I guess I just don’t understand why the specific importance of focusing on “dividends” instead of focusing on the total return of your investment, including stock appreciation. I don’t really care if a company decides to issue a dividend or not; presumably, if they don’t issue a dividend, then they’re doing other things to increase the value of the company, which will be reflected in the stock price of the company. As an investor, I can make money by selling a percentage of my holdings or collecting dividends, and I don’t really care how that’s divided up – it’s an artificial distinction.
My returns are based on full cash purchase of the properties, as it is hard to compare the attractiveness of properties at different price ranges when only calculating down payment or properties that need very little rehab/updates. I did think about the scores assigned to each factor, but I believe tax deductions are a SIGNIFICANT factor when comparing passive income steams.
As a private lender, you can lend to anyone in your social circle. For example, many home rehabbers need access to a source of capital they can tap into very quickly in order to fund the initial purchase of their properties. You can partner with a rehabber who uses your capital for a short-term in exchange for an interest rate that is mutually agreed upon.
Those who choose to focus on passive income will need either family money, funds from investors, or the nerve to borrow large sums by taking on debt to fund the purchase of assets. Consider someone who takes out substantial bank loans to build an apartment building or buy rental houses. Although this can turn a very small amount of equity into a large cash flow stream, it is not without risk. When using borrowed money, the margin of safety is much smaller because you can’t absorb the same degree of setback before defaulting and finding your balance sheet obliterated.
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A Risk Score of 10 means no risk. A Return Score of 1 means the returns are horrible compared to the risk-free rate. A Feasibility score of 10 means everybody can do it. A Liquidity Score of 1 means it’s very difficult to withdraw your money without a massive penalty. An Activity Score of 10 means you can kick back and do nothing to earn income. To make the ranking as realistic as possible, every score is relative to each other. Furthermore, the return criteria is based off trying to generate $10,000 a year in passive income.
Almost all of these ideas require starting a personal blog or website. But the great thing about that is that it's incredibly cheap to do. We recommend using Bluehost to get started. You get a free domain name and hosting starts at just $2.95 per month - a deal that you won't find many other places online! You can afford that to start building a passive income stream.
One aspect you might want to add to your scoring is “inflation protection”. At one end, bonds and CDs generally pay a fixed nominal coupon that doesn’t rise with inflation. Stock dividends and Real estate rents (and underlying property value) tend to. Not reallly sure how P2P lending ranks- though I suppose the timeframes are fairly short (1 year or less?) and therefore the interest you receive takes into account the current risk free rate + a premium for your risk. Now that I think about it, P2P lending probably deserves a lower score in the activity column than bonds too (since you probably need to make new loans more often).
Acorns: Acorns is a great way to start investing and building wealth. As it turns out, Acorns will pay you $5 to start investing with them for as little as $1. That’s a 500% return, plus it’s probably time you started investing for your future. They even have features like round-up and found money that allows you to get free money from places you already shop at.
You don't have to be Paul McCartney to rack up residuals. You might own properties that you rent out even though you're not a Realtor. Maybe a blog you started took off, and while you no longer work there, you still collect part of the profits. Or perhaps you're a serial entrepreneur who creates companies and moves on. You, too, are earning residual income.
Leveraging the internet to create, connect, and sell is something every creative person should attempt to do. The only risk is lost time and a wounded ego. You can start a site like mine for as little as $2.95 a month with Bluehost and go from there. They give you a free domain name for a year. Forget all the add-ons. Not a day goes by that I’m not grateful for my site.
If you pay your bills with a credit card make sure it offers cash back rewards. You can let your rewards accrue for a while and possibly put the easy money you earned toward another passive income venture! (Be sure that the card you select doesn’t have an annual fee or you might be cancelling out your rewards). Check out this list of the best Cashback Rewards Cards.
One word of advice, and something I intend to do once I have the money saved up, is to build or buy out property that can support apartments or townhomes. One tough mistake some people make is buying a pair of homes to rent out and they get a nice $2,000-$3,000 a month but that’s it. Buying a house is expensive and the rental prices keep lower income families from potentially coming to you with their money to rent. If you have an acre to work with (more or less is OK too) you should be talking to a contractor to build apartments or townhomes. You will make a little less per unit BUT your audience grows significantly because now you can have college students, single parents, older folks, etc. all able to afford your rental units AND instead of capturing one $1,000-$1,500 a month payments, you can probably charge $700 a month per unit (or more, depending on the market) and build maybe 3, 4, 5, 10 units for the price of a home or two and now you’re making something like $2,100-$10,000 a month. It all depends on what you have to invest but if you’ve got $250,000+ I’d highly suggest you talk to a bank/investor that can get you in touch with a good contractor to build on a property and get permits and take out a matching $250,000 loan (I’ve read that $500,000 is plenty to build a good amount of apartments to start) and you can fill up your apartments and make a killing every month. You’ll have more tenants to deal with but if you’re competitive with your pricing you won’t have a hard time keeping tenants or replacing them.