What’s the common denominator among successful entrepreneurs?
They use income-generating assets to secure several consistent revenue sources.
The same goes for investors.
They generate steady passive income over time by maintaining a varied portfolio of income-generating assets.
The best part about these investments is that they aren’t only for seasoned entrepreneurs and investors.
Anyone could begin investing today with sufficient research and preparedness.
Whether you’re just out of school or nearing retirement, there are ways to grow wealth and attain financial independence by setting up passive income streams.
Read on to find out the best income-generating assets you can get in on today!
What Do Income Generating Assets Mean?
This type of asset is a recurrent cash flow, revenue, or income stream that generates continuous funds over time.
Naturally, many positive cash flow assets that create revenue require varied amounts to jumpstart.
Some investments require little to no capital to get started, while others demand considerable sums of capital to expand and maintain over time.
Moreover, cash flow assets are a valuable resource not only for seasoned investors but also for anyone looking to set up cash flow even as they sleep!
Anyone can diversify their income streams by engaging in passive income activities with adequate knowledge, preparation, and starting capital.
Related Reading: Alternative Investments – Check Them Out Here.
Tips For Beginners
Using funds from a primary job or money from existing savings is the most typical approach to begin investing in income-generating assets.
Entrepreneurs can direct those assets into a long-term investment that will generate income.
I suggest that you go through extensive financial planning to establish the amount of money you have and how you should allocate it.
You don’t really need loads of money to get started.
You could start small or look into investment fundraising.
Many investors will become more active early in their careers in order to lay a solid baseline for future income-generating assets.
If the prospect of raising funds appears daunting at this time, some examples just demand a small sum of money to get started.
CDs and savings accounts, for example, frequently do not impose minimum net worth requirements on clients.
One of the most crucial factors to remember as you begin investing in these assets is the necessity of diversification.
The most financially skilled investors frequently invest across many platforms.
A diverse portfolio can serve a number of objectives.
The most prominent one is that it can provide some security if one of your assets fails.
The Best Income Producing Assets To Invest In
Trying out one of the following ideas can help you set up a cash flow without even working.
However, diversifying your investments might help you stagger your income and generate income from even more sources.
Let’s check these ideas out!
Stocks are investments in corporate equity that allow investors to set up cash flows through a variety of methods, including dividends.
Dividend-paying stocks are paid out over time and do not require a large amount of capital to reap the benefits.
It’s crucial to lay the distinction between investing in individual equities and mutual funds.
Individual stocks allow investors to purchase single shares in a business to gain exposure to the industry.
Going for mutual funds, on the other hand, entails purchasing several equities from various companies.
Mutual funds are less risky than individual equities because they are more diverse.
However, individual stocks can possibly produce bigger returns.
To get started, you have to study up on the stock market and the types of businesses you might want to invest in.
Large-cap dividend-paying stocks are one of the best income-producing assets.
These blue-chip businesses in the S&P 500 are renowned for being “Dividend Aristocrats” for their continuous dividend increases.
Dividend stocks come from companies that have reached the end of their growth cycle. This implies that they are far more stable than newer, expanding companies.
While dividend stocks might be a solid source of income, many tech companies, such as those in the internet and biotech, do not pay dividends.
Instead, they put the majority of their residual revenues back into their business to keep it growing.
So, please try to master the stock market before putting your assets at risk.
You can also buy shares in collectible assets through Rally. It’s a platform for buying & selling equity shares in collectible assets like vintage cars, paintings, NFTs, etc.
Related Reading: M1 Finance Vs. Robinhood – Find Which One Is The Best For You Here.
Real Estate Investing
One of the most tried and tested ways to generate a monthly income flow is to invest in rental homes.
For many folks, real estate investing has been the primary source of wealth.
Depending on the type of property and location, net cash flow per unit might range from $100 to $1,000 per month.
Most real estate investors strive for a cash on cash flow return of 8%-12%.
However, some may be satisfied with a lower rate.
Here are the types of rental properties you can invest in:
Single-Family Rental Homes
Unlike stock market investors who rely on appreciation, rental property owners rely on monthly cash flow.
Most real estate investors begin with a single-family rental home.
The single-family rental has the benefit of being easier to manage. Single-family homes can have fewer tenants, fewer appliances, and fewer items to break, resulting in fewer difficulties.
Moreover, the entry barrier is rather low.
If you’re planning on relocating, keep your old home rather than paying a broker 7% of the sale price.
