The average person starts working in their 20s, retires at 62, and earns roughly $2 million in their lifetime. This might sound like a lot, but in reality it isn’t much at all. If you live to 80 and start working at 20, $2 million is roughly $30,000 per year.
This is why it’s important to find ways to generate passive income to help build your wealth more quickly. Let’s take a look at 8 ways to do it.
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What is passive income?
Passive income is money that you can earn without putting in a lot of effort. You won't have to work on a passive income stream every day once you've identified and established one, but that doesn't mean you won't have to do some work now and then.
The majority of passive income ideas will require an initial outlay of time and money. They will also need some monitoring or regular maintenance to stay on track, but you won’t have to dedicate a lot of time to them on a daily or weekly basis. Passive income is a great way to put your money to work for you. You can even earn money while you sleep.
Why passive income?
A growing number of people are turning away from their careers and focusing on generating passive income instead. Why? There are several reasons.
Passive income is stable. You may lose your job without notice, but when you create a stream of passive income, you own it. You continue to earn passive income no matter what happens in your career. Sure, there are factors that may affect your income stream, but you have more control over those factors, and you can always create a new passive income source when you need one.
There aren’t any limits to passive income. Your salary is limited. Your employer will never pay you more than you’re worth, and they may pay you much less. Passive income is basically infinite. As you build the income stream, you’ll see how quickly your earnings grow. You can potentially generate a passive income that surpasses your salary.
Passive income gives you freedom. There’s nothing quite like financial freedom. You can focus on hobbies or travel while your wealth continues to grow. More importantly, with a healthy savings account and a diversified investment portfolio, you’ll have more opportunities than ever.
You can retire early. Have you heard of FIRE? It stands for Financial Independence, Retire Early. It’s a growing movement that focuses on building substantial wealth through passive income and investments so you can retire early and enjoy your life. Some people retire in their 30s—or even younger. It’s an innovative concept, and it’s quickly gaining traction because it’s liberating and attainable.
Best Passive Income Ideas
So, how do you create passive income? Here are eight passive income ideas, complete with strategies and tips to get started.
1. Invest in Real Estate.
Real estate is one of the most lucrative passive income investments you can make. You can start with very little money, and there are several ways to quickly grow your real estate portfolio. Many investors start with a house flip, where you purchase a property that needs some work, do the work yourself or hire a contractor, and sell it for profit.
However, house flipping is not passive income since it requires you to put in time, effort and money to fix up the property. There are many other ways to passively invest in real estate without buying a home. Consider REITs, EFTs, and EquitySlice Investment Income Funds.
2. Get a High Yield Savings Account.
Most savings accounts offer very limited returns (often just a fraction of a percent), but high-yield accounts are a little different. These accounts are insured by the FDIC, so your money is safe. Most high-yield savings accounts earn at least 1.5 percent each year, which is more than double the average savings account. While a high-yield savings account won’t earn a ton of money immediately, it’s a passive way to build an emergency fund or start saving for larger investments. There is also another higher yield, but still liquid option.
EquitySlice Vault, for example, provides a high rate of return when compared to savings accounts, in fact, up to 50 times more at 5.06 percent.
EquitySlice Vault employs a type of demand note, the proceeds of which are used to purchase and secure income-producing real estate assets. They use a floating rate that is always 2% higher than the average savings account as reported by the FDIC.
The yield also offers premiums based on your account balance and the length of your lock-up period. The higher and longer they are, the higher and longer the rates of return, so it can be a short-term or long-term investment.
For example, if you commit $25k for a period of 12 months, you will receive a premium reward rate of 0.25 percent and 1%, respectively.
3. Invest in Dividend Stocks.
Stocks can be intimidating for first-time investors, but they can be a lucrative investment for those who do their research. They're also a way to earn money without much ongoing effort or management.
Dividend stocks pay earnings each year or quarter. As the stock grows, the dividend grows, too. You can start with just a small investment, then use your dividends to purchase more stocks and grow. Best of all, dividend stocks are typically a much safer investment than growth stocks, so you likely won’t lose any money if you do your research. Most people use dividend stocks as one of several passive income streams to maximize their investments.
4. Buy a Rental Property.
The average profit for a residential property is $67,000 . But do you really need to invest $200,000 to purchase your first property? Usually, no. In fact, most rental property owners opt for a mortgage or other financing instead. The monthly rental payments cover the mortgage payment plus any maintenance or repairs. The rest is profit.
You can start with any property you like and can afford residential or commercial. Individual home, condo, townhouse, vacation home, or multi-tenant apartment building. Some investors only purchase properties for short-term rentals, list the properties on Airbnb or Vrbo, and collect the rental income. You can even hire a rental company to handle all the paperwork and red tape.
Of course, as you grow your business, you can invest the monthly income into more rental homes and expand your portfolio. It's a great way to build sizable cash flow both short-term and long-term.
5. Buy ETFs focused on Dividend Stocks or Real Estate.
Exchange-traded funds are a quick, easy way to purchase multiple dividend stocks at once. If traditional stocks are too big of a time investment and you prefer a more laid-back approach, ETFs may be the route to take.
