Are you looking for income producing assets that help you make money while you sleep?
Aren't we all!
No matter your reasons for wanting to make some extra money, I've compiled some of the best income producing assets.
In this post, I'll explore some of the top income producing assets, why you should purchase income generating assets, how to invest in these assets, and many other passive income tips and tricks. Let's get started!
What is an Income Producing Asset?
If you aren't quite sure what income producing assets are, they're quite simple to understand.
Any asset that makes you money can be considered an income producing asset. For example, if you own a blog that makes money each month – this can be considered an income producing asset. There are many examples of these assets that I'll explore below.
You don't need to be a financial expert to invest in passive income streams like the stock market or real estate, but it will require some planning and strategy to maximize your earnings.
Owning income producing assets is vital if you're trying to reach financial freedom.
Because these assets can generate a significant income – owning them is a great way to make some serious cash.
Reasons to Purchase Income Generating Assets
Now that you understand what exactly an income generating asset is, you might be wondering what advantages come with owning them.
Income producing assets are an excellent method to diversify your income.
What exactly does that mean?
In simple terms, keeping your income diversified means you don't have all of your eggs in one basket. For example, most individuals rely on one source of income from a typical job. The money is used to pay bills and to live off of. But what happens when you lose your job? You'll no longer have a way to pay your mortgage or put food on the table.
By owning income producing assets, this can help to supplement a small portion of your income in the case of a job loss.
For example, if you own a blog or online business that makes $1,000 a month, this can be a good chuck of change if you lose your job to keep your bills paid.
Some income producing assets have a much greater income potential than a typical job.
For example, if you own $250,000 of stock in dividend paying companies, this can generate $17,500 a year in income assuming a 7% increase in value. The following year, your portfolio would increase another $18,750. As you can see – owning an income generating asset has serious income potential.
Another example is if you are a business owner. If you make $50,000 a year, starting a business can have a much larger income.
Reach Financial Independence
If you work a job and are attempting to reach financial independence, owning income producing assets is vital. Saving money alone won't get you there.
You'll need to invest your own money to generate passive income when you attempt to retire early or reach financial freedom.
23 Best Income Producing Assets to Own
Below are some of my favorite income producing assets you should own to boost your passive income portfolio and make more money. From savings accounts to bond index funds, there are plenty of options for you to grow your money.
Investing in the stock market can be one of the easiest ways to grow your money and generate income each month.
Growth stocks are one of the most common type of stocks that generate passive income by increasing in value through the price of the stock.
For example, if you purchase a stock (let's say Nike), for $170 per share it will gain value by rising in price. In a few months, your stock might be worth $200. This is a $30 per profit per share that you own. You'll want to consider the tax implications of selling a stock within one year of owning it. If you decide to sell your holdings, you might face short term capital gains taxes – which can be as much as 37% currently.
While purchasing individual stocks can be challenging, it can help you to diversify your investment portfolio if you currently own other assets – like real estate or a business.
Growth stocks can be purchased on the stock exchange and are a perfect first income producing asset to own.
To get started, I recommend downloading the Stash app. You can easily purchase your favorite growth stocks, dividend paying stocks, and ETFs with the easy to use app. Sign up below to get $5 free to invest!
Dividend paying stocks are another great option to generate passive income from your investment. Dividend stocks are known to be reliable companies that have performed historically.
When you consider investing in dividend stocks, you'll want to analyze the companies performance to see if they have a strong track record of delivering results.
One of my favorite things about dividend paying stocks is how passive they can be. By reinvesting your dividends, your portfolio will grow exponentially.
While there are many benefits of dividend paying stocks, some investors dislike the fact they they tend to be more mature companies with slowing growth. Because of this, you’ll want to ensure the company you invest in isn’t falling consistently otherwise your investment might lose value.
Just like purchasing a growth stock, you can use Stash to purchase dividend stocks. Register below to get started!
Exchange Traded Funds (ETFs)
If you want a diverse investment portfolio that has a strong record of results, purchasing an exchange traded fund can be one of the best income producing assets to own.
ETFs are very similar to mutual funds (more on this below) in that they contain a group of stocks and investments that are traded directly on the stock exchange. This means that they are very liquid to own.
The key difference between an ETF and mutual fund is the way in which they are managed. ETFs are not very actively managed – meaning your holding won't buy and sell stocks very often. This helps to reduce fees. Because of the lower fee structure, ETFs are a great way to build your income.
