# Passive income from investing and renting

> Source: https://www.investbay.com/en/blog/how-to-build-a-passive-income-without-illusions-realistic-paths-to · Part of InvestBay (https://www.investbay.com) · See /llms.txt for an overview.

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# An honest guide to passive income, or Don't expect miracles

23 April 2025

**Updated:** 8 October 2026

*Passive income comes from assets or activities that, after the initial work, do not require your day-to-day involvement. You need capital, time or both. With investments, distinguish between money paid out while you hold them and growth in value that only shows when you sell. Neither result is guaranteed.*

Below you will find an overview of the main options, how much money and work each of them requires, a concrete example in euros and a comparison of the routes to income from real estate. Don’t expect miracles, but do expect a realistic picture.

### What passive income is

Passive income is money that comes in without daily work. At the start, however, you almost always have to put something in: money, time or both. Typical examples are interest, dividends, rent or income from a finished digital product.

You may have come across the split into active, passive and portfolio income. It comes from the US tax environment and does not necessarily match the tax classification in your country. For tax questions, follow the tax rules that apply to you or ask a tax adviser.

On top of that, passive income does not mean certainty. Payouts can fluctuate or stop, and the value of the asset can fall.

### Overview of options: how much money and work they require

Investment income and running a business are two different things. After you buy, investments mainly require ongoing monitoring. A business, even when it is called passive, needs active operation.

| Option | Capital needed | Ongoing work | Source of income | Main risks |
| --- | --- | --- | --- | --- |
| **Investment income** | | | | |
| Savings account, term deposit | From tens of euros | Almost none | Interest. On a savings account, the rate changes. | The return may not cover inflation |
| Bonds, bond funds | Funds from tens of euros, individual issues often more | Low | Interest (coupon) | The issuer does not repay; a lower price if sold before maturity |
| Dividend shares, distributing ETFs | Via ETFs from tens of euros | Low | Dividends and price changes | Price fluctuations, a cut or cancellation of the dividend |
| Accumulating and index ETFs | From tens of euros | Low | Growth in value. Returns are reinvested, nothing is paid out. | Price fluctuations. You get to the money only by selling. |
| Real estate funds, REITs | From hundreds of euros | Low | Payouts or growth in the value of the share | Fall in value, fees, limited redemption for some funds |
| Investing in a real estate project (for example via InvestBay) | From €100 | Low | A share in the results from renting and selling, according to the project terms | Project and operating risks, limited access to your money |
| Renting out your own flat | Tens to hundreds of thousands of euros, often with a mortgage | Medium to high | Rent | Non-paying tenants, an empty flat, repairs, mortgage interest |
| **Businesses with active operation** | | | | |
| E-book, online course | Low, mainly time | High at the start, then ongoing | Sales | The product may not sell |
| Blog, YouTube, affiliate | Low | Consistently high | Advertising, commissions | Algorithm changes, irregular income |
| E-shop, dropshipping | Hundreds to thousands of euros | High | Margin on sales | Competition, complaints, dependence on suppliers |
| Renting out equipment, vending machines, storage space | Thousands to tens of thousands of euros | Medium | Rental fees, takings | Wear and tear, maintenance, fluctuating demand |

The capital figures are indicative. None of the options guarantees regular payouts or protection against loss. We describe how to start with smaller amounts in the article [What to invest small amounts in](https://www.investbay.com/en/blog/small-investments-how-and-where-to-invest-small-amounts).

### How much will it earn? An example with €4,000

Let’s take an investment of €4,000 and a model annual return of 5%. That is €200 a year before fees and tax. It is an illustration, not a guaranteed income, and the return may not be paid out regularly. It depends on where it comes from:

- **Payout while holding:** the investment pays interest or a dividend. At 5%, roughly €200 a year would arrive in your account and the amount invested would stay invested.

- **Total growth in value:** the investment pays nothing out and the return shows in its value, for example with an accumulating ETF. After a year, in the model, it would be worth around €4,200, but you get the money from the growth only when you sell.

Deduct costs from the result. An ongoing fee of 1% a year means roughly €40 at a value of €4,000. Then comes tax. How much depends on the type of income and the tax rules of your country. Do your own calculation for a different amount, return and period in the [investment calculator](https://www.investbay.com/en/calculator). The result is an estimate, not a promise.

### Passive income from real estate: three routes

The best-known form: you [buy a flat](https://www.investbay.com/en/blog/what-to-watch-out-for-when-buying-an-apartment) and rent it out. Simple at first glance; in practice, one non-paying tenant or a burst pipe is enough to turn passive income into fairly active work.

*“Even if you have a tenant who is fine, you still keep an eye on whether they pay, and at least once a year you deal with the utility settlement. And when things start to go wrong, it can quickly turn into a very active business. You can of course outsource it to a property manager, but that costs more money again,”* says Pavel Los, CMO InvestBay.

