Passive Income - Naughty or Nice?

Posted by Graham Turrell on Fri, Dec 22, 2017 @ 07:35 PM

As we start this series of posts on the classic (and sometimes controversial) topic of Passive Income, it's worth taking a bit of time to agree on what we're talking about when we use the phrase.

It seems there's a massive misunderstanding around whether passive income is to be aspired to or or something to be suspicious of. It's an innocent enough phrase but why does it evoke such strong opinions both for and against?


What's the reality behind passive income? As with most things in life, taking the time to understand something is usually well worth the effort.

I suspect there are two key reasons for this lack of understanding:

  1. There is no simple definition of what passive actually is and how it can be attained, and therefore a lot of confusion around the whole subject.
  2. The phrase has, like several others, been used and associated with "get rich quick" schemes. The idea put out to the unwary is that passive income is a way of getting money for nothing and often for no financial commitment, which is highly appealing but ultimately doomed.

To try to address both of these reasons let's get down to some proper definitions.

The most succinct definition of passive income I have found, from trading website ADVFN is: "Income (such as investment income) that does not come from active participation in a business."

Often the best place to look for definition of income types ought to be from the tax man. In the UK passive income isn't a category for tax purposes, but you can get a feel here for what HMRC considers passive income.

But according to the US tax service there are three types of income:

  • Active income
  • Passive income
  • Portfolio income

Active income is when you trade time for money. A regular Job.

Dictionaries can't quite decide in some case the difference between passive and portfolio income.

According to Investopedia, US passive income is "Earnings an individual derives from a rental property, limited partnership or other enterprise in which he or she is not materially involved."

And portfolio income is "income from investments, dividends, interest, royalties and capital gains. Portfolio income does not come from passive investments and is not earned through normal business activity. Typically, income from interest on money that has been loaned does not count as portfolio income." - Investopedia, again.

(It's somehow reassuring to know that the simple phrase passive income seems equally misunderstood on both sides of the Atlantic!).

Nevertheless, all agree that the difference between active and passive (or portfolio) income is whether one is materially involved in generating the income.

Some income is more passive than others.

In reality there is seldom black-and-white active or passive income - most income is somewhere on a scale between the two...

What about property income ?

Since we're on a property blog, this is an excellent question. If you're a landlord and working directly in your business are you getting passive income? I would say not quite - its somewhere on the scale : semi-passive. If you've delegated out all the work to managing agents, what then? Still not 100% passive but getting closer.

If you've invested in a fully-managed purpose-built student property ?

Or invested in property bonds or crowdfunding?

Again these sit on the scale of semi-passive, especially when you include the due diligence and research needed before making the investment. It's hands-on, "do-once" work, but work it certainly is.

And in the end

In conclusion, I would suggest that a stronger investment goal than the Holy Grail of pure passive income is to create income streams through investments that are leveraged by other peoples time (lettings agents, good brokers, investment researchers) and perhaps also other peoples' money (for example secured loans and mortgages).

I'll leave you with an example of semi-passive property income: Purpose-built student property is a proven "done-for-you" model. Once you've carried out your due diligence and own the student suite, there is literally nothing to do for years -  except receive your net rental income (which compares very favourably with labour-intensive buy-to-let).

Don't take my word for it - see for yourself some passive income in action...

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Tags: Property Insight, Property Investment

How to Succeed in Student Property - Tip 5 - Understand about capital growth and exit

Posted by Graham Turrell on Fri, Dec 15, 2017 @ 10:27 AM

As we've seen, purpose built student property can offer consistent rental income that buy-to-letters can only dream of - when the right development is chosen and invested in. But the question that so often comes up is ...

"what if I want to sell the property later?"

A fair question because unlike with regular buy to let property, there is generally no residential resale market: your potential buyers will all be property investors. This is because purpose-built student accomodation (PBSA) can only be occupied by students - there will be a covenant or equivalent on the property deeds to stipulate this.

