5. Rental Properties
Another option to create passive income is by investing in real estate to rent out. If they are situated in an area with a strong rental market, long-term rentals can be a solid source of income. However, they also come with long-term stressors such as upkeep, numerous mortgage payments, property tax obligations, and other expenses.
Another option is to concentrate on short-term rentals through a website like Airbnb, which depends on a constant stream of tourists passing through your region. Alternately, start small and rent out a single room in your home to start funding your rental empire.
6. Peer-to-Peer Lending
Long-term bets to generate passive income include real estate investments. Peer-to-peer lending is one strategy to take into consideration if you wish to maybe generate income and withdraw your investment in less than five years.
Peer-to-peer lenders, such as Prosper and Lending Club, connect eager lenders with borrowers whose creditworthiness has been checked as an alternative to traditional bank loans. It has a higher risk than depositing money in a money market fund or high-yield savings account, but it also has the potential to pay out higher interest rates of 5% or more.
7. Private Equity
Another typical way to earn passive income is to invest in a private company you think has the potential to make money in the future. This practice is arguably the foundation of peer-to-peer lending. Investing in private equity funds, which are normally only accessible to accredited investors who meet specific net worth or income requirements, may be an option for high-net-worth individuals.
Another option is to support a friend, family member, or other reliable partner by agreeing to share in any future earnings and lending them money to start their own firm. But beware: investing in one company, no matter how big or small, is a long-term, high-risk bet. Never put more money at risk than you can afford.
