How To Start Capitalizing On Rental Income—Property Or Not!

Do you have someone in your life who seems to have complete financial independence, and wondered how they got there? It’s very common for financially successful people to own a property, or even a few and rent out for extra income. While owning a property can be very lucrative, there are a fair share of downsides associated with it, such as high upfront costs, property taxes, and volatile markets. In this guide, we shed light on one of the best kept real estate investment secrets—an alternative to owning a property and renting it out that still lets you reap the benefits of rental income.

Rental income is a great way to augment your regular income stream to put you on the path to total financial liberty. Bloom Investment Counsel is pleased to assist you in diversifying into this inactive income stream by working closely with your external advisors if you’re looking to invest in brick and mortar real estate, but if you’re not there yet, not to worry—there is an alternative that we can help you with directly.

What Is Rental Income?

  • Rental income is money you receive in exchange for renting properties that you own or have use of (to engage in this type of income stream, you can either own property yourself or co-own it with another person/people). 
  • Rental income can be earned either from renting out a residential or commercial property. For example, it can come from renting out a house, an apartment, a room, or office space.

Can Rental Income Protect My Income Stream from Inflation?

  • Rental income is a great strategy to protect your money from the inevitable, negative impacts of inflation. 
  • To counteract the consequences of inflation on your cash flow, try investing in real estate, as rental income received by the investor will normally rise over a period of time with inflation.

What Are REITs?

Alternatively, we can mimic rental income for you in the form of a related investment—real estate investment trusts (REITs).

  • A REIT is an organization that owns, operates, and/or finances income-generating real estate. While this is not exactly on par with a rental property, this method of investing allows you to receive income from real estate investments in the form of distributions (which are like dividends)—all without needing to purchase, manage, or finance any property yourself.
  • REITs are a common and potentially lucrative investment that allow you to dip your toes in the benefits of real estate income without the many dreaded hassles.

Bloom Investment Counsel, Inc. has many years of experience investing in REITs on behalf of clients. Contact us to learn more about how we can help you achieve a reliable income stream through this investment vehicle.

What Are the Pros of Rental Income?

  • This type of income usually rises with inflation, thereby allowing you to ensure your capital does not succumb to the negative impacts of inflation.

What Are the Cons of Rental Income?

  • Traditional rental income, where you purchase a property to rent out, requires a large upfront cost.
  • Selling a rental property can be difficult and/or time consuming, which can lead to a lack of liquidity.
  • Depending on prevailing conditions, the real estate market can be particularly volatile at times.

Bloom Investment Counsel, Inc. is a well-established Toronto-based independent, privately-owned boutique investment management firm providing customized, actively managed, Canadian and U.S. dividend-paying portfolios for wealthy individuals, family offices, foundations, corporations, institutions and trusts.

Founded in 1985, Bloom has experience in managing in excess of $2.5B in assets over the years. We believe that generating independent cash flow is central to the success of our clients’ portfolios because it provides capital for the present day, if needed, while continuing to preserve and build wealth for the future.

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This content is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this content should consult with his or her financial partner or advisor.

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