Mutual funds are more actively managed. This means that a portfolio manager actively decides when it might be time to buy or sell a stock in the mutual fund. This means that your returns might be higher with a mutual fund, but you'll also pay more in fees.
If you're searching for a well-diversified income producing asset, a mutual fund can be a perfect choice.
Mutual funds are a great investment that contain varies types of investments to grow your money.
As previously mentioned, mutual funds are more actively managed so they tend to have larger returns, although many times this is offset by an increase in fees.
These funds can be perfect income generating assets for both new and experienced investors.
Index funds are one of the most popular types of investments when considering the stock market.
Index funds are essentially a group of stocks that make up an index. For example, the stock ticker SPY is an index fund that tracks the S&P 500 (which is comprised of the 500 largest companies in the United States.).
Index funds are an easy way to diversify your assets with pretty strong returns.
Real estate can be a great way to produce income regularly from your assets and particularly rental properties.
One of my favorite things about owning a rental property is the methods in which it generates income. Whereas other assets might only produce income in one way – a rental property has a few main methods.
The first is rental income. This is the most obvious way owning a rental property makes money. Each month you'll collect a rent payment from your tenants. If you have a mortgage on the property, you'll need to consider this when pricing your rental so that is generates cash flow for you.
The next method is through appreciation on the property. It's common for your property to increase in value by 2% to 3% annually depending on the current real estate market.
The last way you will generate income from rental properties is by the equity you will gain by paying the mortgage. For example, if you have a mortgage on the property that costs you $750 per month and you charge $1,100 per month for rent – each month you will own more and more of the property while also pocketing an extra $350 in recurring cash flow.
Owning a rental property can be one of the most lucrative methods of real estate investing although it's not always the easiest.
The most common roadblock for investing in rental properties is the income and down payment required. Most investment properties will require at least 20% in cash for a down payment plus lenders will want to ensure you can afford to pay the rental mortgage plus any primary mortgage you might have.
Outside of this hurdle, there are a few other things to consider before purchasing a rental property to generate cash flow:
- Will you hire a property management company to complete maintenance?
- Do you have enough cash to make any repairs that might come up?
- Are you looking for a more passive income stream?
Real estate investing with rental properties can be an excellent method to reach financial independence.
There are several types of properties you can invest in. Between a single family home, commercial real estate, or multi family rental properties – there's sure to be an option for you.
Crowdfunded Real Estate
Just like a real estate investment trust, crowdfunded real estate take a more hands off approach to real estate investing.
There are many platforms available to get started investing in real estate without having to deal with leaky roofs, water in the basement, or other issues that could arise with rental properties.
I’ll explore some of my favorite real estate crowdfunding investment options below.
Fundrise is a great way to invest in real estate without the hassle of owning multi family properties.
With Fundise you can invest as little as $500 to get started making it very accessible to both beginner and experienced investors.
Sign up below to get started!
My second favorite real estate investment platform is PeerStreet. With PeerStreet you’ll need to invest a minimum of $1,000 to get started – which is slightly higher than Fundrise but still no unreasonable.
You can check out my full PeerStreet review here for more details or register for your account with the link below!
Realty Mogul is an easy to use crowdfunded real estate investing platform that enables you to invest in pre vetted real estate without the hassle and headache.
Register for your account with the link below!
CrowdStreet is another great crowdfunded real estate platform to grow your money. This platform focuses on larger investors and has zero account fees.
The minimum investment is larger than all other platforms, but it’s worth checking out if you’re looking to grow your money.
Real Estate Investment Trusts
If owning rental properties isn't your thing, investing in a real estate investment trust could be a great way to generate cash flow each month.
With this investment, instead of having to deal with the headache that comes with managing a property, you'll instead be investing in a company that does everything for you.
While this real estate investment doesn't produce multiple income streams like owning rental properties, it is still a great income producing asset that anyone can invest in.
There are many real estate investment trusts available to invest in. You'll want to take a look at the fees that are paid to get a better understanding of how the company can perform.
Building wealth with real estate assets is a perfect option for many investors. Real estate investment trusts make it easy to get started.
Short Term Rental Properties
Owning rental properties is a great way to grow your passive income streams and short term rentals are no different.
With the rise of sites like Airbnb and VRBO, customers are always on the search for homes (and rooms) to rent for shorter periods of time.
Sometimes it can be for a weekend and sometimes for an entire week.