Not your regular property market


Without a residential resale market, the future value of the apartment is likely to differ from an equivalent residential development. As the buyers are investors, the property value will be determined in a very similar way to traditional commercial property, where that value is based almost exclusively on the Yield - the achievable student rental income from the property.

This commercial element to the investment is often seen as an advantage over the rises and falls in popularity of the residential property market and somewhat easier to predict on a spreadsheet. For that reason too, PBSA can offer a convenient "hedge" to have inside a traditional buy to let portfolio. 

OK, so more about this "usage thing"...

Only students can live in your property. There are advantages to this occupancy restriction though: officially-designated purpose-built student property is treated as a special case by the UK Government, with potential tax advantages for the owner. For instance it is exempted from the recently-concocted Second Home Stamp Duty Surcharge, which for buy to let buyers with a residential property already, adds a 3% hike on to their SDLT bill.

How to resell your student property

Student hall property has traditionally been the domain of buy-and-hold strategies, and those investors planning to hold their property as an income cash-cow for the long term had not been especially concerned about selling. 

The good news about resale though is that what was once a very niche property marketplace with just a few student developments, has in recent years exploded in the into the most popular specialist property market in the UK. Many estate agents with significant property investor databases now recognise the secondary (resale) market and it is MUCH easier to resell a good student room property.

And a part of that market prefers to buy room in halls with a few years track record under their belt. So provided you choose to invest in the a new-build student hall that ticks all the right boxes, the ability to sell you property on is perfectly possible, with some capital growth to boot.

Many investors have gone on to build substantial portfolios of purpose-built student property and as confidence continues to build on the success of the market this is set to continue.

Growth tips from the trenches

The secret to building any successful property portfolio is doing your research when you buy, and this is especially true of student room investments. So become your own purpose-built student property expert, and learn the right questions to ask the developer before making a decision to buy. Use an agent, broker or consultant with as much experience in this field as possible, and pick their brains mercilessly!

For example our team purchased their first student room investment way back in 2005 when the market was in its infancy. Whether you speak with us, or any other excellent, experienced agent about student property, make sure they're independent and as unbiased as possible towards the developer or the development. Above all you need to trust that they have your interests at the heart of all they do. 

With our ten years' experience, we carefully select every development we offer and are beholden to none. If we aren't 100% satisfied, we won't offer it, period.

A great example

Here's Canterbury Hall, our current favourite with just a few suites now remaining to buy. If you would like, drop me a line and I'll be happy to go through why we think it's the best of breed right now to add to your own portfolio.

Canterbury Hall Preston Investment Handbook 

Tags: Student Accomodation, Canterbury Hall

[property insight] Principles, Strategy and Tactics in property investment

Posted by Graham Turrell on Tue, Dec 12, 2017 @ 09:50 AM

Welcome to the first in a series of posts designed to equip you as an investor to be clear on your purpose and intent, and to immunise you against the turbulence of a changing property market.

When the property world changes under your feet, how do you respond?

investment-portfolio-strategy.jpegThe last two years in the UK have been tumultuous for property investors and landlords. Unexpected external forces such as government changes to taxation has had a hugely different impact on investors depending on who they are - and they way they think.

So what makes one investor throw in the towel whilst another survives and thrives on change?

The secret is to understand the importance of, and difference between your investment ...

  • Principles
  • Goals & Objectives
  • Strategies, and
  • Tactics

Only two or at a stretch, three of these should really ever change when confronted with unexpected world or local events. Which would you say is which?

During any flight, a plane is off-course 99% of the time.

It's true - in flight a pilot is making constant adjustments to direction of travel in response to the elements. The analogy fits :  your strategy is your flight path and your tactics are the minor course corrections that you will always be making as the unexpected happens in the day-to-day of running a property portfolio or investment business. This is normal behaviour!

But our strategies need to change when major external events such as politics or the economy force it. Otherwise you could find that your flight path takes you over dangerous air space and you could be in for a bumpy ride or even a dramatic end to you flight..!

