value of the house you let out are also yours when you sell (although maybe subject to capital gains tax).

Cons

• You may get bad tenants who may not pay or may damage your property. To reduce this ensure you carry out careful checks on any prospective tenants (due diligence).

Basic principle

• Buy a house using a buy to let mortgage. Let it out through a letting agency or privately.

What to watch out for.

• Make sure the sums add up and you can make a profit once you have paid out interest on the mortgage, allowed for repairs, buildings insurance and any letting fees, including allowing for time the house is left empty.
• Pick a house in an area where there is a demand for a property.
• You will need to pay tax on any profits through self assessment.