When you purchase stocks, you’re looking for appreciation in the stock value and perhaps dividend income if the company pays it. With bonds, there is income yield on the interest rate paid by the bonds. And in real estate investments, a properly selected and managed rental property can provide a steady income stream in the form of rental payments, with appreciation.
The majority of residential property income comes in the form of basic rent. Your tenants pay a fixed amount per month – which will go up with inflation and demand – and you take out your costs from it, claiming the remaining portion as rental income.
The most common way to make money in real-estate is through appreciation – an increase in the property’s value that is realized when you sell. When looking at residential properties, location is often the biggest factor in appreciation. As the area around the property evolves the home’s value starts to climb. Property improvements and renovations also create appreciation.