PASSIVE INCOME: Get rent? Invest for better returns


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Rental income is one of the most lucrative ways to earn passive income. It is one of the best ways to earn a regular income post retirement. If you have not retired, you can make the best use of rental income by investing it in sync with your financial goals. Depending on your age and risk appetite, you can choose appropriate investment products to achieve your financial goals. Here’s what you can do to make the best use of your rental income.

When you are young

Youngsters earning a rental income can invest such earnings towards a higher return as they usually have a higher risk appetite. They can invest rental earnings into mutual funds via the SIP route. In the long term, they can create a huge corpus even if they invest a small portion of their rental earnings. The SIP investment should be diversified across different equity mutual fund categories such as large cap, small and medium cap, etc. Some portion of monthly income can also be invested directly into the stock market. You may need some funds for repair and maintenance, so invest a part of your rental income into a liquid fund SIP or a recurring deposit (RD).

Also read: National Pension System: PFRDA introduces new bank account verification and name/PAN matching process

When you are middle-aged

People aged between 35 and 50 years are usually married, have children and several financial responsibilities such as the child’s education, their marriage, repayment of loans, etc. So, they may invest rental income in investment avenues which carry medium risk during the start of this age group, and as they come closer to their 50s, they can shift gradually to low-risk investments. For example, they may allocate major part of the rental income towards investment in a balanced fund or debt fund and a small portion into large-cap equity fund via SIP. As their age increases, they may shift investments to small saving schemes such as PPF, post office monthly saving schemes, etc.

When you are close to retirement

As you get closer to retirement, you should focus on securing your investments by avoiding unnecessary risks. In your 50s, you may invest in low-risk investments such as PPF, Bank RDs, SIP in debt funds, etc. If you have an existing loan, you can use the rental income to prepay them before you retire.

If you are a retiree

Post-retirement, you may need a regular monthly income to meet your day-to-day expenses. So, your rental income can come handy at this stage. If you have surplus funds after meeting all expenses, you can allocate the same in instruments like a liquid fund, high-interest savings account or bank FDs. You may also invest the money in a senior citizen savings scheme (SCSS) but be careful of the applicable lock-in requirements while investing in it.

Also read: NRIs can earn up to 9% on NRO fixed deposits now – Check latest FD rates

Rental income can be beneficial if you allocate it to an efficient investment instrument that can help grow your wealth and beat inflation in the long term. Adhil Shetty, CEO,, says, “Most people generally use rental income to cover regular expenses. But rental income, when utilised wisely, can help boost your financial stability. If capital growth is your goal, you may reinvest this money in instruments like equity funds. You could also use it to repay debts, build your emergency fund, or pay for insurance coverage. Plan your investment so it aligns with and helps you reach your financial goals.’’

The rental income increases yearly. So, you should also increase your investments. You can continue to enjoy rental returns in the long term only if you manage your property well. Therefore, keep an adequate portion of your rental income for maintenance of the property.

Double benefit

* Take the SIP route to invest the monthly rent in various instruments

* Post-retirement, you can meet your daily expenses with your monthly rental income

* Always keep an adequate portion of your rental income for the maintenance of your rental property

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