Principles should always stay the same.

They say "you either stand for something or fall for anything" -  it's so true, but its more than that: what you stand for will help you stand tall. So above all as an investor it's vital to get your principles right.

If you were offered, would you invest in "you"?

How we manage change in our property investing life can brand us either high-risk or low-risk investors, and this has little to do with the things we've invested in. I'm talking about us as individuals : what is the "risk" of us being a successful or unsuccessful investor? 

Today I've introduced some thoughts an ideas. I'll be explaining more so look out for as we unpack these crucial and fascinating aspects to becoming a better investor.

If you haven't already, why not subscribe to the blog and make sure you don't miss a thing? Click the button and join the community!

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Tags: Property Insight

How to Succeed in Student Property - Tip 4:  Deciding if Student Room investment is right for you..

Posted by Graham Turrell on Tue, Dec 05, 2017 @ 10:28 AM

Student room ownership through Purpose-built Student Accommodation can provide some interesting returns from rental income, but they're certainly not for everyone.Here's a handy checklist and some expert notes to help you decide if they're right for you.

So why not sit down with a nice cuppa or a sandwich at your desk, and ask yourself ...

Is hands-free income appealing to me, or do I like to be in full landlord-style control of my property?


For active landlords, managing and improving their properties is part of their "job" and they embrace and on the whole enjoy it.

Purpose-built student property (or PBSA) on the other hand is by necessity managed entirely by expert specialist facilities management companies. Having research the investment, PBSA investors are satisfied that the management company know exactly what they're doing and to let them get on with it. If you think you'll have "ants in your pants" at this and would want to be involved in the running, furnishing, tenant finding, refurbishing, then PBSA is definitely not for you - because you simply can't do that!

Do I have the time to regularly keep an eye on my property or do I prefer to set and forget?

Those with the considerable time and inclination to be a landlord have the choice of whether to spend it on their properties. For those who simply cannot spare the drain of time in their busy lives to run a buy-to-let property portfolio, PBSA probably wins hands-down.

Is my investment background primarily property ownership or mainstream investment such as stocks and bonds or companies?

PBSA In many ways sits between the two. You have the benefit of ownership of physical property assets with the advantage of being able to sit back and enjoy the income. However, property is not a liquid asset like stocks and shares, and your capital is tied up in the asset. Admittedly you can sell the asset but this would take time. So what are you comfortable with?

Am I able to pay for and own the property outright (typically £50k-£75k)?

Off-plan PBSA is predominantly a cash purchase, although we do have access to a lender willing to look at offering a mortgage, subject to status and the PBSA development itself.

Am I looking primarily for income or capital growth?

PBSA should be considered primarily a long-term reliable income generator. As it is effectively commercial property, its value is based on achievable rental income, which will rise steadily with inflation over the years. Don't expect residential-style price movements (either up or down). As leverage (a mortgage) is not available at purchase, high percentage capital gains should not be realistically expected and will likely not be the key reason you invest in PBSA.

Do I enjoy researching property investments?

    1. There is a little more upfront research to do with PBSA that with buying buy-to-let, especially if this area of property is new to you. But as a fully-managed and maintained asset, the rewards of time-saving come quickly.
    2. Whether you do or you don't, seek out a good partner who can help you with your research (it's what we and other top-notch investment property brokers will do for you). 

Am I willing to retain the asset for at least 5 years?

If you think you may need your invested capital back at short notice, then at this stage of your investment life, direct property investment of any kind including buy-to-let and PBSA, is probably not for you, sorry. Property Bonds may be more suitable though, take a look at our blog topic on that subject.

If you still think you're the right type of investor for Student Property, take a look through our Student `Property market Industry Report, to discover the strong case for investment...


Download Student Property Market Review 2016-18 

Tags: Property Insight, pbsa

How to Succeed with Student property - Tip 3 : The subtle art of comparison !

