Imagine a life where you don’t need a job because you took the time to develop a stress-free, passive income. You work hard to earn your assets — shouldn’t it start working for you? Here’s what you should know about creating passive income to fund a lifetime.

Key Takeaways

• Achieving financial security and freedom is an attainable goal for anyone willing to invest their money into sources that generate passive income.
• Earn rental income through owning residential real estate and build wealth on a monthly, quarterly, or annual basis.
• Cash-flow real estate ensures the investor will accrue positive income regardless of the expected expenses.
• Investing in a stable company promises dividends that increase with each passing year and can be determined by the age of the company’s stock market history.
• Qualified dividends allow shareholders to reinvest the money earned, improving their opportunity to enhance their return on investment.
• Selling your stock shares opens up the possibility for short-term capital gains; the more money you make back on the sale, the more you can profit.
• When you gain 100 shares, selling options enables you to rent them out to buyers, putting more money in your pocket.

Sources of Passive Income to Fund a Lifetime

Passive income is income you can accrue without having to work and, when combined, can achieve exponential annual growth. Invest your money into these three impactful passive income streams and let them do the work for you:

Convert Real Estate Properties Into Rentals

An effective financial strategy is to purchase residential real estate and rent it out to third parties. This process generates rental income, which can derive from monthly rent; extra fees like parking or pet rent; a portion of the security deposit; and advanced rent payments, typically the first and last month combined. Keep in mind that liabilities bleed you, taking money out of your pocket. However, owning assets puts money back in your pocket. 

Investing in real estate with the intention of converting it into a short-term or long-term rental provides investors with excellent passive income. It allows you the flexibility of setting optimal rental prices to meet local or tourist demands. You can also add multiple tenants or expand your investment portfolio with additional properties. The best method to earn this money is through real estate that is cash-flow positive.

Cash-Flow Real Estate

Cash-flow real estate means you are constantly making a profit on a rental property, no matter the expenses. Expenses comprise debt, taxes, property management, and repairs. Ideally, this cash flow maintains positive numbers monthly. However, considering the initial investment of purchasing a property, generating a profit may take a year or longer. 

Once this period passes, you can expect to make a return on your investment quarterly or annually. It is essential to ensure that the rental income is positive. A negative cash flow means you are losing money on the rental, which is a possibility if it stays vacant or its rental prices are not optimized. Plan accordingly to make sure the amount you charge your tenant in the lease covers all expenses and leaves money left over for you to pocket. Avoiding common mistakes when investing in real estate can improve your chances of developing reliable passive income.

Invest in Dividend Stocks

Real estate investment can be expensive, especially when considering the outstanding property taxes, required insurance coverage, and possible home loan expenses. Fortunately, there is a more affordable passive income source, dividend stocks.

What Is a Dividend Stock?

Dividends are the payments a public company will give to the stock owners, known as shareholders. The company’s source for this payment is from their earnings, typically paid quarterly to the shareholders. Not all companies pay out a dividend, so it is imperative to purchase stock from a company that does to create passive income.

How To Invest in a Dividend Stock

Investing in a stable stock ensures a dependable dividend payout because companies value their shareholders. Putting your money in a company that supplies its shareholders with dividends is a promising passive income strategy because they increase annually. You can verify this annual dividend increase by researching the company and seeing how many years its stock has been available to the public. Many stable companies have had public stocks for over 25 years, with some surpassing the 50-year mark. 

Perks of Investing in Dividend Stocks

Regarding federal taxes and depending on your income level, you might not have to pay taxes on the dividends. This zero-tax payment occurs when the dividend is taxed as a capital gain, not ordinary income. Capital gain refers to the increase in the value of a purchased asset. Ordinary dividends face the potential of receiving an income tax upward of 37% for 2022 and 2023. The good news about qualified dividends is that the maximum tax rate is 20%.

Dividends are paid to shareholders as cash, allowing them to save or reinvest the money earned into the company to purchase more stocks. This reinvestment plan is a win-win situation since it will continuously grow your dividend amounts and boost the stock price. 

Maximize Short-Term Capital Gains 

Decades ago, investing in the stock market was difficult to navigate and expensive due to brokerage fees. With the ever-growing age of technology, mobile investment applications present zero brokerage fees, making stock market navigation more straightforward. These apps even offer you the flexibility to buy fractional shares, which is ideal for investors who are new to stock market investments. 

As you discover different ways to purchase stock, you will also find out how to sell the investment property and turn a profit. This sale process is referred to as short-term capital gains. Consider selling options to maximize your capital gains as a source of passive income. 

Selling Options

Rent out your stock shares by selling options but remember, you must have 100 shares to unlock this ability. There is a market for buying options, and it depends on the company, which will dictate how expensive it will be. In the process of selling options, an individual pays you for the share, and you get to keep this income regardless of what happens to the stock. As you rent out your shares, you can wait for the stock price to dip and buy more.

Potential Stock Market Risks

Something to keep in mind is that option buyers are the ones assuming all the risk. They are choosing to risk their investments by gambling on the stock market in hopes of making a small percentage of their money back. When you sell options, you make more profit and have the option premium.

Although selling options on your short-term capital gains is profitable, it is still risky. No matter how you choose to invest in the stock market, remember that it is volatile. For example, if the company is in free fall and its stock plummets, you are responsible for buying back your options. Unfortunately, the stock will decrease as the price drops, devaluing your assets. Because of this potential risk, buying stocks from a stable company that pays dividends is vital to gaining financial success. Historically, dividends go up even if the stock price dips.  

Learn More About Investment Strategies

Investing in the stock market goes beyond short-term capital gains and selling options, but you won’t know this until you learn more about other strategies. Real estate and stock market education are invaluable for investors seeking financial freedom. Infinity Investing is a top leader in presenting helpful workshops and training videos led by industry experts to educate investors on the right steps to take to generate passive income to fund a lifetime. 

An Infinity Investing membership saves you thousands of dollars and hours of specialized training. Sign up for their 360 Pro membership plan for exclusive access to real estate investment properties, stock trading room techniques, and weekly stock market tips and recaps. Members enjoy the additional perks of being a part of Infinity Investing’s private Facebook group, expanding their network of like-minded individuals.

Infinity Investing cares about providing you with reliable ways to invest your money. Adopting one or all of these passive income streams can help you achieve lifelong wealth, secure a happy life, and earn money while you sleep.