Where to Invest Money to Get Monthly Income?
Generating monthly passive income is the dream for many. Wealth begets wealth, and by detaching your ability to earn money from the time you have in a day, you can make your money work for you to reach your financial goals.
When assessing where to invest money to get monthly income, depending on your financial situation, some avenues will make more sense than others. In this article we explore why investing money to make monthly passive income makes sense, several ways to achieve it and why when it comes to where to invest your money in the UK, property is one of the smartest directions.
Why Invest Money in the UK to Generate Monthly Income?
Passive income has the benefit of allowing you to diversify your income stream, making you less dependent on an employer and job by giving you an alternative source of revenue. The UK offers a diverse and flexible range of investment options. Whether you are looking for a low-risk, steady return or a higher-risk investment with potentially bigger returns, there are available options to choose from.
While passive income may require some upfront time investment, in the long run there is usually limited work required or little need to invest additional time daily, and by reinvesting your money you could generate ongoing returns. Whether it’s for discretionary spending, holidays and luxury items, savings to buy a house, or future planning such as early retirement, with enough passive income, investing money in the UK to get monthly income can begin as a side strategy, and for some grow enough to become a primary source of income.
Passive income can be a great way to supplement your current income or even replace it entirely. There are a variety of passive income ideas, from property investment to stocks and bonds, to online businesses and even creating digital products such as eBooks. By investing your money into these passive income streams, you can generate ongoing returns without needing to put in any additional daily effort. This means that you can continue to make money while going about your daily life. Furthermore, by reinvesting the profits from these passive income streams, you will be able to increase your returns over time and enjoy more financial freedom.
Where to Invest your Money in the UK: Passive Income Ideas
When considering where to invest money to get monthly income, these are a few of the best monthly income investments you can pursue that allow you to earn money without having to work for every penny. Setting yourself up for monthly passive income will require some money or work, or both to create, but by investing these upfront you can reap the benefits later:
Some investors in the UK may opt to generate passive income from dividends generated by mutual funds or exchange-traded funds (ETFs) (dividends are typically paid on a quarterly basis instead of monthly, but it’s still an effective way of gaining consistent income).
Because they require a low initial cash investment, have strong historic growth and remain an easy starting point, ETFs can be a good option to generate passive income for those starting out.
The challenge with ETFs is acquiring the knowledge to find value investments and stocks capable of offering long-term dividends, as well as understanding where value lies in the coming years and decades. Are ETFs safe investments? It’s important to know that the dividend yield percent will vary by stock and that market fluctuations are common and share prices can go down as well as up. It’s important to understand that stock prices are always subject to market volatility, so it’s important to do your research before investing in any stock or ETF.
For those new to investing in the stock market, it is often worth hiring a financial advisor or professional who can handle the money for you. Or if you’re willing to risk it, you can use online tools as well. By researching the history of a particular stock or ETF, you can identify companies with strong growth potential and those that have historically paid out reliable dividends. Additionally, by diversifying your portfolio across different stocks and sectors, you can ensure that any losses due to market volatility are minimized.
Bonds are another way of investing money in the UK to generate monthly income. Government and corporate bonds exist and basically act as a loan from you to a borrower. As a lender you will typically receive interest back with your investment on a regular basis, and bonds typically pay out interest payments on a monthly basis until they mature. While bonds are generally considered low risk, they are lower-return investments.
In addition to government and corporate bonds, there are also other types of bonds that can be bought and sold on the stock market. These include convertible bonds, which can be converted into stocks at a later date, and high-yield bonds, which offer higher yields than traditional bonds but also carry more risk. There are also index-linked bonds, which are linked to an inflation rate or other index and can help protect your investment from inflationary risks. All of these types of bonds come with different risks and rewards that should be taken into account when making any investment decisions.
Investing in a rental property is one of the best ways to generate monthly income. With a buy-to-let property you generate a rental income from tenants, while still having an asset at the end that most likely will appreciate in value. The monthly rent you receive can be used to cover mortgage payments and maintenance on the property, so it pays for itself.
One of the benefits of investing in property is that rents adjust with inflation, so generally there is no need to worry about diminishing returns. You’ll also have the advantage of predictable income, as you will know the monthly ingoing you will generate from rent. Investing in a rental property also gives you the opportunity to reinvest: A property that generates £1,000 per month in passive income could cover the mortgage and property expenses and money can eventually be reinvested as down payment for another property, giving you a self-perpetuating cycle of growing wealth and income.
Generally, the risks associated with buy-to-let property such as tenants failing to pay can be mitigated through due diligence. You’ll also need to invest time and knowledge to ensure that a property purchased will be profitable – both in terms of generating monthly rental income and capital gains so you don’t lose money upon sale of the property.
Other Places to Generate Passive Monthly Income
If you have an entrepreneurial side, you could generate monthly income by offering your services in your niche area, creating revenue streams in exchange for your know-how such as courses or books that generate passive income. Similarly, those with a creative side may find ways to market their skills in design or creation to gain passive income.
Another avenue could be a high-interest savings account, which has the benefit of avoiding the need for making a large purchase beforehand and requires no loss of liquidity. Banks will offer different interest rates, and many online banks will offer rates higher than the traditional brick-and-mortar institutions.