Posted by Graham Turrell on Sat, Dec 02, 2017 @ 10:22 AM

They say that size isn't everything , but for investors when it comes to student rental income it's usually at the top of every list. But how can you confidently predict what that income will be from what is currently still a construction site? Fortunately help is at hand...

graduation-day-hats.jpgThe vast majority of PBSA on the market are offered to investors "off-plan" which means agreeing to purchase a property before its built and therefore before it has a track record of being a successful student development. The rewards for this include relatively low purchase costs and usually a good selection of student rooms to choose from .. off the plan.

But without a proven income from the development, how can you be satisfied that your investment is going to give you the income you expect and have been "promised" by your sales agent?

The answer as usual is to do your own homework but seeking out the closest established student halls, closest in a number of ways. When choosing your comparisons, consider:

  • Location - proximity to the development you're considering
  • Age and design
  • Target audience (Undergraduate, overseas, postgraduate)

Often the developer will provide you with a set of income projections. That's fine, but scrutinise these for accuracy. Ask yourself:

  • Are these sufficiently detailed - is there a spreadsheet breakdown of costs and rental income, or just headline figures with little or no justification?
  • Do these figures come with citations or references to justify them?
  • Can the figures be easily verified?

The more data the developer or agent provides you on request the better: it shows there confidence in their development and their commitment to you as a serious investor.

Where this isn't immediately to hand, all is not lost. Comparative data can be obtained by desktop searches, speaking to university accommodation offices and speaking to the student management company that has (hopefully) already been signed up to run the development.

Armed with this data and some nifty spreadsheet work it's then much easier to make your own realistic projections on income and see how this squares with the developers' own.

When HighGround looks for a suitable student hall to offer our investors, we carry this out as a matter of course, regardless of the volume of figures given to us by the developer. We insist on independently checking every assumption to our total satisfaction before we offer it to our investors.

If it doesn't stack, we reject the development. But hey that's just us.

Find out more about why UK student rooms remain so popular with investors. Here is a great introduction, backed up by some solid facts and figures. Download our Student Property Guide today:

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Tags: Property Insight, Student Accomodation

How to succeed with Student Property - Tip 2 : Look Beyond the Headlines

Posted by Graham Turrell on Tue, Nov 28, 2017 @ 09:09 AM

Welcome to our second post with tips on what to do when considering purpose-built student property investments.

You've likely heard the phrase "if it seems too good to be true, it probably is", right ? (I could spend a whole book chapter unpacking that piece of received wisdom, in fact I shall do soon - it's fascinating !).

Being objective

But objective investment research requires put aside the scepticism as well as any giddy excitement. It's a stoic activity, but one we all find difficult to some extent, as most buying decisions involve emotion at some level !


When it comes to a passive investment such as buying a student room in Purpose-built Student Accommodation (or PBSA for short), one should approach the claims of the property developer or agent with a curious mind.

Here's an example: "Fixed returns of 6% for 5 years". These terms are often offered by the developer as an incentive to buy the student rooms. This is a reasonable idea as it provides some comfort for the buyer whilst the student hall ramps up to speed in the first few years of operation.

That said, these offers are largely irrelevant for well-run new halls, as good student facilities companies of halls built in the right location should enjoy full occupancy at market rent from opening. It can however, mask problems with poor location and bad management

So, as an intelligent investor, here are some key questions to ask yourself:

  1. is the student hall in the right town or city, and the right location?
  2. is the student demand there? - some good signs are: investment being made into university facilities and infrastructure; an excess of private student houses of multiple occupation; strong postgraduate programme; growth in local student numbers over the last 5 years.
  3. looking at similar private or university-run halls in the area, do the rents match the estimates provided by the developer's estate agent to the investor? Get out the spreadsheet - real numbers reveal the true story!
  4. does the company set to manage the hall have a strong, long track record of experience with running student halls and advertising them to students to drive the best rents and highest occupancies.

Intelligent investment involves looking beyond the juicy headline figures, being neither carried away by them nor dismissing them out of hand.

