Why do you, or anyone for that matter, want to buy income-generating assets?
When many people get into real estate, either as agents or brokers, they quickly realize that they can make a lot of money. However, all that amount of money they make comes with having to trade a lot of time for the dollars.
More often than not, frustration kicks in because they realize that although they’re making good money, they need to invest a lot of time in their craft. Basically, to make a certain amount of money, they need to keep investing their time.
Over time, you realize that you need to buy assets and other things that will be generating income for you when you’re not working, whether you’re sleeping, at the beach, or on vacation.
How to Buy Assets that Generate Passive Income
Your assets can be generating more income for you when you’re still working. While you’re investing your time, making good money, and improving and growing, your money and assets are also working in the background. This is very powerful.
Wealthy people all over the world use this trick to achieve that status. They simply disconnect their time from their money. While they might continue to work because they want to grow and get better, they don’t have to once their passive income outpaces their active income.
When you’re trading your time for money because you have to hustle to make the next bill for the coming month, that’s stressful. However, when you’re trading your time for money because that’s what you love to do and it’s your passion, it becomes a very different situation.
In this article, we’re going to look at different things to consider when you’ve decided that it’s time to start buying some income producing assets. While this is not financial advice, we hope that these tips help spark some ideas.
What’s Your Wealth Goal?
What’s the big goal? What are you trying to achieve?
If you don’t know your wealth goal and don’t have an idea of what your ideal lifestyle needs to look like, how are you going to work towards it? How are you going to do the difficult things every day to propel you towards financial freedom?
For example, if you’re in the real estate business, you know that picking up that phone every single day and cold calling is not a walk in the park. The rejection from prospective clients can be hard on the ego.
However, if you have a wealth goal and you have an ultimate grand picture in mind, it’s going to be much easier to get through this rejection and all those hard days of grinding it out at the office.
Find out what that goal is. For example, it could be to make $5,000 a month in reoccurring passive income so you never have to work again and your assets generate enough passive income and cover all your monthly bills. Or it could be something much bigger, like $20,000 or $50,000 a month in passive income.
Here are a few pointers to help you set your wealth goals:
- Get a pen and paper and write them down: You’re more likely to achieve your wealth goals when they’re written somewhere. Jotting your goals down also demonstrates that you’re committed to them.
- Be specific when writing them down: Don’t say something generic like “clear my debts”. Something like “pay $10,000 to my debt this year” would suffice.
- Ensure they’re measurable: If you want to pay $10,000 to your debts this year, you can pay around $900 every month.
- Have deadlines: You won’t focus on your goals and work hard to achieve them if they’re not time-sensitive. Give yourself a finish line and work hard towards it.
Until you realize what that goal is, it’s going to be very hard to achieve it. Without direction, there’s no way you can discover which road is right for you.
Dive into what really matters to you and what motivates you. Also, establish what your ideal lifestyle really looks like. This way you’ll buy the right assets that work for you.
How Many Risks Are You Willing To Take?
You really have to consider the number of risks you’re willing to take on because some people are not comfortable with big risks when investing in assets. They become conservative when it comes to investing, possibly because they’ve lost a lot of money before.
It’s not fun when you work really hard to put your money in investment only for it to crash.
However, you can mitigate these risks by really diving into it, and becoming an expert and a seasoned investor. Don’t just take someone else’s word for something and go invest because someone said it’s a good idea.
You’ll be leaving it to somebody else. You’re playing with fire if you leave your financial future into somebody else’s hands.
Do the research, read the books, and really pick up the knowledge because that’s what’s going to make you a wise investor and help you achieve your financial goals sooner. Leaving it to somebody else is way too risky.
Is Passive Income Real?
Always think about the amount of management that you’re willing to take on.
For example, let’s say each time you buy an investment property, you look for 15-20% cash on cash return. This means that if you want to invest $100,000 into a property, you’re looking for a rent profit of anywhere between $15,000 and $20,000 a year.
These are great numbers for any investment. However, with rental properties, you should always consider some sort of management for your property, until you can hire a property manager. If you’re not okay with that, then you might want to consider something else.
Imagine if your tenant calls you one evening and complains about water leaking. You’re going to have to go there with a plumber and spend some money to fix the issue. Not everyone is willing to invest the time to manage a property portfolio.
While these numbers are really good and impressive, you have to consider the management that comes with it, unless you factor your numbers into hiring a property manager. At that point, you still have to think about it because even with a property manager, you still have to manage the property manager.