Investing for income and investing for growth are two different things. For investors looking to gain growth, generating passive income with skills or through a high-interest savings account is unlikely to deliver higher returns when compared with other avenues.
Best Place to Make Money Without Risk? A Buy-to-Let Property
When considering where to invest money to get monthly income, focusing on real estate is perhaps the best option – presenting the prospect of strong returns with relatively low risk. Across the UK there is no shortage of people looking to rent a house or apartment, and in certain areas and cities demand for quality rental property exceeds supply.
By renting out your property to tenants, not only do you get a predictable monthly income, but by investing in an area with strong yields, the rental income generated should be enough to cover costs such as maintenance, taxes and other fees, enabling the property to pay for itself. When the mortgage is paid off in full, you could have a significant level of passive income coming in on a monthly basis. Investing in property also gives you the ability to drive your net worth over time; as the property increases in value, you have an asset that will deliver a return when you come to sell it.
One thing property investors looking to generate a monthly income should consider is the upfront costs associated with buying a property. As well as an initial deposit, which can range between 5 – 40% of the total property cost, stamp duty fees will also apply. Find out the latest information on stamp duty on properties in the UK in 2021 in this article.
If you want to get an indication of how much stamp duty you will have to pay on a property, using a stamp duty calculator can help. You must pay Stamp Duty Land Tax (SDLT) if you buy a property or land over a certain price in England and Aspen Woolf’s updated 2021 Stamp Duty Calculator is a helpful tool to give you a better understanding of how much you will need to pay on a property. The exact amount will depend on a few factors, including whether the property is non-residential or mixed use, and whether you’re a first-time buyer. You should always get professional advice from a property lawyer, accountant or other financial advisor on tax-specific situations.
Where to Invest Money in Property in the UK?
When considering investing in property in the UK to generate a monthly income, there are a few popular locations that foreign investors cast their eyes towards. The UK is home to a number of buy-to-let hotspots that present investors with great opportunities to earn ongoing passive income as rental income.
For the buy-to-let investor focusing on monthly rental income, aiming to find a property that can deliver a rental yield of around 5% is a good benchmark. This should allow you to cover the ongoing monthly costs associated with owning a property – mortgage fees, taxes, repairs, upkeep etc. – while still having cash left over. Be sure to understand the difference between gross and net monthly rental yield. The higher the yield, the better, so finding areas with low property prices and a growing rental market is a good strategy. Read more about what is a good property yield in this article.
One of the UK’s most exciting rental markets, the average house price in Leeds currently stands at £178,735. By 2024, house prices are tipped to rise by 28% and rents by 18.8%. Leeds is one of the most sought after cities to live in the UK and a thriving rental market is driven not only by Leed’s status as one of the most popular student cities in the UK, but by young professionals attracted by the city’s lifestyle offerings and growing job opportunities. Right now average yields in the city are around 4.29%, meaning Leeds offers a strong opportunity for investors looking to make ongoing monthly returns.
Which properties in Leeds have the potential to generate monthly passive income?
Sky Garden Leeds is a new development in the centre’s Southbank district which includes the refurbishment of the Grade II Listed Midland Mills and the creation of a residential tower. New builds offer many advantages and the properties available could make investors a steady stream of passive monthly income.
Nottingham now stands at the top across the whole of the UK for property price growth in the last 12 months. Nottingham’s future remains equally bright, with a staggering 25.5% of growth forecast over the next five years. In Nottingham city centre, asking rents are up annually by 6.8%. Flats can be bought for an average of £111,103 and rents present landlords with potential for monthly returns thanks to competitive yields, particularly because demand exceeds supply. Towards 2028, the East Midlands population is set to increase faster than anywhere else in England – 7% vs 5% – and a growing population generally provides a good boost to property demand.
Which buy-to-let properties in Nottingham have the potential to generate monthly passive income?
The Wells Nottingham is a brand-new boutique development minutes from Nottingham city centre. With the city’s thriving rental market, investors can benefit from projected yields of around 7.5% meaning a good means of monthly rental income is certainly possible.
Manchester continually ranks top in the UK city landlords are most likely to invest in. Manchester is forecast to see both the highest sales price and rental growth of any UK city over the next five years, despite a higher volume of property development. The average rent of a two-bedroom flat sits at around £1,145, and cumulative rental growth through to 2023 is 16.5%. As housing stock continues to increase in quality, rents are still expected to strongly rise, reflecting Manchester’s liveable appeal and popularity.
Which buy-to-let properties in Manchester are good for generating monthly rental income?
Manchester Waters is one of the remaining large-scale regenerations being undertaken in the city. Upon completion the waterfront development will consist of studio, one and two-bedroom apartments located close to MediaCityUK – an international hub for the tech, innovation and creatine sectors. With rental yields predicted to reach 6%, properties in Manchester Waters could make a good source of passive monthly income for investors.
If you’re considering where to invest money to get monthly income, be sure not to overlook buy-to-let property as an option. To find out more about investing in property to generate monthly returns, get in touch with us today.