You now have an income-generating asset in your possession.
Multi-family Rental Properties
Multi-family properties provide an economy of scale that single-family homes can’t match because they have several tenants under one roof.
When the same foundation supports two, three, or even four distinct paying renters, it’s a lot easier to swallow the thought of some foundation work.
Multi-family properties, like any other investment, aren’t flawless.
There is a lower supply of them, and the only buyers who are often interested are other investors, making finding a good offer more difficult.
They also impose a lot more risks like:
- They typically make more of a dent on your cash flow.
- They necessitate larger capital outlays.
- You’re more vulnerable to location-related problems when you have several leases.
We’re approaching the big-shot mogul zone now.
When you only manage a few rentals, a $50 increase in rent won’t make much of a difference.
Now imagine you’re in charge of a 12-unit apartment complex.
The same $50 increase in monthly rent generates approximately $7,200 in more cash flow each year.
This is when things start to get interesting.
Minor adjustments in operational efficiency can have a significant impact on the bottom line in large apartment buildings.
A skilled manager can also use this scale to create a well-oiled cash flow machine.
There are two types of management structures for trailer parks:
A. Similar to an apartment complex, parks own the land as well as the mobile homes.
So, the owners receive a combined rental payment for the entire complex.
This certainly raises the problem that renters may have a detrimental impact on one another and that landlords must handle these issues.
B. A more typical and ideal trailer park layout doe exist.
The property is owned by the park investors, and the renters own the mobile homes while paying monthly rent for their trailer lot.
This clearly shifts the risk of property damage to the owner.
Plus, lot rentals continue to be pretty affordable in comparison to other real estate opportunities.
Since you can fit so many lots on a single property, rental prices per lot are relatively modest in comparison to the property’s overall worth.
This allows landlords to take a property management strategy similar to apartments.
You give an onsite property management a free lot in exchange for them handling the day-to-day issues.
This transforms a potential headache into a reliable passive income-producing asset.
It’s never been more convenient to rent out a house for a couple of nights, thanks to companies like Airbnb and VRBO.
Some property owners believe that renting their property to a large number of different persons for a short period of time is more profitable than renting to a single tenant for an extended period of time.
Of course, maintaining a large number of distinct clientele requires additional maintenance, wear and tear, and hospitality, but the benefits can be substantial.
Real Estate Investment Trusts (REITs)
Real Estate Investment Trusts (REITs) are sometimes referred to as real estate mutual funds.
REITs are a collection of cash flow assets managed by a firm that buys and develops real estate with funds provided by investors.
You can invest in trusts that construct condos, apartment buildings, business complexes, and other structures.
Dividend stocks are paid by real estate investment trusts.
These are ideal income-producing assets for anyone looking for a simple method to get started in real estate investing without having to buy the property themselves.
Investing in REITs through Streitwise is one option worth considering.
This service integrates the best-performing property assets into professionally created portfolios using funds raised from qualified investors.
The profits are subsequently dispersed and serviced by an online REIT, whose purpose is to increase your income.
Because of its superior property selection and minimal cost structure, the company has generated an annualized return of 8.4%, substantially surpassing comparable public REITs or bonds.
Savings accounts are one of the most elementary investments to generate passive income.
You can earn money by opening a savings account at your local bank and making interest on your own money over time.
The possible incoming cash flow will vary depending on the type of account and interest rate.
On average, investors may expect a return of between 1%-3% on their savings account deposits.
Low interest rates may result in poorer returns (as compared to other income-generating investments), but savings accounts provide liquidity.
These funds are frequently available to investors on short notice.
High-yield savings accounts, which differ from ordinary savings accounts due to their high interest rates, are also available.
Related Reading: How To Make Money In Real Estate – Read More Here.
Private Equity Investing
The undertaking of investing in private enterprises, many of which are still taking their first steps, is known as private equity investing.
This can be an appealing option, especially if you’re in the midst of the next big startup.
While private equity investing can yield substantial returns, there are a number of considerations to consider.
The most salient is that finding the ideal companies to invest in will need some research from you.
It is not atypical for private enterprises to fail in their initial few years, so exercise caution when considering potential investments!
Private equity investments have a lockup period as well.
This is the period during which investors will be unable to access the monies they have invested.
Depending on the company, lockup periods might last anywhere from six months to ten years.
If you’re thinking about investing in private equity, think about how a lockup period can affect your finances.