You can get to the same type of income in other ways too. The routes differ in what you own, who looks after the property and how quickly you can get to your money:

| | Renting out a flat directly | Real estate fund | Project via InvestBay |
| --- | --- | --- | --- |
| **What you own** | The flat; you are registered in the land registry | A share in the fund; the fund owns the assets | Participation in a specific project. You are not the owner of the property registered in the land registry. |
| **Management** | Yourself, or a property manager for a fee | The fund manager | InvestBay and its partners handle operation, letting and sale |
| **Costs** | Repairs, insurance, property tax, possibly a mortgage and a manager | Management fees and possibly entry and exit fees | Operating and management costs are reflected in the project result |
| **Access to your money** | Selling a flat usually takes months | Redemption under the fund’s rules, sometimes with a notice period | You usually get to your money only after the project ends |

A rented property generates income only when it is occupied and the rent is paid, and operating, management and other costs are paid out of it. Growth in price becomes a realised result only when the property is sold. When assessing an offer, look at both components separately. A more detailed comparison can be found in the article on [real estate funds](https://www.investbay.com/en/blog/investing-in-real-estate-funds-a-guide).

### Shares, ETFs and funds: what to watch out for

- **Not every ETF pays dividends.** A distributing ETF pays out returns; an accumulating one reinvests them and you get money from them only when you sell.

- **An index fund may not bring regular income.** It is often an accumulating class that tracks market growth, not payouts.

- **The price of traded assets is not just an estimate.** Shares and ETFs have an ongoing market price. You usually realise a gain from price growth only when you sell, however, and until then the price can move in either direction.

- **A REIT is not the same as an ordinary European real estate fund.** A REIT is a foreign, typically American, company traded on a stock exchange, with its own rules for payouts and taxation. Ordinary European real estate funds operate under different regulation.

- **A company can cut or cancel its dividend at any time** and the value of shares fluctuates. An advantage is usually higher [liquidity](https://www.investbay.com/en/blog/investment-liquidity-what-it-is-and-how-to-calculate-it). We discuss why time matters with shares in the article [Why the length of your horizon matters when investing](https://www.investbay.com/en/blog/long-term-investments-the-key-to-growing-your-money).

### What works in practice and what to avoid

- **Expect work at the start.** Choosing and vetting an investment, writing a course or finding a tenant takes time. Anyone offering you income with no work and no risk may be after your money; see the article on how to spot an [investment scam](https://www.investbay.com/en/blog/investment-scam-5-steps-to-safe-investing).

- **Reserve first, then investments.** Even passive income can fall in harder times, for example in a [crisis](https://www.investbay.com/en/blog/investing-in-times-of-crisis-practical-tips-and-strategies). So keep a separate [financial reserve](https://www.investbay.com/en/blog/financial-reserve-how-to-build-and-manage-it-correctly).

- **Don’t bet on a single source.** Spreading your money across different investments reduces the [risk](https://www.investbay.com/en/blog/understand-investment-risk-for-effective-investing) that your whole income disappears along with one source. More in the article on [diversification](https://www.investbay.com/en/blog/a-comprehensive-and-practical-guide-to-investment-diversification).

- **Calculate in euros after costs.** Compare the percentages in an offer only after fees and tax. Find out where the return comes from and how you get your money back.

- **Check and persevere.** Passive does not mean uninvolved. From time to time you need to check the results and adjust your strategy. Results often show only after years.

### Frequently asked questions

**How can I create passive income without money?**

Instead of capital, you invest time and knowledge: an e-book, a course, a blog or affiliate marketing. According to the table above, however, this is more of a business with ongoing work, and the result is not certain.

**How much can I earn from passive income?**

There is no general answer. It depends on the amount invested, the period, the costs and the risks. The example above gives a rough idea: €4,000 at a model 5% corresponds to roughly €200 a year before fees and tax.

**Is passive income really work-free?**

Not entirely. It requires effort at the start and then ongoing monitoring. Compared with active work, however, the involvement is smaller.

**What is the best way to earn passive income?**

There is no single best way. Choose based on how much time and capital you have, when you will need the money and what loss you can bear. The overview table at the start of the article will help you.

### Want to compare specific real estate projects?

Review their horizon, costs, risks and expected sources of return.

[View investment offer](https://www.investbay.com/en/properties/)

*Investing in real estate projects involves the risk of losing part or all of the amount invested. Neither returns nor payouts are guaranteed, and the option to exit the investment early may be limited.*

### Sources

- CFI Team. (2019, April 24). Passive Income. Corporate Finance Institute. https://corporatefinanceinstitute.com/resources/accounting/passive-income/

- Investopedia. Passive Income. https://www.investopedia.com/terms/p/passiveincome.asp

- Investopedia. Active Income. https://www.investopedia.com/terms/a/activeincome.asp

Know someone who is thinking about investing? Send them this article so they have the key facts in one place.

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