Black and white or shades of colour?

Investment due diligence seeks to simply get to the truth and make an informed decision. It's harder work than just accepting or rejecting the headline figures, but ultimately far more helpful.

At HighGround Property, we operate unusually detailed due diligence on every student hall investment we consider and, as a result tend to reject around 80% of all investments that appear on our desk. Only those that pass our exacting standards are one's you'll see from us.

Our classic example of the moment is Canterbury Hall  service the UNiversity of Central Lancashire in Preston...

Canterbury Hall Preston Investment Handbook


Tags: Property Insight, Student Accomodation

Property Investors: why you should follow the UK Government money

Posted by Graham Turrell on Fri, Nov 24, 2017 @ 05:29 PM

In this week's November Budget, the UK Chancellor has left us in no doubt - punish landlords and reward property developers.

Warning: this is a lengthy but important post. If you are at all involved in property investment, or thinking about it, read on.

philip-hammond-nov-budget-2017.jpgBuilding good, renting bad

The UK Chancellor Phillip Hammond this week made it very clear that a key objective of this government is to build houses. And build at a rate last seen in the 1970's. Substantial funding and support is being offered to developers to build the 300,000 annual homes construction targets. We applaud this but we as investors need to adapt - and quickly.

This government strategy includes continued support for corporate "Build to Rent" (B2R) developments, which we believe puts further long-term pressure on small private landlords to compete and make a living.

"Hooray! It's not worse"

Some commentators are suggesting that because no further punitive measures have been placed on Landlords this time round, this is to be celebrated. Unfortunately the reality is, in the last two years so much damage has been done the message to private BTL investors is sadly clear: "you're not welcome".

I'm of course talking about:

  • the 3% Stamp Duty surcharge for second homes (primarily affecting buy to let investors trying to grow their businesses);
  • the devastating changes to taxation of mortgage interest for private landlords;
  • the emergence of trial rent controls (expect this not to go away!);
  • the "demonisation" of landlords in the media;
  • the growing frustration of Generation Rent desperate to get on the housing ladder.

So it is clearly government policy: we can expect to see the rise of many small and medium-sized property developers, and the decline of small-scale private landlords as they are forced out financially and replaced on the whole by (albeit largely middle-class) first-time buyers.

The problem is that development funding is today still hard to find, and despite government money, this is likely to remain a major bottleneck for getting builders to build. The need for private funding for developers through crowdfunding, property bonds and good old-fashioned joint venture partnerships is going to become more important to the government vision than ever before.

"Whatever your political view on this, it would seen very sensible for property investors to recognise this sea-change quickly and look to either build property, or finance those who do."

Which team would you rather be on - the aided or the persecuted?

It is time for landlords to review their long-term strategies, especially if they do not currently include adding "asset value" by developing, extending or carrying out major refurbishments. For a growing number of property investors, buy-and-hold residential letting is no longer the Holy Grail it used to be, and may never be again.

In the light of government-backed "landlord persecution" some landlords have pledged to sell their portfolios, but may have no clear plans where to invest the profits.

As a business, our focus is set firmly in line with the government camp, at least as far as supporting development is concerned. We support small developers by connecting them with investors large and small through Property Bonds, Crowdfunding, and other collaborative ventures such as student room ownership in new purpose-built student accommodation. We have been doing this for a decade and long before it was fashionable. We believe in wealth creation through property now more than ever.

Here's one example of how investors can profit from great UK property developers today. It's possible to invest in midlands-based Godwin Capital from just £5k and enjoy double-digit fixed annual income through property plus your capital returned in two years. All without the need to lift even a hammer.

godwin capital no 2 brochure download

Tags: Property Insight, Property Bonds

How to succeed with purpose-build student rooms - Tip 1

Posted by Graham Turrell on Tue, Nov 21, 2017 @ 11:50 AM

There's no denying the success of Purpose-built Student Hall Accomodation in the UK. Demand for quality student living is still constantly outstripping supply, even as the number of new builds grows and competition between them is getting tougher.

canterbury_hall_roof_garden.pngIn this new era of student choice, it's more important than ever to have the facilities that students actually want to use and frankly "beat up" the competition with them.