A fascinating investment concept is starting your own business, which is among the top cash flow assets.
This might be anything you want it to be, such as an Etsy product or your own real estate investing company.
Building a business is an excellent method to enhance your cash flow while simultaneously pursuing a passion.
Perhaps the most significant advantage is that you can dedicate as much or as little time to this job as you choose.
It could begin as a side hustle to complement your regular income and eventually become your primary focus.
There are several business opportunities that you may find appealing.
Opening franchises, whether for gyms or cafes in your area, is maybe one of the most commonplace.
As you can imagine, these enterprises require a significant amount of funding, time, and effort to succeed.
Selling any of your skills online could be an alternate business concept.
If you have experience in copywriting or design, for example, you may work as a freelancer until you have enough clients to establish your own company.
Building your own business can eventually turn into a valuable source of revenue.
It all depends on how much effort you are willing to put in.
I propose doing some study on fresh ideas, identifying a market need, and then finding a mentor to help you with any initial questions.
It will take some time to get started on this path.
Still, it might be a terrific opportunity to pursue your interest while also improving your overall income.
Examples of Businesses You Could Try:
Laundromats in the United States generate income ranging from $50,000 to $1 million and cash flow ranging from $15,000 to $300,000 per year, according to the Coin Laundry Association (CLA).
It’s also worth noting that the laundromat industry has an astounding 95% success rate in the first five years.
That is significantly higher than the 45% success rate for new businesses in the same time frame.
Car Wash Business
A car wash business is another commodities company to consider.
Car washes are known for being cash flow machines, which is why you’ll find them everywhere.
According to the United States, According to the Census Bureau, an in-bay automatic vehicle wash generates around $139,000 in sales per year, with a net profit of $86,531.
A tunnel car wash, on the other hand, makes nearly $680,000 every year.
In 2017, the United States Census Bureau revealed data showing that Americans spend an estimated $5.8 billion on car washes each year, and that number is rising.
High-end coffee shops are springing up all across the country, thanks to Starbucks’ success in making expensive coffee fashionable.
Coffee and tea are inexpensive to make yet sell for $3 to $5.
Those figures appeal to every businessperson.
The location and ambiance will be your major investments.
Effective branding can make or break your customer’s perception, and it will allow you to demand higher prices for your drinks.
You’ll need to roast your own beans if you really want to wow the coffee experts.
Although industrial roasters can cost upwards of $10,000, the street cred you earn with hipsters can be invaluable.
Annuities are essentially a one-time payment to an insurance company that is repaid to the investor with a return on investment over time.
Because the funds can only be withdrawn beyond the age of 59.5, this technique is popular among retirees.
Tax Lien Certificates
Tax liens are purchased at auction by investors who pay the full amount of taxes owed on the property.
In exchange, the investor receives the principal amount as well as the agreed-upon interest from the property owner over a 1-3 year redemption period.
Interest rates vary per state, based on where the lien is located. Interest rates in Illinois, for example, might reach 36%, while they are just 10% in Montana and Missouri.
Most tax liens purchased at auctions, according to NTLA Executive Director Brad Westover, are sold at interest rates ranging from 3%-7% nationwide.
Our parents say money doesn’t grow on trees. Well, it turns out it can.
You can essentially farm your money when you join the forestry industry.
Your cash flow will be determined by tree growth!
Trees gain volume as they grow, making them more useful for timber harvesting.
Some timber species can grow 3-4 feet per year in excellent soil and reach mature heights of over 100 feet.
These massive trees are worth a lot of money!
Yes, it necessitates a great deal of patience.
From seed to maturity, it takes 15-30 years, depending on the species of tree.
Softwoods, such as pine, grow in just over a decade, whereas hardwoods, such as cherry oak or maple, take much longer.
A mature acre of timberland can be harvested for $500-2,000 per acre, and bare timberland can be purchased for $100-500 per acre.
Some tree species, such as Walnut, whose straight-grained wood is sought after for furniture, veneer, and gunstocks, can yield over $100,000 of timber per acre!
The trees may need to be pruned from time to time to stimulate quicker, straighter growth, but even these culls can be sold to offset operating costs.
Do you want a faster road to success?
After 3-10 years, certain trees, such as Walnut or chestnut, might begin to produce nuts, which can be sold to generate cash flow.
Others double-crop their forests which means growing trees far enough apart to grow other crops in between.
Some also allow cattle to roam on the land to generate additional revenue.
