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3 Investments That Lead to Passive Income

By Jamie Richardson | June 5, 2019

We all dream of earning money without spending year after year tied down to jobs we hate. Passive income allows you to do just that. In a nutshell, this type of income is money that comes in on a regular basis with minimal ongoing effort or maintenance on your part. Once you make an initial investment of time or money (or, as is often the case, both), the ball starts rolling and you start earning an income and continue to do with without expending a substantial amount of additional effort.

For those who are serious about earning real money through passive income streams, investing is the way to go. There are, of course, other things that you can do to earn passive income, but making smart investments is, by far, one of the best ways to earn the type of money that can improve your overall financial situation and change your life.

Unfortunately, for beginners, the idea of investing often seems overwhelming. There are all sorts of ways that you can invest, and when you don’t know what you are doing, making smart investments is challenging. If you are looking for solid passive income ideas that are likely to yield good results, here are three good investments that lead to passive income.

Real Estate

There is no denying that the real estate market fluctuates. While this may make it seem like a scary investment, experts say that real estate is the best investment for those who want to generate long-term returns. If you buy a rental property, for example, you can almost instantly create a regular stream of income. When you have the right tenants, you can collect and cash rent checks each month with minimal effort.

Real estate investment trusts, or REITs, are another option. If you are not interested in dealing with the day-to-day hassle and frustrating of managing an investment property, being part of a REIT allows you to earn money with minimal involvement. The REIT technically owns the property, so you don’t have to worry about being a landlord. REITs pay higher dividends than most bank investments, stocks, and bonds, and because you can sell your interest in a REIT whenever you’d like, this is a flexible alternative to owning property outright.

Another option is real estate crowdfunding. This is sort of a “middle ground” solution that allows you to choose between debt or equity investments in residential and commercial properties. You get the tax advantages of owning property while generating long-term revenue. With an investment of as little as $500, you could “own” a piece of property and earn between 7 and 13% in annual returns.

High Dividend Stocks

Building a solid investment portfolio with high dividend stocks is a good way to create passive income that has an annual rate that’s much higher than what you would receive on typical bank investments. In fact, they are one of the easiest ways to earn income passively because you essentially get paid just for owning them. When companies bring in revenue, part of the money is distributed among investors in the form of dividends. The money you earn can be out as a cash payment, or you can reinvest the funds to buy additional shares in the company.

Because high dividend stocks are, well, stocks, the potential for capital appreciation always exists. This means that you could earn passive income from two sources – dividends and capital gains – from a single investment.

Before investing, however, keep in mind that dividend yields vary from one company to another. They also tend to fluctuate from one year to the next. If you are searching for high dividend stocks to invest in but are not sure where to get started, look for ones that fit into the “dividend aristocrat” label. These stocks come from companies that have offered increasingly higher dividends for at least the past 25 consecutive years.

Peer-to-Peer (P2P) Lending

Peer-to-peer lending is a relative newcomer to the world of investments. Lending Club and Prosper were the first institutions to offer P2P loans beginning in mid-2000, and they’ve changed the way countless loans are handled. Instead of going to the bank, borrowers apply for loans from other people. People who have been denied loans from financial institutions are often approved for P2P loans at rates that are lower than those of larger financial institutions.

By investing in P2P lending, you can earn an annual return that averages between 5 and 7%. One of the best parts of this type of investment is that you can get started for relatively little money. Even if you do not have thousands of dollars to loan to someone, you can start small and use the returns you earn to build a larger portfolio.

If you decide to go this route, don’t put all of your initial money into one loan. Instead, split it up into multiple loans. This ensures that, if one loan goes bad, you won’t lose all of your money. Building a large portfolio with several different loans is a must if you want to be successful in P2P lending.


These are just a few of the many passive income ideas that are out there that can help you create additional revenue streams. Making smart investments is always a good way to create passive income and earn money while you are sleep. It is extremely important, however, to do your homework before making any sort of investment. Always understand the amount and type of risk that is involved. Also, keep in mind that virtually no investment is guaranteed. While the odds may be in your favor, things can go wrong and you could end up breaking even or, even worse, losing your money.

Investing in real estate, high dividend stocks, and peer-to-peer lending are three relatively dependable options for turning your upfront investment into on-going payment. If you are looking for a way to generate passive income through investments, these three options are a good place to start.

Jamie is a 5-year freelance writer who enjoys real estate. He is currently a Realty Biz News Contributor.
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