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Are you looking for a way to diversify your income and protect yourself from economic downturns? An excellent solution is creating passive income streams.
That’s why it’s worth exploring a few practical ways to generate passive income and provide stable returns in challenging markets.
Real Estate Investments
When it comes to real estate, it can be as passive or as hands-on as you’d like it to be. But the nice thing about real estate is that there’s limited correlation to financial markets. That means that even if the economy and stock market hit a rough patch, real estate investments typically avoid most market volatility.
“Real estate has long been considered a solid investment, and for good reason,” said Dana Ronald, president of Tax Crisis Institute. “Even during a recession, people need a place to live, and businesses still need space to operate. This creates a demand for rental properties, making real estate investments a reliable source of passive income.”
Real estate investors have a lot of options available to them. If you’d prefer to be more hands-off, you can purchase real estate through a real estate investment trust (REIT). While some REITs are private, most are traded through public stock exchanges.
Real estate crowdfunding websites are another way to invest in real estate indirectly. Websites like Fundrise allow you to invest for as little as $10.
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You could also choose to invest in a physical property where you’ll be dealing with tenants.
“With rental properties, you can generate passive income through tenant rent payments,” Ronald explained. “However, it’s important to carefully research and analyze the market and potential tenants before purchasing.”
Ronald also said that REITs tend to be more passive and less risky than owning physical properties during a recession.
Rent Your Stuff
When recessions happen, people start becoming more conservative with how much they spend. They’re less likely to hire help to get things done around the house and more likely to do the work themselves.
However, many people don’t have the necessary tools to complete some projects. That’s where you come into the picture. If you have tools around your home, you could rent them to others and earn quick, passive income.
As an example, you might have a post digger that others would be willing to rent if they’re replacing their fence. You could even rent out your snowblower to someone who doesn’t want to purchase one themselves.
On Dividend Stocks
High-dividend stocks can be a great way to generate passive income, even during a recession.
“These stocks pay out regular dividends to shareholders, providing a steady stream of income regardless of market conditions,” said Andrew Pickett, lead trial attorney and founder at Andrew Pickett Law.
Make Your Money Work Better for You
“When choosing dividend stocks, it is essential to research and invest in stable and well-established companies with a history of consistent dividend payments.”
Invest in Self-Storage
Another popular investment opportunity? Self-storage buildings. These tend to be highly recession-proof because people are always looking to store their items, especially if they’re moving and need a place to store items temporarily.
You can invest in self-storage units through a REIT, or you can purchase a self-storage building directly. Self-storage buildings do a great job of running themselves. You’d need someone to handle sales and someone else to do any maintenance. Beyond that, they’re incredibly passive for investors.
Peer-to-Peer Lending
Whether the economy is booming or in a recession, lending to others can be a great money maker. Some people would prefer to cut out the bank or financial institution when borrowing money. While peer-to-peer lending comes with risk, there can also be high income potential.
Businesses like Prosper and Funding Circle provide a platform that allows you to locate different investment opportunities and understand their risk before jumping in.
Create an Online Course
If you have something you’re passionate about and can teach it to others, you could build an online course. Platforms like Teachable give you all the tools you need to build a course, even if you’re not very tech-inclined. Building an online course takes a lot of work upfront, but once launched, it can be a tremendous passive source of income.
Open a Savings Account
Opening a savings account isn’t going to make you rich, but it is going to provide you with a passive return on the money you save. According to the FDIC, the average APY on a savings account is 0.46%. However, many high-yield savings accounts have an APY of between 4% and 5%.
Make Your Money Work Better for You
If you can do without the cash for a period of time, you could consider a certificate of deposit (CD), which will typically have a slightly higher APY.
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