Grant Cardone, one of the most successful real estate moguls, recently proclaimed a rather controversial statement:
“If you are a single-digit millionaire, you are not wealthy…you are worried. Millionaires are basically middle-class people who are worried about money.”
This can be disheartening to many, but this eye-opening declaration has some truth to it. It is largely attributed to the soaring inflation and home prices we've experienced across the country in the last few years. Grant, who is known for not sugar-coating the truth, goes onto say that you won't become wealthy solely from your W2 job. Once again, spot on. It is a well-known fact that the average multi-millionaire has at least 7 passive income streams to ensure they make money while they sleep.
Passive income offers the potential for financial freedom, flexibility, and a more secure future. By diversifying your income sources, you can create a stable foundation and open doors to new opportunities or work on passion projects. In this article, we will explore various ideas and opportunities to help you generate multiple streams of passive income.
Passive Income Stream #1 - High Yield Savings Account or Certificate of Deposit
Probably the most basic form of passive income is simply to open a High Yield Savings Account or Certificate of Deposit (CD) that earns interest on the money you save. These are good investments when you want a low-risk investment and provide a very predictable return. It is usually a smart move to put your money in these accounts during high interest rate environments, like the one we are in now. Note that High Yield Savings accounts can change their interest rate at any time, but offer liquidity to access your money, whereas CDs offer a fixed interest rate, but you typically cannot access the funds until after the term is up.
Passive Income Stream #2 - Rental Properties
Our favorite source of passive income is Real Estate. Investing in real estate can provide a consistent and reliable source of passive income. By purchasing properties and renting them out, you can earn monthly rental income that exceeds your expenses and reserves (maintenance, vacancy, and capital expenditures), leading to positive cash flow. Not only that, but the tenant is also paying down your mortgage, as well as providing you with tax benefits due to depreciation. For more information on these benefits and ideas on how to get started investing in real estate here, refer to this previous blog article: Benefits of Real Estate Investing and How to Start.
Passive Income Stream #3 - Dividend Stocks and Mutual Funds
Investing in dividend stocks and mutual funds can be an excellent way to generate passive income. Dividend stocks pay out a portion of the company's profits to shareholders regularly. Similarly, mutual funds pool money from multiple investors to invest in a diversified portfolio of stocks, bonds, or other securities. Look for established companies with a history of consistent dividend payments or well-managed mutual funds with a solid track record.
Passive Income Stream #4 - Peer-to-Peer Lending
With the rise of online lending platforms, peer-to-peer lending has become an attractive option for passive income. Platforms like Upstart connect borrowers directly with lenders, allowing you to lend money and earn interest on the loans. Carefully assess the risks involved and choose reputable platforms with robust risk assessment and borrower verification processes.
Passive Income Stream #5 - Digital Products and Online Courses
Leveraging your expertise or skills to create digital products or online courses can generate passive income in the long run. Write an e-book, develop a mobile app, or create video tutorials on a subject you are knowledgeable about. Platforms like Amazon Kindle Direct Publishing, Udemy, and Teachable make it easy to reach a wide audience and earn passive income from your intellectual property. There are also many YouTube videos and online articles showing how to create simple designs and templates on Canva to sell on Etsy and other marketplaces.
Passive Income Stream #6 - Real Estate Investment Trusts (REITs) or Syndications:
For those interested in real estate but prefer a more hands-off approach, investing in Real Estate Investment Trusts (REITs) or Syndication can be a viable option.
REITs are companies that own, operate, or finance income-generating properties. By purchasing shares in a REIT, you can gain exposure to real estate investments without the need for property management. REITs typically distribute a significant portion of their income to shareholders in the form of dividends.
Similarly, Real Estate Syndications are a type of investment in which a group of investors pool their money together to acquire, manage, and profit from real estate properties. The investors typically collect monthly or quarterly dividends and may even share in the profits when the property is sold, depending on how the syndication is structured. Real estate syndications can be a good way for investors to get involved in real estate investing without dealing with tenants, toilets, or trash. They can also be a way for investors to access larger properties that they might not be able to afford on their own. Check out this article for further information on the pros and cons for investing in Real Estate Syndications.
Passive Income Stream #7 - Rent Out part of your Home/Unused Space
While most people have heard of renting a room on AirBNB, you may not want to have a stranger living in your home. That being said, renting out unused spaces like a garage or storage space is often overlooked as a passive income stream. I personally rent out an unused garage space and attic space on an app called Neighbor that makes it a very seamless and safe process to connect with people who are need of storing a vehicle, small furniture, etc. It is also great for renters since it comes with built-in insurance for their belongings.
Building a secure financial future involves diversifying income streams and strategically investing in assets that generate passive income. By incorporating a few of these passive income ideas into your financial strategy, you can create a resilient and diverse portfolio. Remember to assess your risk tolerance, conduct thorough research, and seek professional advice when needed.