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Earning Passive Income from a Rental Property

In today’s day and age, a lot of people earn money via nontraditional methods. The standard 9-to-5 workday is giving way to side hustles and passive streams of income.

If you are interested in escaping the rat race, you should consider purchasing a rental property. In this article, you’ll learn if this passive stream of income is right for you and how to get started with it.

What Is Passive Income?

Before we dive into the ins and outs of owning a rental home, you should be familiar with the concept of passive income.

Passive income is money you earn without exerting a lot of effort. While it does require some money and time initially, passive income will become easier to rake in over time.

Most people are familiar with passive income in terms of investing in the stock market, but owning a rental property is another way you can earn it.

Purchasing a Rental Property—Are You in the Right Place?

While there are different ways to profit in the real estate world, we will cover purchasing a property and renting it out to tenants.

You should only purchase a rental property if your financial circumstances allow. We recommend being debt-free and having an emergency fund built up before investing in a rental property. Don’t let purchasing a rental property interfere with other financial goals like saving for retirement.

Settling on the Right Property

Once you have determined that you are in the proper financial circumstances, you can begin to look for the right investment property. Check out the following guidelines when you’re picking out your first rental home.

How Much to Spend

For your first property, you shouldn’t be eyeing multi-million-dollar homes. Start with something stable and modest. If possible, pay cash for the first place you want to rent to tenants. Try to find something priced at around 70% of what it’s currently worth in the real estate market. You don’t want to pay more than what the property is worth.

The Type of Property

If you want to start generating rental income, don’t buy a place that’s in complete disarray. You want to find something that’s move-in ready. In general, try to avoid foreclosures, as these can be costly fixer-uppers.

The home you purchase doesn’t have to be brand new. If you buy your property with the help of a company like Sterling Woodrow, it will set you up with a management company that can handle any repairs that arise later down the road.


Select a local property for which you can regularly conduct check-ins. Buying something overseas can become complicated, especially if you are new to real estate investing. Try to find a home that’s:

  • Close to good public schools
  • In a neighborhood with well-performing real estate prices
  • Close to major highways and public transportation

Start Collecting Rent Money

If your rental property is in a good area, you’ll likely be able to find responsible and easy-to-deal with tenants. Depending on the type of property you own, and the type of person you are looking to rent to, you’ll want to be savvy where you advertise to make sure you end up with the best outcome possible. If, for example, you intend to rent your property to students, you can list your student accommodation here and help prospective tenants find you. With tenants living in your rental home, you can collect rent money while putting in minimal effort.

Some landlords deal with repairs themselves, while others source out the work to a management company. Evaluate your experience and other obligations to determine the best route for you.

While you want to ensure your home is in good condition, don’t be overbearing. Check in on your tenants every couple of months and leave the doors of communication open. 

Get Started with Earning Passive Income through Real Estate

Some people are unaware of how profitable renting out a home can be. While it does take some research and initiative on your part, renting out a home is a smart financial move that can produce passive income for years to come. If you have the financial resources to do so, start looking at the properties available in your area!

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