Passive income from investment: Dividend ETF or rental property

I prefer ETF for the convenience.

Dividend Portfolio of ETFs:

Pros:

• Diversification - ETFs provide exposure to a basket of stocks, reducing risk.

• Relatively low maintenance - Once the portfolio is set up, it requires minimal ongoing management.

• Liquidity - ETF shares can be easily bought and sold on the stock exchange.

• Potential for dividend growth over time.

Cons:

• Dividend yields may be lower than rental income from an investment property.

• Exposure to stock market fluctuations and volatility.

• No direct control over the underlying assets.

Investment Property for Rental Income:

Pros:

• Potential for higher cash flow and rental income.

• Ability to leverage through mortgage financing.

• Potential for property value appreciation over time.

• More direct control over the asset.

Cons:

• Higher upfront costs and ongoing maintenance expenses.

• Less liquidity compared to stocks/ETFs.

• Exposure to risks like vacancies, repairs, and dealing with tenants.

• Requires more active management.

So, this means that

• A dividend portfolio of ETFs provides diversification, lower maintenance, and liquidity, but may have lower income potential.

• An investment property can generate higher cash flow, but requires more upfront capital, active management, and faces unique risks.

Why not both? Then you can have passive income from dividends while dreaming of your tenants paying rent on time!

I kinda got both so let me share my experience.

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I got a dividend portfolio that's yielding like ~4% in dividends. I periodically add money into it but most of the dividends collected gets funneled into Money Market Funds which earns some %% as well.

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This is easy for me because my day job takes a lot out of me and i don't have the mental capacity after work to think about too much stuff, neither do i want to make too many decisions (Sometimes not making a decision is the best decision.)

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On the rental property, I can't say I got a rental property. But I do rent out a room in my HDB flat that I'm staying with my wife. so it's me, wife and tenant.

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This can be a little tricky because you are managing another human living with you if you are renting a room.

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If you can manage that portion or the tenant is pretty nice in general, then it's a great blessing.

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P&L wise, I get about $700/year with my dividend portfolio and $1,150 per month from my room rental.

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That said, my house is paid via CPF so no cash upfront for us. We keep solid cash that can be used to invest in other instruments.

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