What’s the best part?
Rain or shine, trees, and their value continue to increase.
Overall, the value of timber increases by 2-14% per year, with taxes delayed until harvest.
Every month, one vending machine makes about $300 in profit.
Some can earn even more, while others can earn less, depending on the type of vending machine, location, and refill frequency.
If you run your vending machine business properly, you can see a significant long-term return on your investment in commodities.
Some of the most common products to dispense are soda, snacks, candies, ice cream, and money.
Interest Paying Bonds
Bonds are essentially corporate IOUs to investors.
You put a set amount of money into a bond, and the company promises to pay you back a particular percentage.
This is, of course, an oversimplification.
You can buy bonds from a variety of sources, including:
- Massive, stable companies (Investment-grade corporate bonds)
- The federal government (Treasury bills)
- State and local governments (Municipal bonds)
- Regular companies (Corporate bonds)
- Smaller, riskier companies (Junk bonds)
- Portions of the federal government (Agency bonds)
- Overseas companies and governments (Foreign bonds)
Interest rates vary dramatically depending on the sort of bond you own and the current interest rate environment.
Bonds, on the other hand, can yield anything from 1%-4% in general.
Bonds are popular among investors because of the consistency of their set payments and the underlying price of the bond.
While the price of stocks fluctuates dramatically, the price of bonds is far more stable.
Certificates of Deposits
Certificates of Deposits (CDs) are time deposits that resemble savings accounts.
Investors put money into a specific account and earn interest on it over time.
The fundamental distinction between CDs and savings accounts is that CDs force investors to wait a certain amount of time before they can access their money without penalty.
CDs often feature greater interest rates than savings accounts due to the mandated time span.
Investors could, for example, find a five- to seven-year CD with interest rates as high as 2.5%.
While the period may be longer than anticipated, one of the best aspects of CD investing is that there are no income requirements.
As a result, CDS is one of the most accessible asset classes.
Peer-to-peer lending takes the place of banks and allows previously refused borrowers to get a loan at a lower interest rate than huge financial organizations.
Peer-to-peer lending has grown into a multibillion-dollar industry and a viable source of revenue.
According to prominent peer-to-peer lenders, investors can expect annual returns of 5%-7%.
Peer-to-peer lending, like any income-generating asset, carries a moderate risk because some borrowers have been known to default on their contracts.
For various reasons, farmlands are one of the top income-generating investments.
Farmlands, unlike many other investment categories, do not have the same level of volatility.
Farmlands offer a vital resource, and that is food. Plus, farmlands have a minimal association with the stock market.
As a result, demand for farmland has remained largely stable throughout history.
There are two options for investors who want to profit from this asset.
You can first purchase land and lease it to a farming enterprise.
This technique will necessitate study to guarantee that the land is in the proper location and that the tenant is reliable.
Another option is to invest in real estate investment trusts or crowdsourcing platforms dedicated to agriculture and farmland.
Keep in mind that you should do your homework on these businesses before investing, as there may be costs that reduce your earning potential.
Websites are another income-generating asset with a comparatively cheap entry cost.
Domains relevant to a hot niche or emerging trend can be purchased by investors and then sold to interested clients.
Another option is to spend time developing the website through content production.
Investors can employ paid adverts and sponsorships to earn incoming cash flow through affiliate marketing once the website has grown traffic.
As long as the site is maintained, this can yield continuous revenue over time.
Billboard advertising is one sort of ad revenue that, with the optimal business plan, can be a very lucrative cash flow source of income.
JCDecaux and Clear Channel Outdoor, the two largest worldwide outdoor advertising businesses, combined for $6.98 billion in sales in 2019.
Even with a few tiny billboards, to begin with, you may make anywhere from $300 to $2,000 per month per billboard.
The larger ones may earn up to $30,000 per month.
Please note that there are so many variables that go into calculating how much a billboard may earn, such as:
- The size of the billboard
- Whether it’s static or digital
- Its location
- Whether it’s near a high-traffic location like a highway or a major intersection
Because of these factors, profitability figures are pretty hazy.
Purchasing Existing Businesses
Buying an existing business rather than creating one from scratch might save you a lot of money, time, and effort.
Most importantly, you will reduce your risks of going out of business.
Based on the figures laid out by the US Bureau of Labor Statistics, these are the survival rates of a new business:
- During the first two years after beginning, 20% of new companies fail.
