Sources of Passive Income

Nowadays, it isn’t easy to find sources of income. The gap between the rich and the poor is widening. Some say that if you work hard, you will always have the income to survive. But what will you do if it is tough to find a job? Actually, even the rich find it hard to keep their income. However, this is less of a problem for some who know where to find passive income sources.

So, let us define passive income first. Passive income is a type of income earned from investment. There are two types of income – active and passive. We earn active income from the result of our labor. Salaries, commissions, and service fees are sources of active income. What are the sources of passive income? Sources of income have different forms. Some popular sources are dividends, interest earned, rent, sales, land, equipment, and money.

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Dividend

The dividend is earned from the net profit of a company. It is a form of profit-sharing, and it is more common in the stock market. When a company is owned by several people or more, the profit is divided according to each owner’s investment. These owners are called shareholders, and such a profit is known as a dividend. The dividend can be cash or stock. It is a cash dividend when the profit is distributed in cash through bank checks. And it is a stock dividend when it is distributed in the form of shares of stock. As one of the sources of passive income, the dividend is also attractive, especially during growth. Not all companies give consistent dividends. It is important to remember that stock selection determines your future income. If the company selected is proven to give higher dividends, there will be a big possibility that it will continue. Most companies that consistently give higher dividends are called income stocks. Income stocks may not be large companies. In fact, even some large companies fall short in making consistent dividends due to their high cost of operation. So, not all stocks are a sure bet as one of the sources of passive income.

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Among the many sources of income in the stock market is an “income stock,” dependent on their good industry environment. For instance, if the IT industry is beautiful, any IT company can be a candidate as a source of passive income. This means that it is better to choose from those companies than to pick a huge company of which the industry has been suffering from economic turmoil. Therefore, a good source of passive income in the stock market is a company from a good industry.

Interest Earned

Interest earned is also prominent as one of the sources of passive income. When we deposit our money in a bank, our money earns an interest rate. What is the interest rate? Interest rate is the percentage charged when we borrow some money, and it is earned when we lend. Although we are not necessarily a lender, we can also earn this because the money we have deposited in a bank contributes to the bank’s amount lent to borrowers. Of course, there is a condition before we consider our deposits as sources of income.

We can consider our savings to be a source of passive income. This only happens when the interest rate is high and our deposit is in a significant amount. Time deposits or bank bonds are examples of passive incomes. A savings account, too, can be one. Banks differ from one another in interest rates. So, to get an attractive income through the banks, we should choose the right bank and deposit at the right time when the interest rate is high.

Rent and Lease

Sources of passive income are numerous and complex, but the easiest one is through rent or lease. Everybody knows without any explanation that the income we get from having our property rented or leased has proven to give us a reliable source of income. If you have an extra house and lot or a unit of apartment, you will only need to get somebody willing to occupy the place. Your sources of passive income here are not your property but a reliable tenant who can pay the rent consistently and stay longer. The only consideration here is the profile of your tenant. If your property is a commercial lot, you may have it leased to those business people putting up a restaurant, a gas station, or a warehouse. The profile of your tenant here is more credible than the household ones. Commercial lot tenants will surely stay longer. This can actually become your concern because this type of investment is not liquid. It is a long term investment. Nevertheless, many of us will consider this as one of the best sources of income.

Investment in transportation service, however, is hardly considered to be one of the potential sources. The risk involved here is high. But if you are just an ordinary individual who owns one or two units of a taxi cab, it is good to rent them out, provided that you invest a little in your vehicles’ depreciation.

Sales

Buy-and-sell business can be some sources of income depending on the items or goods you trade. The bigger the things you trade, the more passive the income becomes. If we trade smaller things, that’s marketing and a good source of active income. But if what we buy and sell are cars, houses and lots, stocks, and bonds, they are definitely great sources of passive income.

Land

The land is the best source of income. It does not have to be from renting it out. Since time immemorial, it has been the most reliable source of income. In the past, fertile land could produce crops, trees, plants, and grains without human intervention. Even livestock and poultry were products of fertile land. All these things that land could produce were sources of passive income. Such circumstances are still true until now, but with little intervention.