Asset ideas that generate income

There is definitely something that shifts inside you when you start learning about personal finance. At least that was the case for me. When you understand that instead of spending money on consumables you can invest in income-producing assets a whole world of possibilities opens up. You begin to see financial independence as a real possibility and begin to plan for it. Sure, when you are just starting out it can be a little bit daunting to save and invest because it can take time to build your assets and see results. But once you begin to enjoy the process of wealth building, even the time it takes become a fun challenge.

Here I share with you types of assets that generate income in 2021.

My favourite type of investment. When you buy stocks you own a small piece of a company, and you can make money not only from the value of your shares going up, but also from the dividends that you receive.

Certificates of Deposit (or term deposits in NZ) are investments placed with a financial institution in exchange for a fixed interest rate for your return at the end of the term. You are essentially loaning money to those institutions. At the moment (April 2021), interest rates are pretty low for most CD’s (term deposits), but they can be nice assets and a nice way to diversify your investments in a less risky environment.

It’s interesting to point out that Certificates of Deposit in New Zealand are a type of investment available in the money market (wholesale market) and not in the retail market.

Bonds, like CD’s, are also a type of loan. They are issued by companies and governments to raise money, and they pay the investor a fixed interest rate. Just like with CD’s, Bonds offer modest returns but are a safe way to diversify your assets and will usually give you better returns than a regular savings accounts. It’s important to point out that when interest rates rise, the price of bonds decrease – which means that you they would be sold for less when there are other bonds with more attractive interest rates available.

REITs ( or LPTs in New Zealand) are a great way to invest in real estate without actually owning property, without the stress of having to do home renovations or deal with tenants.

REITs stand for Real Estate Investment Trusts (or Listed Property Trusts in NZ) and they are trusts that own or finance real estate. You can invest in the companies individually, through an exchange-traded fund, or with a mutual fund. There are different types of REITs. Some invest in buildings, others in mortgages, and others in specific real estate sectors. Regardless of what type you choose you can get a healthy dividend from your investment.

This is great income-producing asset. With rental properties you can not only receive rent each month, but you can also increase your net worth if the value of your property rises and as you tenants pay down your mortgage.

Rental properties usually require more cash up front and a lot of hard work finding the right property for the right price. It’s certainly a bonus if you enjoy renovating homes and dealing with contractors.

While rental properties can be a great income-generating asset, make sure you do your maths first and check that your asset will in fact cash flow.

I’ve grouped a range of options here. Rental units here refer to any type of assets that can produce rental income, but are not rental properties. Some ideas include a spare room or sleepout, storage rooms, machinery, tools, garden plots or even cars. You can get creative here, just think about assets that people need and would pay money to rent.

With peer to peer lending you are lending money to someone in exchange for a fixed-interest return. Just like with other investment types, the asset that is producing income is your money.

There are different platforms that allow you to invest in peer to peer, some riskier than others. I strongly recommend that you do thorough research on what is available in your area. Some peer to peer companies have funds that keep you investment secure in case someone defaults on their payment and some don’t. With some companies you need to manually go through all your available loans, and with some you don’t. However, it is not complicated to get started with peer to peer and the returns can be a lot higher than what you get with a regular savings account or CD’s.

This is one of my favourites as the earning potential is infinite. There are many different types of businesses, online and offline, and there is always something that potentially aligns with your risk profile and interests.

There are different ways to get started with a business. You can either buy an established business to operate yourself, you can build your own or you can become a partner in an existing business. If you’re a silent partner you simply put your money to work, and collect the dividends.

There are of course risks associated with owning a business, as most small businesses fail within the first 5 years of operating. And unless you’re a silent partner, having a business is not a passive investment at all. You will need to work very hard, but the results can be exponential.

This is something I have become more and more interested in in the past few months. Websites can generate income in so many different ways: through advertising, affiliate links, direct sales, etc. Starting a website can be a fun and cheap way to build an asset, just be aware that it is very time intensive.

Buying a well established website can be a great investment that produces income straight away. It’s certainly easier to buy an established website SEO optimised and stable traffic than starting one from scratch. There are many websites dedicated to selling websites and you will generally have access to all relevant information so you can analyse the potential return on your investment. Just make sure you do your due diligence and don’t just take the seller’s word for it.

This is an interesting one. I’ve never tried it myself but I know there are many people out there making a nice income from this type of asset.

They can be great if you choose carefully both your locations and items that you will be selling. Vending machines these days are not just those machines selling candy and chips, but you can sell healthy snacks, drinks, ice cream or even coffee.

This is a very broad category, and includes assets such as stock photos, music, videos, ebooks, software, graphics, html files, etc. These assets can generate income when you license or sell them, and once they have been created the income you produce will be mostly passive (although you might have to do some marketing). They can also be cheap to create.

Some of my favourite ways to make money with digital assets is TeachersPayTeachers (being a former teacher), selling ebooks on Amazon or other websites and selling printables on Etsy, Apps can also be a great income-producing asset if you have the skills to make them or are able to invest in the services of an app developer.

Royalties are the fees that someone pays for licensing to use or sell a product. Usually, royalties are paid as a percentage of revenue that’s generated by the product.

Royalties are mostly used when someone invents or creates a product and sells it to someone else. You can earn royalties on books, songs, patented products, etc. If are able to create these sorts of products, royalties can provide a nice income stream.

What about you? What types of income-producing assets do you have? Would love to hear from in the comments below 🙂

 

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