Imagine earning money while being busy with other things. You can earn passive income while sleeping, going on vacation, enjoying your favorite hobby, or working your regular job. Many investments can generate a passive income for long-term wealth creation. All investments have some risks, so diversifying your investment portfolio can help to minimize the risks. Here are five investments for you to consider that can provide you with passive income.
Owning a Rental Property
Real estate investing is one of the most popular ways to earn a passive income. You can make money on a rental property in two ways. You can earn a passive income through monthly rent payments. You can also make money on the long-term capital appreciation as the value of the rental property increases. Owning a rental property requires managing and maintaining the property. Therefore, earning an income with a rental property is not completely passive unless you hire a property management company.
Real Estate Investment Trusts
REITs are a great choice for passive income if you like the idea of investing in real estate but do not want to manage and maintain any properties. A REIT is a company that invests in commercial real estate. Individual REITs tend to invest in one type of property, but some invest in multiple types of properties.
REITs can specialize in health care facilities, industrial properties, office buildings, shopping malls, and other commercial properties. The best thing about REITs is that they distribute around 90% of their gross revenue from rent payments to shareholders. These high dividend payments will give you a nice passive monthly or quarterly income.
P2P loans are popular among investors who want a passive income because of the high returns on the investment. P2P loans allow investors to provide loans to consumers for any purpose. In return, the consumers make monthly principal and interest payments back to the investors. As a P2P lender, you can fund an entire loan. You can also partially fund a loan and let another investor finance the rest of the loan. You don’t need a lot of money to start investing in P2P loans either—there are options where you can start investing with under $100.
Another way to produce passive income is to invest in a start-up business. You can provide funds to a new business in exchange for equity ownership of the company. When the company starts to produce revenue, you will receive a percentage of the income without being involved in the day-to-day operation of the business. You are also helping to support a small business you believe in. There are many different start-ups to choose from, so this type of investing feels more personal.
If you are looking for safe investment, you can put your money in a high-yield savings account or CD. It won’t be a lucrative investment, as the return is typically quite low compared to the other options on this list, but it does pose little to no risk to your money. This is a great option for those with a large sum who aren’t interested in taking a chance on other opportunities; a commonly recommended choice for people who get lucky in the lottery or get an unexpected inheritance.
Making investments in ventures that give you the freedom to do whatever you want is financial freedom. These types of investments don’t always produce enough return to allow you to quit your day job, but they can give you the extra income to cover fun vacations and spending cash. If you get lucky, you can take your earning and reinvest to keep growing your wealth. Always explore different types of investments to see which one is best for you.
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