How to make Passive Income from Real Estate/Properties


You can buy properties and rent it out to earn rental income. Location, location, location…. is the key in building up rental income from properties. Your tenants are helping you to finance your properties. Over time, when your property appreciates in value, you stand to also make capital gains should you decide to dispose it.

Many people have become rich building their wealth through property investments over a period of time. Look at those who are rich and you’ll notice that their wealth consists of owning many properties. Names like Donald Trump, Arnold Schwarzenegger & Li Ka-shing are among those you would have most probably heard of.

So how do you start investing in properties? There is no such thing as a "Perfect Property". However, you need to spend time & effort to do your research thoroughly and come up with a checklist of your expectations before investing in properties. Do not rush and buy on impulse but take your time to compare properties and prices so that you can find the best available opportunity out there for you to choose from. As long as around 80% of your expectations are met, you can consider to go ahead with the purchase. For beginners, preferably search for a ready tenanted property with positive cash flow to buy if possible. As all you need to do is to just take over the existing tenancy agreement and start generating passive income immediately. Make sure the properties that you intend to invest in are located at areas that can be easily rented out. For example properties near colleges, factories or train stations are normally sought after for rentals. Identify where your targeted tenants would like to rent and then zoom in to that area to search for the properties to invest in. If your targeted tenants are expatriates, then you need to consider the type of amenities that would appeal to them such as nearby international schools, established presence of other expatriates from their own country, good infrastructural links for them to move about and shops or eateries catering to them and so forth. Try to put yourself in the tenant's shoe to see whether the property is suitable to rent or not.

Use a calculator instead of your heart when buying properties. Rental Yield and net cash flow are generally the numbers that you need to calculate each and every time you assess a potential property for purchase. As a general rule of thumb, the Rental Yield of your property investment must be more than twice the interest rate you can get from fixed deposit investment should you put the money in the bank and a net positive monthly cash flow from the rental received after deducting the bank installment and expenses to maintain the property which includes the service fees, insurance, quit rent & assessments.

                    Rental x 12 months
Rental Yield = --------------------  x  100%
                      Purchase price


After you have bought a property, you need furnish it ready for rental before you can list it out in the media or to real estate agents to find the potential tenants for you. This is the risk and fear that most property investors have in trying to get their properties rented out to good rental paying tenants. However, if you've done your research thoroughly in the first place, the risk is lesser and you are more likely to get your property successfully rented out.

Once you start to enjoy the passive income from the rental of your property, you can continue to build up your property portfolio to generate more passive income and at the same time building up your wealth too when your property appreciates over time.