Get into investments that yield passive income. Use this simple reference guide to see top trends! Easy for beginners. Build your portfolio. Explore your options!
Passive income describes income or cash flow stemming from a one-time investment. This type of investing is a set-it-and-forget-it approach to investment. The good news is, you do not have to be rich to get into it. Finding the best passive income vehicle is crucial to the process, however. You want the return on your investment to be worth the time and effort you place into it initially. The following passive investing strategies are time-tested and proven to be excellent choices for passive income investing. As with any type of investing, make sure you fully understand the risks and rewards of each type before acting.
Peer-to-Peer Lending (Angel Investing)
If you are familiar with CrowdFunding then you understand this concept. This type of passive income investment allows you to essentially become a lender to a borrower, who repays you the amount with some interest attached. There are great online platforms that not only protect you but protect the borrowers. You get to select whom you would like to fund. Average returns on the platforms such as Lending Club or Prosper is around 7-12%. Better still you can get started with this type of investing with as little as $25. In this case, your money is pooled together with other small investors.
Real Estate Investment
Property investment is a perennial favorite for passive income investors. It is popular because the land will always be in demand. Growth in the rental, Airbnb, VRBO, and other rental platforms has seen this investment sector experience skyrocket. On a single Airbnb apartment rental, it is possible to not only get your rent covered but to also make well over 200% on your investment of time and energy.
For those not wishing to do rental arbitrage, there is the rental property route. With as little as three to 20% down you can purchase a home, then turn around and rent it out for slightly more than your monthly payments. The good news about a home purchase is that once it is paid off, all that money becomes passive income.
Not interested in running an Airbnb property, or managing a rental home? Try your hand at real estate investment trusts (REITS). A REIT pays 90% of the income generated as dividends, but you are also taxed on that accordingly. Like crowdsourcing, REITs pool together the capital from multiple investors, and someone else manages the actual property. Then the income that is generated from that property is divided between all the investors. Properties falling into this type of arrangement are often larger commercial buildings. They include apartment buildings, healthcare facilities, retail centers, or office spaces.
Index Funds
An index fund allows you to participate in the stock market without losing your shirt. The fund is a collection of different types of stocks, bonds, and securities so that if one does not perform well, the others may. This diversification makes this type of investment quite stable in comparison to other types of the stock market investment. The other benefit to an index fund is that it does not cost a lot to get started. However, this is dependent on the financial organization you work with. Each may require a different minimum investment to get started. Others may keep the initial investment low but then charge you a hefty commission to manage your portfolio.
Dividend Stocks
Simpler than the index fund investment is the dividend stock. This type of investing is where you pool your money with other investors, usually through an investment company, to buy pieces or percentages of well-known companies. These “pieces” are called shares. You receive money proportionate to the number of shares you own in a company. For example, if you owned 10 shares of a company that paid $5 in annual cash dividends, you receive $50 a year return on your investment. Dividends are often paid every three months. The key to this is to invest in companies that have been in business for at least 25 years and have a good track record. These are often referred to as “aristocrats”.
Quick Entry Passive Income Ideas
Maybe you are not ready to invest in real estate or tackle the confusing world of the stock market. No problem. The following are some quick ways you can generate passive income with little to no investment, other than your initial investment of time.
Advertise on Your Car: Specialized advertising agencies pay people to allow them to place advertisements on their vehicles. If you are already driving your car around and you live in a metropolitan area, then this could generate some great side income. There are scammers out there, so be aware that you should never pay to play in this field. Your car is wrapped with a graphic, paid for by the company, and then you drive around as a free advertisement. Most companies want someone who has a good driving history, drives a good number of miles already and has a decent car. Try sites like Carvertise, Promotocar or Wrapify.
Rent Out Household Items: Do you have many household items hanging out in your garage? Consider renting them out. Good candidates for this include tents, camping gear, beach gear, sports equipment, or appliances. The trick is to loan only those items that people may need for a short while and it does not make sense for them to buy for themselves. One of the hottest items is baby equipment. High-value items do very well and can generate income over the cost of the actual item. A good place to rent out tools or cleaning equipment is Zilok. Some other great places to rent out your stuff includes:
If you are willing to rent out your RV, then consider using Outdoorsy to get started. Have a boat that does not see much use? Consider renting it out through GetMyBoat. You get to set the rates and you can require that you be allowed to captain the boat if you are concerned.