If you want to generate more passive income then you may be wondering whether it is better to invest in property or stocks and shares?
I get asked this question all the time and I always say that there are two things you need to consider, not just one.
Usually, the only thing that people consider is the return that they can get on their investment.
The thing they miss is the amount of time and effort they have to expend to generate that return.
If you’re wondering what I’m talking about then let me explain…
Investing In Property
At first glance, property always seems like a great long-term investment.
If the property is your main residence, or even a second home somewhere nice that you use yourself, then I agree that property is a great investment as you can get a lot of enjoyment from it as well as making some money from it when you sell it on later.
However, when the property is bought purely to make money from, its a different matter entirely.
One of the big problems with property is the long, complicated, risky process involved in buying and selling it.
Finding, viewing, deciding, contracting, etc. takes time and expense – several weeks, if not months plus spare cash for surveys, legal fees, agency buying/selling fees, etc..
Then you need a lump sum for a deposit and you need a mortgage to purchase the property (unless you have lots of cash going spare).
That’s more time, effort, fees, payment insurance, etc.
Then you may have a bad survey or end up buying a property that has damp, dry rot, insect infestation, dodgy walls or roofing, etc. – very risky if you don’t know what you’re doing – even the experts get caught out occasionally.
After all that, if you want to make an income from it, you’ll need to find someone to occupy your property and you will probably have periods when the property is vacant, while you find a tenant.
If you get a bad tenant who doesn’t pay or wrecks the place or won’t leave then that’s lost income, more legal expenses, more repair/decorating bills, etc. as well as the stress involved!
Even with good tenants, you’ll need to spend money maintaining it, insuring it, cleaning it between tenancies and may even end up being called out at short notice for repairs, etc. especially if it is a furnished property.
I’ve looked at property long and hard myself but, in my view, whilst property can be a useful source of income, buy-to-let property investment is very lumpy and extremely difficult to do well.
So, that brings us to stocks and shares then.
Investing In Shares
Firstly, shares can be bought and sold much quicker and easier than property via an online broker.
You can buy shares with much smaller sums of money than you can property and the transaction fees are much, much lower too.
Once you’ve bought your shares, there’s no more work to do – no tenants, no repairs, no cleaning, etc.
Of course, you can follow the company’s prospects in the news if you wish, but shares really are the true passive income generator – especially if you buy shares that pay a good dividend!
Sure, there are risks of buying shares of a bad company, but you can reduce your risk by buying different shares and building a portfolio.
You can build a small portfolio of 10 different shares with as little as $5,000 or £5,000 – you can’t get 1 property for that, never mind 10!
How To Start Investing For Passive Income
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