Property investing is often marketed as a reliable source of passive income, but according to property expert Matt Kyle, the reality is far more complex.
While property can generate regular cash flow, Kyle argues that the process of managing and maintaining investments requires active involvement, making it anything but passive.
Kyle, a seasoned property investor and advisor, explains, “The term ‘passive income’ creates an illusion of effortless earning. In reality, property investing involves a significant amount of time, effort, and expertise. From researching properties and financing to tenant management and maintenance, there’s a lot more to it than just collecting rent.”
Kyle adds that many first-time investors underestimate the demands of property management, which can include dealing with tenant disputes, regulatory compliance, and unexpected repairs.
Hidden responsibilities
Property investors often face challenges that require hands-on attention, including:
- Tenant relations: Managing tenant queries, complaints, and lease renewals can be time-consuming.
- Maintenance and repairs: Properties require ongoing care to maintain their value, from fixing leaky taps to addressing structural issues.
- Legal and regulatory compliance: Landlords must stay updated on ever-changing laws, such as energy efficiency standards and eviction rules.
“Being a landlord is essentially running a business,” says Kyle. “And like any business, it requires time and effort to ensure it runs smoothly.”
Letting agents ‘doesn’t absolve you completely’
Some investors turn to letting agents to handle day-to-day operations, but even this solution isn’t entirely passive.
Kyle explains, “Hiring a letting agent can offload some responsibilities, but it doesn’t absolve you completely. You still need to oversee the agent’s performance, make key decisions, and manage finances.”
Kyle shares the experience of one of his clients, a 35-year-old IT professional from Birmingham, “This client bought a buy-to-let property, expecting it to be a passive income stream. Within the first year, he faced tenant disputes, unexpected repair costs, and compliance updates that he hadn’t budgeted for. It quickly became clear that the investment required active involvement.”
How to approach property investing
Kyle suggests that investors shift their mindset and approach property investing with realistic expectations.
“Rather than viewing property as purely passive, think of it as a part-time job or business. Success requires planning, strategy, and adaptability,” he advises.
Kyle recommends the following steps for potential investors:
- Thorough research: Understand the local property market, tenant demand, and potential risks.
- Budget for unexpected costs: Set aside funds for maintenance, repairs, and void periods.
- Stay updated on legislation: Keep abreast of changes to landlord laws and regulations.
- Consider professional advice: Consult with property advisors or financial planners to create a sustainable investment strategy.
Is passive income possible from property investing?
While property investing may not be entirely passive, Kyle acknowledges that it can become less labour-intensive with experience and the right systems in place.
“Once you’ve built a portfolio and established reliable processes, the workload can reduce significantly. But it’s important to recognise that achieving this level of efficiency takes time and effort.”
Kyle concludes, “Property investing is a fantastic way to build wealth and generate income, but it’s not the ‘set it and forget it’ venture many believe it to be. Understanding the realities and being prepared to put in the work will make all the difference in turning property into a successful investment.”
By reframing expectations and embracing the active aspects of property investing, potential landlords can better prepare for the challenges and rewards that come with this popular form of wealth-building.