Owning short term rentals comes with more responsibilities than long term rentals. You'll need to be sure the home is cleaned prior to your guests arrival. This means you'll be forced to pay for routine cleaning and that become costly.
If you don't want to complete this work, you can also opt to hire a property management company that focuses on short term rentals.
The income you can make from these properties can be extremely lucrative. Homes that are located on the beach, are close to large events, or have a desirable interior can make thousands of dollars each month in passive income.
You can also check out these real estate investing apps to help you get started!
Own a Physical Business
Some income producing assets can be more difficult to manage than others. Owning a business requires a unique skillset of entrepreneurial skills alongside the motivation and dedication to grow your business.
The major advantage of this type of income producing asset is that the income potential can be quite extreme – even with limited resources.
One the other hand, this is also one of the most risky income producing assets. Because 20% of businesses will fail within the first year of operation, you'll need to craft a plan and strategy to ensure your venture thrives in any environment.
Start an Online Business
If you're looking to start a business with low start up costs and a serious income potential, I believe starting an online business can be an excellent way to expedite your journey to financial freedom.
What exactly is an online business?
There are many types of online businesses (sometimes referred to as digital real estate) to generate passive income.
I own several types of blogs that make money which are great examples of an online business.
Because you can grow an online business from virtually anywhere in the world, I believe it is one of the best income generating assets you can own to diversify your income.
But a blog isn't the only online business you can start. Some people will choose to build affiliate websites, grow social media channels, or sell online courses to make money.
Starting any business will require proper planning and a well-defined strategy for success. If you do not dedicate the time and resources to successfully start and grow your business it can be hard to keep it afloat.
Private Equity Business
If you want to grow your passive income streams, investing in private equity funds can be a great choice.
You can think of private equity as a pool of money that is used to grow several businesses. Private equity groups can have billions of dollars to invest making it possible to work large deals and own big businesses.
Investing in private equity can be more difficult than other types of investing because it will typically require you have a significant amount of cash – usually upwards of 7 or 8 figures.
The major advantage of private equity is that you won't be doing any work. Because the businesses are run by employees, your investment can grow without having to invest any time.
Write a Book
You might not think of a book as an income producing asset but when you look into the details, it certainly is.
By authoring a book, you can sell it in perpetuity and generate income every time you sell a copy.
Books don't always have to be physical, either.
With the growth of Amazon self publishing services, you can now create electronic books (ebooks) to sell online and make money.
As with any passive income stream, authoring a book will require a significant amount of time and energy in the beginning.
You'll need to decide the subject of your book, how you will market it, among many other tasks that come with authoring a book.
Need help publishing your book? Check out this video for more help!
High Yield Savings Accounts
High yield savings accounts have become mainstream over the past few years as banks have realized the value of customers.
These accounts can pay as much as 10 times the average of a traditional savings account – making them a one of the best income producing assets.
The rates for a high yield savings account aren't the highest, but they are very safe method to make passive income.
My favorite high yield savings account is through CIT Bank. It's completely free to open and you can earn as much as .50% on your money. Open your free account below to start making money and reach your financial goals.
Money Market Accounts
If you're searching for an income producing asset that requires no work at all, a money market account could be a viable option.
While this type of account won't yield the highest returns, it can be a great way to generate some additional passive income each month from your money.
Money market accounts are rather safe income producing assets when compared to other options like peer to peer lending or if you loan money.
The investment risk from a money market account is extremely low.
Certificate of Deposits (CDs)
Similar to money market accounts, certificate of deposits can be one of the lowest risk assets to own.
CD interest rates can be similar to a money market or high interest savings account. They change over time as the FED changes interest rates.
Currently, it’s possible to get a CD with around .5% interest. While this isn't the investment option with the highest return, it's a safe way to grow your money.
Peer to Peer Lending
Peer to peer lending can be a great income producing asset although it has more risk than other investments.
With this investment, you’ll essentially lend money to friends or other individuals needing money and you’ll get paid interest for the duration of the loan.
The interest rates on this investment can be much more lucrative than traditional savings accounts.
Peer to peer lending can be a good income stream to grow and diversify your portfolio although it can be slightly more risky than other options.
Bonds can be another safe way to generate income from your money.
A bond is defined as a “fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental)” by Investopedia.
Companies and government are the two most common issuers of bonds.
Government bonds feature very low interest rates because of the assumed safety. Your money would only be lost if the entire government collapsed.
