Top Investment Options for Earning Monthly Income: The Best Way to Invest 1 Lakh Monthly

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Whether you’re looking for a steady income to fund your retirement or simply want to bolster your financial portfolio, finding the right monthly income investment is critical. In 2022, several investment avenues offer reliable returns and flexibility. Let's explore the best options for generating a regular monthly income, focusing on Residential Rental Property, Holiday Real Estate, and Real Estate Investment Trusts (REITs).

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Residential Rental Property

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One of the primary passive income ideas that comes to mind when thinking about earning monthly income is Residential Rental Property. This investment has seen tremendous growth in popularity over the past year, thanks to its potential for generating both rental income and capital gains.

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To buy a rental property, investors purchase a home and rent it out to tenants. This results in a dual income stream:

r r Rental Income: The regular monthly income that tenants pay for leasing the property. In the UK, rental income reached a record-high of ￡1,061 per month in September 2021, according to HomeLet.r Capital Growth: The increased value of the property over time, often referred to as capital gains or appreciation. UK property prices saw their highest rate of growth in 2021 since 2004, averaging ￡250,000 for the first time.r r r

These benefits make residential real estate an excellent choice, especially for those planning for retirement. Investors can earn a steady stream of rental income and potentially secure a substantial profit upon selling their property. However, there are ongoing costs, including property management fees and interest payments if a buy-to-let (BTL) mortgage is used. A minimum initial investment of around ￡30,000, including property taxes and a BTL mortgage initial deposit, is typically needed to secure an effective residential property.

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Holiday Real Estate

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For those who prefer to live in the property or travel, Holiday Real Estate is a lucrative choice. This type of investment involves owning a home that can be rented out on a short-term basis to holidaymakers or tourists. Websites like Airbnb are popular platforms for advertising holiday homes.

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Investors can earn monthly income from their holiday homes, which can vary significantly based on the size and quality of the property. However, securing a BTL mortgage can be challenging, and you may experience long periods of vacancy if the area relies on seasonal tourism. Timing and strategic location are crucial for maximizing returns in this investment option.

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Real Estate Investment Trusts (REITs)

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For investors who don’t have the cash required to own property directly, Real Estate Investment Trusts (REITs) present a viable alternative. REITs are companies that pool cash from investors to purchase and manage real estate investments. Similar to mutual funds, REITs operate by pooling investor funds to buy and manage properties, providing a liquid investment option.

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Most REITs are traded on stock exchanges, making them easily accessible and highly liquid. This feature can be advantageous for those looking to invest and earn consistent monthly returns. REITs offer a way to diversify your investment portfolio without the need for large initial capital, making them an appealing option for many investors.

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To learn more about property investment and whether now is a good time to invest, you can read our ultimate guide for 2022. For detailed insights on buying property in the UK, check out our new property guide.