Asset Ideas to Generate Passive Income
Let’s look at some ideas to kick around and think about when you get into your journey of deciding what assets to acquire to generate passive income and build your future wealth.
Landlording
Landlording is a beast that has been tried and tested over the years. While not everyone wants to be a landlord, smart people do because becoming a landlord provides you with a financial future of abundance, great wealth, and generational wealth if you do it right.
A lot of people understand the model and can wrap their heads around it.
It can provide a great ROI by growing your wealth through appreciation. You also have leverage from the bank, mortgage pay day and the passive income through the recurring monthly rents that come in every month.
What most people don’t realize is that becoming a landlord also gives you some tax benefits. You can talk to your accountant and possibly get some write-offs.
Landlording is really beautiful as it’s something you can touch and feel.
Dividend Stocks
Dividend stocks are another potential investment option that is less intensive management-wise.
Everybody talks about stocks and getting rich through them. A Lot of people have done really well in the stock market and everybody thinks that you only make money when a stock goes up in value.
That’s true as in some cases, but those are really growth stocks. Growth stocks are stocks that you buy and expect to grow faster than others in the market. They might not even offer dividend payouts.
Some other stocks offer dividends. They take a portion of their profit and pay it out to their shareholders every quarter. In some cases, these dividends are paid out every month.
As an investor, you get a dividend check or the amount goes into your brokerage account. You can then reinvest this amount by buying more stock or you can spend it on other needs.
Over time, there are what we call dividend aristocrats. These stocks that have increased their dividends in each of the past 25 consecutive years. They have been proven to be really good for a lot of people.
Many older people use the cashflow from dividend stocks to fund their retirement.
Again, always do your due diligence. If you want to invest in dividend stocks and do it right, you have to do the research and become an expert. Don’t rely on anyone. Read the books and do the actual work to become a savvy investor.
Remember that at the end of the day, nobody cares about your money like you do.
Buying a Business
How many businesses do you drive by every single day and wonder how much profit they’re actually making? Have you ever thought about whether the business is owned by somebody that’s ready to retire?
That could be a big opportunity. Think about it; if that person wants to retire and they don’t want to just close the door on everything they built over the last 20 or 30 years, they might consider selling that business to you.
The owner may want the business to continue to thrive, grow and make a profit, but no longer want to be involved with the business. Due to this, you can buy many businesses through what we call seller financing.
You can get creative with this and negotiate for better terms between you and the previous owner that’s selling you that business.
Buying a business can be a really good opportunity for someone that would like to acquire an asset or something that generates income every month, but doesn’t want to start from scratch. Starting from scratch can be difficult and is not a walk in the park.
Think about all the potential possibilities and opportunities that you can have from acquiring an early existing business.
Keep in mind that buying a business will require you to take some time to manage it. However, there is a chance you get a higher ROI depending on the amount of time you invest in it. If you don’t want to spend time on your assets to manage and develop them, this might not be for you.
Some Semi Absentee business ideas :
- Dry cleaner
- Coin-operated laundry
- Coin-operated carwash
These are other ideas that can be operated passively.
Some other ideas can be completely unconventional and still great. For example, there are many different online businesses that you can start from scratch. If you also don’t want to start an online business from scratch, you can acquire one that’s already making some income.
Visit websites like empireflippers.com and flippa.com and other website brokers that will help you acquire income-producing websites that are already out there making a profit. Always remember to do a lot of due diligence/research as people have lost money buying online businesses.
These websites could be something like a blog or an eCommerce site connected to Amazon FBA sales. It could also be a product or service business.
There are many different businesses out there that are being run online and are great options for someone that wants to travel, see new things, and be location independent.
If you’re, say, a savvy marketer and can add value to such a business it might be something great for you. It could also be something that you want to run in the background of your already existing business.
Key Takeaways
There are many income-generating assets out there that we couldn’t even cover in one article. You simply need to decide what’s the best one for you and you’ll be well on your way to financial freedom.
The first thing you want to figure out is your wealth goal. Secondly, think about the amount of management and time you’re willing to put into the asset that you want to acquire.
Thirdly, do your due diligence. Always look at all the different assets and possibilities out there and decide which one is the best for your lifestyle and wealth goals.
Most importantly, consider your skill set. Regardless of how perfect the assets appears to be, if you don’t have the specific set of skills needed to add value to it and make it grow, it’s probably not going to work for you. Always make sure you educate yourself on the things you choose to invest in.