Property is often sold as passive income. In practice, owning a rental property yourself is closer to running a small business. Here is how passive each option really is.
Buy-to-let: rarely passive
You find tenants, handle repairs, meet safety and licensing rules, deal with arrears and file tax returns. A letting agent takes on much of this for a fee, but you remain responsible as the landlord.
Commercial property: less hands-on
Commercial tenants are businesses, and many leases are on full repairing and insuring terms, so the tenant handles repairs. The work comes at lease renewals, rent reviews and when a unit falls empty.
Fractional ownership: designed to be passive
A manager runs the building and the company that owns it. You receive your share of distributed net rent as dividends and regular updates. Your decisions are which properties to invest in and whether to sell.
REITs and funds: fully passive
You hold shares or units and receive dividends. You do not choose individual buildings.
The catch
Passive does not mean guaranteed. Rent can fall or stop, costs rise and values change. Income from property companies is usually paid as dividends, which are taxed differently from rent you receive directly. See tax on fractional property investment.
This guide is general information, not financial, tax or legal advice. If you are unsure whether an investment is right for you, speak to a regulated financial adviser.