Corporate bonds can feature much higher interest rates with the increase in risk. Companies will issue bonds to get cash in order to develop new products, expand their marketing efforts, or other business expenses.
Bonds can be any duration in length and you'll be paid on the terms of the bond.
While most people may not think of land as an income producing asset, it certainly can be.
More specifically, farmland can be one of the best income producing assets because people will always need food.
Platforms like FarmTogether have made it more easy to invest in farmland to generate income.
The returns for this invest are higher than other investments like a bond, savings account, or CD.
Finding things to rent can be some of the best income producing assets for individuals looking to make some extra cash each month.
While this isn't a traditional investment like other options on this list, I still consider some items to be assets that make money.
For example, if you own a car, RV, or tools – these items can be a great way to make passive income without having to work.
Even if you don't currently own items that you can rent, it might be worth spending some cash to make extra money with them.
If you own a car that you don't use everyday – it can be possible to rent it out and make around $40 to $50 a day after fees and maintenance.
Annuities are the prime example of income producing assets because that's exactly what they're designed to do.
Annuities will pay you cash every year for your investment, guaranteeing you won't spend or lose all of your money.
With this fixed income investment you can get paid and generate income each month without having to work.
The returns for annuities can be extremely low, however. Interest rates will often be around the same as a high yield savings account but they are less liquid.
Related: How to Invest $20
Alternative Income Generating Assets
As the economy has transformed and investors are looking for other ways to grow their money, alternative investments have grown in popularity.
These income producing assets can be a good way to grow your money although they are more risky than a traditional asset class.
Below are some examples of the best income producing assets for alternative investors.
Full disclosure: I am not a huge fan of cryptocurrency as an investment. But some people are.
Whatever your feelings are on crypto, it's hard to argue against the results. Where other income producing assets might only make a couple of hundred dollars each year on a $1,000 investment – some cryptocurrencies have had returns over 100x in the last few years.
Because cryptocurrencies are so new, it's hard to predict future results.
To start investing in crypto, I recommend using Coinbase. You can register below to get $10 free!
This is a prime example of an alternative investment because of its unique proposition. Because art can not be recreated – it can sometimes be worth massive sums of money.
Older pieces of art by major artists can cost millions of dollars. Each year that goes by, it's likely to increase in value.
You can start investing in art with sites like Masterworks.
How Much Money Can an Income Generating Asset Make?
Some assets are more profitable than others. For example, your income potential with a business you own can be much higher than something like a money market account.
Ultimately, the amount of money you can make from your income generating assets is almost limitless. The more you purchase, the more income they will generate.
We can do some simple math to help you estimate your returns.
For example, if you purchase a basic income producing asset like individual stocks, you can expect to earn around 7% to 8% annually.
If you invest a total of $10,000 into the stock market, in your first year you would generate $700 to $800 of passive income. The following year, you would generate another $749 of income brining your total investment portfolio $11,449 from your original investment of $10,000.
If you were to invest even more money, the monthly cash flow from your assets will rise and grow exponentially.
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How Do I Find Income Producing Assets?
Finding income producing assets is easier than your might think.
Start by browsing the list of income producing assets above. Then you can dig a little further into the ones that interest you.
For example, if you think real estate investing is your best option – you might consider registering for Fundrise to get started.
If you want to invest in the stock market – register with Stash and get $5 free to invest.
What are the Most Profitable Assets?
Some income producing assets are more profitable than others.
While this shouldn't be the sole focus of your investing strategy, it helps to have some assets that perform well over time.
You’ll want to balance safe income producing assets with more risky assets.
Some of the most profitable assets that aren’t as risky include:
- Real Estate
- Mutual funds & Index Funds
- Owning a Business
There are many factors that can affect how profitable your assets are. For example, if the Federal Reserve decides to raise interest rates, some individual stocks can take a hit. For this reason, it’s wise to keep your investment portfolio as diversified as possible.
Making money is always one of your top investment objectives but the more risk you have, the less likely it will be that you have consistent growth.
Final Thoughts on the Best Income Producing Assets
There are plenty of options when it comes to investing your money into income producing assets.
For many investments, it's hard to go wrong. While some will have larger returns than others – most of these assets will prove to be good investments long term.
If you're searching for passive income with the goal of reaching financial freedom in the future, investing in an income producing asset is a no brainer.
Do you have a favorite asset you believe is the best? I'd love to hear in the comments below!