It is never too late or too early to start investing in income producing assets. Having assets that generate a passive income can increase your net worth and strengthen your financial stability. So when life throws you lemons, you’ll be able to make lemonade.
Disclaimer: Investments can rise as well as fall in value, and you may get back less than your initial investment. This blog does not provide financial advice. Seek professional advice to determine if an investment is suitable for you.
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Income Producing Assets Definition
A quick Google shows an asset’s definition to be – ‘a useful or valuable thing, person, or quality’. Financially an asset is defined as – ‘a resource with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide a future benefit.’
An income producing asset is something of value that you invest in that can, in the future, generate you an income.
What are the best income-producing investments?
Here are 11 of the best assets to own and ideas to make money from:
Property is a popular asset and may have been the first one that came to your mind. Two popular strategies are buy-to-let investments and HMOs (House of Multiple Occupancy). Being a landlord is a long-term investment and can increase your wealth through capital appreciation.
Firstly, do your research well. You want to invest in a property with a % yield that will pay the mortgage for you and make you a profit.
Secondly, do not understand the costs involved in being a landlord, the risks involved, and the regulations you must legally abide by.
Property Investment Project is an excellent resource for landlords written by a landlord. *Caution* contains some strong language but very funny!
#2 Your home
Before being able to afford rent as a single occupier, I used SpareRoom. This is an example of how to monetise your own home. If you are a homeowner and enjoy meeting new people who you are willing to let stay in your spare room in return for rent, this is possibly the easiest way to make you money with an asset you already own.
Another option is using Airbnb, whereby you can organise short-term rentals that suit your schedule.
Additionally, if your property has unused land, you can contact local farmers to see if they would want to rent your fields, set it up as a campsite or perhaps rent the space for allotments.
Stocks can provide a steady stream of income and require little input. Often stocks are dividend stocks; these are shares in companies that pay out regular portions of their profit. This type of investment in stocks is often less vulnerable to market volatility. However, dividends are never guaranteed.
These are our tips on how to build a low-cost amazing stock portfolio.
#4 Index funds and ETFs
Index funds and exchange-traded funds is another long term investing strategy. They are both ways of investing through the stock market.
An index fund is a fund with a portfolio that tracks components of the financial market index. Rather than investing in individual stocks, it comprises a range of stocks that are managed to mimic the financial market/index (list of companies). It is ideal for passive income and has vital diversification.
Similarly, ETFs track an index/sector and are made up of a selection of assets. They can be bought and sold on the stock market like regular stocks. ETFs provide diversification by spreading your money across markets and investments helping to mitigate the risk.
Check out our Hargreaves Lansdown, Freetrade and Wealthify reviews, three online trading and investing platforms we use. Websites that build and manage investment portfolios, often a mix of ETFs, for you at a fee. Some are more hands on than others.
A bond is a loan made by you, the investor, to the borrower, often a company or the government. Bonds include term details, for instance, when the loan is due to be repaid and the interest payments. The return on a bond is guaranteed income.
#6 Peer-to-peer lending
In this instance, you are effectively acting as a bank. With other parties you form a syndicate and lend to the borrower. Borrowers also benefit from this system as they may have been unable to borrow from a bank.
The money can be invested in various projects like refurbishing a pub and property developments. P2P lending can be risky as borrowers can break their contract guidelines; consequently, investing can be risky, but this is balanced with the opportunity of making 5-7% and sometimes up to 14% in annual returns.
#7 Real estate investment trust (REITs)
REIT are similar to ETFs as they can be traded on the stock market but are specifically real estate orientated, and as an investor, you are paid dividends. It is a way to be involved in the property market without having to commit to owning or managing your own.
#8 Online business
Creating your own online website and viewing it as a business can generate an income. This is done through:
- product sales
- affiliate marketing
- advertising revenue
- sponsored posts
Whilst this requires initial efforts to set it up, it requires little to no money to start, and as traffic continues to visit your website, eventually you should have a consistent stream of income.
#9 Savings account
A very important asset! Regardless of age, you should have one of these as a minimum to generate passive income. Furthermore, savings accounts are easy to set up. Contact your bank or have a look online to see if any are offering better rates; occasionally, online banks offer better rates.
Although saving accounts may have low interest rates, it is better than having money in accounts earning nothing.
#10 Your car
Who would’ve thought that your little banged up car could earn you money! Or even your nice new one!
Despite cars depreciating in value once bought, they are an asset that you have invested your money into. So why not use them to make money? For example:
#11 Your own business
This could be online or offline. If you are already creating items, why not sell them through online shops, or perhaps you have skills that other people may pay you for. Although these aren’t passive income streams, they can increase your overall income and are a great way to profit from your passion.
Remember, you are your biggest asset!
Although some of these ideas will earn a passive income with little effort, it is important to note that others may require more input and work.
Assets to buy in your 20s
You don’t have to wait until you have a mortgage deposit before you purchase your first asset. Assets can be more affordable, and you can start investing in them at any age!
How can I invest in assets with little money?
On the whole, there are low-cost income-producing assets available if you haven’t got the money available for a mortgage or bigger investments. These include:
- Setting up a stocks and shares portfolio, for this, you can invest as little as you can afford. Investing little and often will still build your portfolio. Side note, the value of your investments can fluctuate, and you could get back less than you invested.
- Creating an online business, be it a blog or selling items you have made
- Opening a savings account
- Using your car to supplement your income
How do I build my own assets?
Keep reinvesting the money you make from assets. Over time, consistency will build your asset portfolio. Asset diversification will reduce the risk as different investments will react uniquely to changes in market conditions.
How can I make passive income?
For more thoughts on how to generate passive income, check out these other ideas on ways to make money online.
If you have any questions about income producing assets or would like to add an idea, please leave a comment in the section below! We would love to hear from you!