These days we are seeing "student magnates" for helping the students - and crucially their parents - choose their digs. And that more often than not means comfort.

If the student apartment or block you own offers features like ...

  • self-contained apartments (no sharing kitchens, thanks!);
  • services - local newsagents and hostelries;
  • bragging rights - gyms, cinema rooms and even private roof gardens

... then you're onto a winner. That property when rented out by an experienced student facilities manager, is going to enjoy the highest possible rental income and occupancy (and therefore property value), for many years to come.

Shameless plug - here's a perfect example of what I'm taking about, UCLan Preston's Canturbury Hall, and a small number suites are still available to a few more property investors (I will be sold out very soon now). Not hard to see why.

Have a look now, and get in touch quickly if you would like to know more.

Canterbury Hall Preston Investment Handbook


Tags: Student Accomodation, Canterbury Hall

[property bonds] Why are Bonds growing in popularity with investors and developers?

Posted by Graham Turrell on Thu, Nov 02, 2017 @ 05:09 PM


7-shutterstock_288113666.jpgWith us living longer, pension funds are not giving many of us the financial future we planned for, and other ways are often sought to grow financial nest-eggs to top up that future income. Bank savings accounts aren’t delivering on that either.


So is there a place in a portfolio for Property Bonds - for those of us that would rather be the lender than the property developer?

With good Property Bonds, you team up with an established property developer in a Joint Venture. But there are none of the set-up costs for the bond holder that you would normally associate with a direct property development project, or the advisor fees that come with buying traditional regulated investments: all of your capital goes to work for you.

Here are a few other key reasons to consider profiting from Property Bonds:

  • Property is seen as a secure asset class and with not enough homes being built in the UK demand continually outstrips the supply.
  • There are more and more obstacles in directly owning investment property. Heavier taxation for residential investment property and reduction of tax reliefs for expenses; difficulty in raising mortgage finance for buy- to-let; dealing with tenants; licensing; regulation, the possibility of rent controls; the list goes on). Many property investors are looking for less hassle and more profit: being the lender, not the landlord.
  • As part of this movement, investors who are cash-rich and time-poor are looking to partner with developers by lending rather than getting directly involved in the day-to-day running of projects.
  • In uncertain economic times a predictable fixed income for a known period of time has much appeal.
  • Whilst no investment is risk-free and they're not for everyone, a well-chosen Property Bond can offer credible security and a practical exit strategy should things go wrong with the developer.

Learn how to spot a good property bond, and those to avoid. All this and more is covered in our Property Bonds guide - grab your copy today:

Download HighGround Property Bonds Special Report

Tags: Property Insight, Property Bonds

Early Bird Last Chance : Property Network with the experts - crowdfunding special

Posted by Graham Turrell on Fri, Oct 20, 2017 @ 02:12 PM


As someone interested in understanding and growing in the power of property to enhance your wealth, I'm encouraging you to join us for an evening of excellent networking and informative & entertaining talks.

But I should warn you - to be fair to all our advance ticket fans our Early Bird discount tickets (just £15.00) will be withdrawn and the price will increase to £20.00 at midnight on Sunday.

We'll be filling up fast now, so I recommend getting the tickets you need right away to secure your seats.

Find out more and secure your seats

Register Now


These quarterly HighGround Investor Network events are attended by an exclusive group of experienced investors, ensuring you have the perfect opportunity to rub shoulders with like-minded people in a relaxed and friendly environment. 

RichardBush1.jpgThis month, learn about the fascinating world of property crowdfunding from leading expert Richard Bush, founder of the CrowdLords crowdfunding platform.

The venue is the gorgeous Thistle Hyde Park Hotel with networking and full hot & cold buffet.

Register Now


Tags: News, Networking Events