With traditional stock investing, you typically want a diversified portfolio. ETFs are a collection of diversified stocks, but someone else does the legwork for you. EFTs that focus on Dividend stocks or real estate have the benefit of generating both appreciation and income. You may not get rich quickly with ETFs, but they can generate passive income and help grow your wealth over time.
6. Purchase Certificates of Deposit.
If you want a safe, easy investment, you can opt for a certificate of deposit (CD). You can purchase a CD from any bank or financial institution. CDs cost a flat rate, and they grow over time at a certain percentage. When you cash in the CD, you get your principal plus the interest you’ve earned. However, you have to wait a certain term before you can cash in. The terms generally range from just a few months to 20 years or more. Longer terms typically offer higher returns.
Need your money early? That’s okay, but you will pay a penalty if you don’t wait the whole term. Still, your money is safer in a CD than riskier investments like stocks, and the returns are better than traditional savings accounts.
7. Consider Crowdfunded Real Estate.
If you want to start investing right away, but don’t have a lot of time or energy, consider crowdfunded real estate.
Crowdfunded real estate platforms provide the opportunity to invest in real estate without purchasing, renovating, or managing the properties themselves. Investors can earn a much better rate of return than they would with savings accounts or CDs.
8. Invest in a Real Estate Investment Trust (REIT).
There's another (passive) real estate investment option called a Real Estate Investment Trust (REIT), a company owns and manages the real estate properties, and investors own shares of the REIT.
Real Estate Investment Trusts must meet certain IRS requirements:
They must have at least 100 shareholders after one year of existence.
They must have at least 75 percent of their assets in cash, real estate, or U.S. Treasuries.
They must have a board of directors or trustees who manage the investments.
They must return at least 90 percent of their taxable income to shareholders as dividends each year.
REITs can be a great investment for several reasons:
You don’t need a lot of capital to invest.
REITs are considered relatively low risk.
There’s potential for sizable returns.
How can EquityBrix Help?
Passive income can be an excellent wealth-building strategy that can generate income and solid returns. Even with salaries in the high six figures, most people will build wealth much faster through a mix of investment strategies often including passive income generating strategies. The challenge, of course, is finding a steady stream of passive income so you can start growing your portfolio and your wealth.
EquityBrix can help you grow your wealth through our fractional real estate investment platform. Our team marries the needs of investors and real estate developers by providing opportunities for above-market returns. EquityBrix is committed to creating high-yield investment offerings, and we can help guide you through the new era of real estate investing.
If you want more information about tokenized real estate investing go to EquityBrix or EquityBrix.com/Learn.
If you are looking to grow your wealth and diversify your investment portfolio by learning about innovative ways of investing in real estate go to EquityBrix, or contact us for more information, or sign-up for the EquityBrix Newsletter.
*Disclaimer: EquityBrix is not an investment adviser. This information is for educational purposes only and does not constitute investment or tax advice. It’s important to be informed and to make your own investment decisions or do so in consultation with a professional financial advisor. Under no circumstances should this material be used or considered as an offer to sell or a solicitation of any offer to buy an interest in any investment. Any such offer or solicitation will be made only by means of a written online prospectus relating to the particular investment.
FAQs
How can you make $1,000 a month in passive income?
Though $1,000 seems high when you're essentially not working at all, once you start investing in passive income streams, you’ll likely far surpass this target. First, though, you’ll need to choose your initial investment. These passive income ideas should help. A few things to remember:
Savings accounts and CDs are low-risk options, but they also have low returns.
Rental properties and stocks offer higher returns, but the risk is also higher.
While REITs are a low-risk investment, the returns are typically much higher than CDs or savings accounts.
They also pay dividends quickly, so it won’t take long to earn your first $1,000 of passive income. Of course, the more you invest, the faster you’ll see your money grow.
Crowdfunded real estate solutions like EquitySlice can give you the best of both worlds.
How can I make passive income in 2022?
Passive income is always a possibility, but 2022 offers more opportunities than ever. Real estate is booming, mortgage rates are low, and the world is in the midst of a digital revolution.
By comparison, the job market is volatile, and many employees feel particularly unstable. If you’re hoping to provide a source of financial stability through your retirement years with a passive income idea, you’re not alone. While passive income is always an excellent wealth-building strategy, it’s most important (and attainable) during uncertain times like these. You can easily choose one or more passive income ideas and get started today. You can quickly build wealth by taking a small portion of your salary and using it to invest in one of these options.
Is it easy to make passive income?
Nothing worth having comes “easy,” but creating a stream of passive income is much easier than you may think.
It’s certainly easier than working full-time. It’s easier than running an online business or starting a side hustle. Depending on which passive income stream you choose, it’s also easy to get started and make your first $1,000.
For example, if you invest in an REIT, the process is usually quick and simple—and you can invest as little or as much as you like.
Of course, once you start investing, the “passive” part of passive income becomes a reality. From that point, everything is easy. You can actually earn money while you sleep, take a vacation, or spend time with family.