- During the first five years, 45% of companies fail.
- Within the first ten years, 65% of businesses fail.
- Only 25% of companies, or 1 in 4, survive to be 15 years old or older.
So, theoretically, purchasing a business that is at least two years old increases your chances of survival by 20%.
If you buy a five-year-old business, your risk is lowered by 45%, and so on.
Of course, there are other factors that influence why businesses fail – but when you buy a more established business, you’re buying more mature systems and safeguards that they’ve already put in place (or at least that’s what you’d hope).
It will then be your job to do your due diligence and vet if that’s the case or if the business is sound and secure.
In the United States, the average small business owner earns $71,900 per year.
When was the last time you had a discussion with a proprietor of a McDonald’s?
You probably haven’t had one since they’re never present.
They delegate all day-to-day operations to someone else, turning their franchise investment into a relatively passive income source.
In exchange for a part of the location’s income, a franchise purchase gives you the opportunity to use a parent company’s trademarks, trade secrets, and established business model.
The prerequisites for opening a franchise are different depending on the brand.
McDonald’s has one of the most expensive franchise fees, at $45,000, and an initial expenditure of $1 to $2.2 million dollars to develop or buy a location.
Moreover, you must have a minimum of $500K in liquid cash flow assets.
What’s your return on such a large investment?
To be sure, you’d have to seek an investment package, but the average McDonald’s location generates $2.6 million in annual revenue.
Varying franchises, on the other hand, necessitate different time commitments from the owners.
Chick-fil-A, for example, has one of the country’s most competitive franchise systems.
They accept less than 0.4% of franchise applicants, and owners must work at least 30 hours per week in the business.
In that instance, you’ve effectively purchased part-time work.
Other franchises, like Subway, accept a far greater percentage of applicants and allow for absentee ownership, which is a far more investor-friendly setup.
The typical cost of starting a Subway is between $116,000 and $253,000.
Investing in royalties is taking ownership of something, usually in the form of intellectual property.
Once an investor acquires the rights, they can sell them to a licensee for a fee in the form of royalties.
These are legally-binding payments.
One of the sought-after cash flow assets an investor can add to their investment portfolio is these types of investments.
If you invest in something like music royalties or oil and gas royalties, you could get double-digit returns depending on the type of compensation.
You could invest in startups in exchange for shares in businesses you believe have long-term growth potential instead of buying a business.
To be an accredited investor, a person must meet the following requirements, according to the Securities Exchange Commission (SEC):
- Have made at least $200,000 per year (or $300,000 for a pair) for the last two years and plan to make that much again
- Have a net worth of more than $1 million, either alone or with a spouse, with the exception of the value of one’s primary residence
Millennials have gone in droves to bitcoin, much to their disadvantage.
Those who have purchased and retained their bitcoin, on the other hand, may wish for it to accomplish something useful while they wait.
If this sounds interesting, BlockFi is a service that provides a variety of services that you could appreciate.
The startup hopes to help crypto investors develop their investment holdings and build their total worth by targeting an audience looking to do more with their crypto cash flow assets.
The BlockFi Interest Account is a popular offering with the service.
This application allows people and businesses who hold cryptocurrency to earn interest on their cryptocurrency held at BlockFi.
Clients of the BlockFi Interest Account can deposit crypto and receive interest on it.
This is frequently higher than the market rate for regular high yield savings accounts.
Related Reading: Which Business Should I Start – Click Here To Find Out.
Final Thoughts: What Are The Best Income Generating Assets To Invest In?
As you become more familiar with the numerous income-producing assets available, you may begin to wonder which ones are the greatest to invest in.
The answer will be determined by a number of factors, including initial funds, timescale, intended level of involvement, and risk tolerance, among others.
When choosing an income-generating asset to invest in, there will almost always be tradeoffs.
While higher interest rates provide the possibility to increase your money through a CD, you may be unable to access those cash flow assets for a while.
Individual stocks, on the other hand, can produce excellent rewards when properly managed, but they come with a higher risk.
As a result, before making any investment decision, consider the advantages and disadvantages of each option to ensure you achieve the results you want.
You may start accumulating wealth by investing in income-generating assets no matter where you are in life.
Investors can choose from a wide range of income-generating assets to generate successful returns.
Many entrepreneurs will discover that real estate delivers great profits with the correct focus.
You can move closer to your objective of financial freedom by doing your due diligence and selecting the income-producing investments that are most suited to you.