***Guest Post***
Diversifying your sources of income is an important part of achieving true financial security. When you diversify, you’re no longer reliant on a single source to meet your needs and wants. Instead, you have multiple streams of income. This way, if one stream dries up, you’ll still have others that you can rely on to pay your bills!
One way to diversify your earnings is by investing in income-generating assets. In doing so, you receive extra money each month that can cover part of your expenses. Not only that, but as you buy more, you can completely replace your earned income and become financially free, too!
What are Income Generating Assets?
When you work a job, there’s a limit to the amount of money that you can make. Typically, your earnings are capped by your skillset and the amount of time you have available to work. To increase your income, you have to invest in yourself and acquire new skills or give more of your precious time to your employer!
However, when you invest in income-generating assets, you can increase your earnings without a huge time commitment. Not only that, but as long as you keep buying them, then your income will continue rising, too. You may even get to the point where you become independently wealthy and are no longer reliant on your employer at all!
Income-generating assets are investments that produce recurring revenue or positive cash flow. Rather than spending all your time earning an income, they allow you to use your money, instead!
Truth be told, not all income-generating assets will give you complete time freedom. Some require more time and effort to be profitable than others. Having said that, your lifestyle as well as financial goals will guide you to the ones that are the best fit for you!
Here are 9 income-generating assets that will help you earn more money!
#1 – Real Estate Investment Trusts (REITs)
It’s no secret that real estate can help you become rich and wealthy. But, oftentimes you need to have a large amount of money for the down payment and invest considerable time managing it, too!
Real Estate Investment Trusts (REITs) give investors access to real estate investments without an ongoing time commitment. These investments typically own or finance income-producing real estate. Some of them may own a wide range of assets while others focus on one sector, like hospitality, office, or multifamily.
As an owner, you enjoy REIT’s capital growth, diversification, and income. In fact, laws require that they distribute at least 90% of their taxable income to shareholders as dividends, making them attractive income-producing assets!
#2 – Rental Properties
If you’re like most people, the first income-generating asset that comes to mind is rental properties. For decades, they’ve been a popular way to not just make extra money, but to create legacy wealth, too!
While owning rental properties can be an excellent way to make money, they can also take a lot of time and effort. At times, managing residential real estate can even feel like it’s a part-time job!
Luckily, if you don’t want to be a landlord, you can hire someone to take care of the property. In doing so, you’ll do less work but you’ll also make less money!
Before buying a rental property, it’s important to understand the ins and outs of owning rental real estate. You should be familiar with landlord-tenant laws, property management, and the property’s financials. After all, a small mistake can not only sour your investment, but it can spill over and cause other money problems in your finances, too!
#3 – Real Estate Crowdfunding
If you don’t want to be a landlord yet still want to make money by investing in properties, then real estate crowdfunding may be right for you. These platforms allow you to invest in properties around the country that are managed by experienced teams of operators. By investing alongside them, your chances of success are much higher than if you tried to do it alone!
Depending on the platform and offering, you have the opportunity to invest in a single property or a portfolio of properties. While some projects can be debt-based, the majority are equity-based. Some even offer preferred rates of return that pay you handsomely, too!
#4 – Bonds
Throughout history, investors have felt secure betting on bonds, especially in retirement. These investments help shield you from large fluctuations in the market while also providing you with a steady income!
When it comes to investing in bonds, there is a wide range of options. You can buy Treasury Bills or Bonds that are backed by the US Government. They’re viewed as being ultra-safe and risk-free investments, however, they may not keep up with inflation!
Depending on your risk tolerance, you could also buy bond index funds that focus on investment-grade corporate bonds or high-yield bonds. Bond index funds can offer higher rates of return than Treasuries. High-yield bonds, as the name implies, offer a higher rate of return, but they have the greatest risk of default, too!
One thing to keep in mind when you invest in bonds is that bond yields and prices move in opposite directions. As the Fed increases interest rates, bonds don’t rise in value, they fall!
#5 – Stocks
Another income-generating asset that you should consider purchasing is stocks. As a shareholder, you either receive income through the dividends that are paid out or from the financial gains you receive when you sell.
While stocks are an easy way to put your money to work, they’re just one of many different types of equity investments that you should consider. You may also want to explore Index Funds, ETFs, and Mutual Funds. Despite their nuances, in general, they allow you to invest in the stock of multiple companies at once. In doing so, your portfolio gets diversified which reduces your risk and increases your chance of financial success!
#6 – Certificates of Deposit
Certificates of Deposit (CDs) are another low-risk way to make money. They pay higher interest rates than savings accounts. However, you can’t access your money before maturity without incurring penalties or wasting money on fees!
In general, CDs range in length from 3 months and 5 years. Depending on your time horizon, they could be a good place to keep money while you’re saving up for a big ticket item, like a house or a car. This way, your money can earn money for you which in turn allows you to achieve your goal faster!
#7 – Private Equity Investing
When you buy stocks, you’re investing in companies that are traded on the public market. Since they’re widely known and accessible, anyone can invest in them easily.
However, private equity investments are not publicly traded. To invest in them, you typically have to know the founder or someone directly tied to the company that’s looking to sell their shares. Oftentimes, these companies are still in the early stages of development. Not to mention, they may not be turning a profit yet, either!
Despite that, it’s still possible to make big money in private equity. However, there are several factors that you should consider first.
For starters, it’s important to realize that the majority of private businesses fail within their first few years. As a result, you could lose your entire investment!
In addition to that, when you invest in private equity there is typically a lockup period. During it, investors are unable to sell their shares or access their money. Depending on the company, it could range from 6 months to 10 years, too. Meanwhile, if you had a financial emergency and needed fast cash, you’d have to get it from another source!
Before investing in private equity, it’s important to understand your risks and do extensive research. In addition, you should not only be comfortable making a high-risk investment but that your entire investment could turn out to be worthless, too!
#8 – Farmland
Farmland is another valuable income-producing asset. For one, it provides food which is one of our most basic financial needs, meaning it will always be in demand. Besides that, it’s less volatile than many other investment options and also tends to have a low correlation with the stock market.
While it’s possible to buy farmland and lease it out to a farming business, you may not want to put in the time managing it. Luckily, you can invest in farmland without leaving the comfort of your home by using crowdsourcing platforms, such as:
The main ways to make money with farmland are by leasing it out, using it to produce crops, and selling it at a higher price when property values are up!
#9 Low Maintenance Businesses
Another lucrative way to increase your income is by owning a business. While many of them can be time-intensive, others don’t require much of a time commitment, at all!
Businesses like vending machines, laundromats, and storage units can be run with relatively low involvement. You could manage them in your spare time or pay someone else to do them for you. Either way, low-maintenance businesses are great because they require little of your time and produce for you even when you’re not around!
If you’re working a full-time job, then starting or purchasing a low-maintenance business could be a great way to make extra money. Besides that, it won’t consume too much of your time, either!
Bottom Line
When it comes to investing in income-generating assets, there are many ways to be successful and make more money. But, it’s important to remember that the option that makes the most money isn’t necessarily the best choice, especially when it consumes an excessive amount of your time!
No matter your financial position today, investing in income-generating assets is a great way to build wealth. Not only that, but to escape from the golden handcuffs that prevent you from living free, too!
About The Author: Lyle Solomon has extensive legal experience, in-depth knowledge, and experience in consumer finance and writing. He has been a member of the California State Bar since 2003. He graduated from the University of the Pacific’s McGeorge School of Law in Sacramento, California, in 1998 and currently works for the Oak View Law Group in California as a Principal Attorney.
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