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Passive Income | How To Make Money Without Working

Don’t feel like your income is sufficient enough? Maybe you’re too busy to work another job. Well, that’s what passive income is for!

I am sure that most of us are tired of the “9-to-5 grind.” That’s what passive income is for! Now, passive income is all about earning money with minimal effort on your part.

Unlike traditional jobs where you swap hours for cash, passive income streams keep money flowing even when you’re on vacation. However, the money does not just come free. With dividend-paying stocks and rental properties, you can start earning some money on the side.

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In general, the concept of passive income is particularly appealing to Americans. The Pew Research Center found that about 63% of Americans worry about having enough money to live comfortably in retirement. Furthermore, a CNBC poll revealed that 46% of Americans feel they are financially unprepared for retirement. Therefore, having a passive income stream provides a valuable safety net and a source of financial security. It helps to bridge the gap between traditional income and retirement needs.

So, there are numerous ways to generate passive income, each with its own level of upfront investment and ongoing maintenance. Nevertheless, I believe that the most efficient and promising income streams are through dividend-paying stocks and rental properties. 

Why Dividend-Paying Stocks?

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Firstly, these stocks offer a unique advantage: they allow you to earn a portion of a company’s profits without the constant hustle of actively trading stocks. Companies with a history of consistent profitability often distribute a portion of their earnings to shareholders in the form of dividends. So, these regular payouts provide a steady stream of income that complements salary, boosting overall return on investment.

According to a long-term study by Standard & Poor’s, dividends have contributed massively to the overall performance of the stock market. Since 1926, reinvested dividends have accounted for nearly half of the total return of the S&P 500. To put it simply, by simply holding dividend-paying stocks and reinvesting your dividends, you have potential to benefit from this long-term growth.

Dividend investing offers a level of simplicity that appeals to many investors, especially beginners. Unlike actively trading stocks, which requires constant monitoring, dividend investing allows you to focus on building a portfolio of stable companies with a history of paying consistent dividends. As a more passive way to participate in the stock market,  you’ll generate income without any day trading.

Why Rental Properties?

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Rental properties are typically a fantastic option for generating passive income. While they require some upfront effort and ongoing management, rental properties offer potential for consistent rental income and long-term property value appreciation. This cultivates a powerful combination of income generation and wealth-building.

Through a report by the National Association of Realtors (NAR), data shows that single-family homeownership rental income in the United States increased by 7.4% in 2023. This number signifies a growing demand for rental properties, which translates to potentially stable and consistent income for investors. Furthermore, a study by Freddie Mac found that rental properties have historically appreciated in value over time. Rising appreciation is an opportunity for long-term investors. Not only are you generating ongoing rental income, but you’ll take those capital gains when the property is eventually sold.

However, it’s important to remember that rental properties aren’t entirely passive. There can be ongoing responsibilities like tenant screening, maintenance, repairs, etc. For a more hands-off approach, hire a property management company, though this will incur additional costs. Overall, rental properties can be a great way to generate passive income and build wealth, but you must weigh the rewards against the responsibilities first.

What Are REITs?

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In addition to rental property income, another excellent and relatively simple option for passive income is investing in Real Estate Investment Trusts (REITs).

REITs function similarly to mutual funds, but instead of investing in a variety of companies, they pool investor money to purchase and manage income-producing real estate properties.

This is a great starting point for real estate ownership, like rental income and property appreciation. More so, you won’t have to directly manage the properties yourself.

The benefits of REITs for passive income are backed by the National Association of Real Estate Investment Trusts (NAREIT). Historically, REITs have outperformed the S&P 500 in terms of total return. This offers investors like you and me a compelling combination of income and growth potential.

Investing in REITs provides a level of simplicity similar to dividend-paying stocks. You can purchase shares of REITs through brokerage accounts, just like any other stock. These shares then generate regular dividend payouts, often on a quarterly basis.

Then, freeing up the responsibilities of a landlord, you’ll save money on expenses such as tenant management and property repairs. 

Questions, Comments, Concerns?

So, will you get started?

Do you have passive income streams that work for you?

I’d love to hear about it!

Thank you. See you in the next!