As an investor, income producing assets are your best friends. There are many kinds of income producing assets you could roll with, ranging from different real estate options to bonds and more. Many investors invest in income producing assets with an end goal of earning passive income. While no invest is ever truly passive, these income producing assets are great choices for passive income to become a close reality, in the long-run at least. These assets have great financial potential, and the risk associated with each will differ. Therefore, be sure to choose what best suits your goals and circumstances.
It’s easy to think of real estate as a way to house tenants and earn income based on that. But if you’re looking to instead house a business, and make larger sums of rent, then commercial real estate is a great option to consider. Investing in commercial real estate leads to higher income because business pay more than individual tenants. However, it also has more risk than traditional real estate renting. Depending on the type and success of the business, vacancies can be more common. Vacancies tend to be longer as well. Still, investing in commercial real estate is a solid way for large cash flow.
By investing in single-family homes or condos, you could be in for some big bucks when everything is well executed. Earning more rent than the costs of the expenses (which you can calculate here) is key to creating positive cash flow, which is ultimately the goal of renting. Renting such buildings can be a great way to pay off mortgage used to purchase it or any other loans. If you are not interested in renting for long-term and are instead interested in selling the property, then have no fear. Equity can build up for the property, which will make it profitable to sell. As with any kind of real estate investment, the usual risks, such as vacancies, are involved. Still, investing in a single-family home or condo is among the most versatile income producing assets.
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What if I told you that you could have an income producing asset without necessarily having to purchase a new property? Well, that could be the case if you decide to rent a part of your house. By renting a part of your house, whether it’s an extra room, attic, or garage, you could earn an amount of rent, mostly passively. Like with other renting forms, this method could be used to pay off loans. The success and possibility for this strategy to become lucrative and passive depends on one key player: the tenant. A good tenant could be the difference between saving money and losing money. Therefore, it is extremely important (for all renting strategies, but more so for this one) to SCREEN prospective tenants meticulously.
If you’re looking for a large pool of tenants, then renting to college students is the way to go. Having many tenants isn’t the only perk of renting to college students. Since students are usually financially backed by their parents or scholarships, there is a higher possibility of guaranteed rent. But all isn’t kind and dandy with college students. The typical college students will more likely throw parties or find other ways to damage the property. Also, since students tend to stay for a semester at a time, there will be periods of time (the summer) when the properties are vacant. Nonetheless, renting to college students is among the best income producing assets out there.
A REIT, or Real Estate Investment Trust, is a company that owns different kinds of properties, and investors pitch in for the investment. The investors who participate are rewarded with high yields and some pretty simple tax rules. Still, things could be risky depending on the type of company you invest in. Also, while tax rules are simple, taxes could be relatively high.
As one of the trendiest income producing assets as of late, Airbnb has revolutionized short-term rentals. Not only do travelers have an enhanced visiting experience, investors are collecting more rent in a brand-new way. Renting on Airbnb typically results in more income than by renting through a traditional counterpart. That’s not all. As an investor, you will dictate how much rent you could earn. Airbnb is a nifty way to earn some cash, so running an Airbnb property will require some hard work. Property management, expenses, cleaning, and scheduling are some things that prospective Airbnb hosts must keep in the back of their minds.
Income producing assets do not just have to be in real estate. If you decide to fund a bond, whether owned by the government or a business, you’re in for the most passive investments of them all. All you have to do is lend the money. The group receiving the funding will monitor it and eventually pay you back, the original amount plus little interest. Depending on the group you lend to, risk could be low or high. Usually however, risk is low, making bonds among the safest income producing assets out there.
Crowdfunding has many benefits as an income producing asset. Investors group up and invest in a property collectively. Usually, investors invest in small amounts. At the same time, the group is in for some high returns. The investment is somewhat passive, as management and rent collection is not handled by the individual investor. Also, since the investors own the property, unlike in REITs, they become eligible for tax advantages.
If you’re looking for the best real estate income producing assets, be sure to start your property search at Mashvisor.
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