Passive Income

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Buy a rental property. You'll get regular income and the asset will appreciate -- as long as you're careful about (1) where you buy and (2) have a good property manager who vets your prospective tenants.

If you have the means, [italic][bold]rental properties[/bold] can be excellent [bold]passive income[/bold][/italic].

Rental properties can also be a pain in the ass if you have to deal directly with problem tenants. I guess it’s considered “passive” income, though.

r4 see item 2 in R2.

Buy shares in an REIT if you want to earn income from real estate. Buy a rental property if you want to spend time in housing court dealing with deadbeat tenants.

Don't you have to pay a capital gains tax from the sale of your home, unless you buy another property within two years? Or something like that?

Some stocks pay dividends. Buy enough of them and you can get a decent passive income from them.

R8 you would have to buy millions of dollars worth of stock to derive an income on which you could live on.

Fundrise

buy an AIR B&B vacation property. Then you don't have to deal with deadbeat tenants. I know a guy who bought one in Palm Springs and makes good money. He bought right near the bars and restaurant areas so people can walk.

Open up an all nude male strip club. They are due to make a comeback.

Find a young, strapping, talented artist and invest in his vision.

Similar to what R12 said. Try bringing back "Tallywackers" in Dallas! Or wherever you are.

Don’t put your money into these soulless funds. Invest in something that matters to you.

For most investors, becoming a landlord is as bad a business idea as raising ostriches or buying stock in an American air carrier.

It's not "passive income" at all. It requires constant vigilance, liquid funds, limitless patience, and a lot more physical effort than most lazy pricks are willing to endure for not much money. Even a dream tenant is still a pain in the ass sometimes. Even a perfect rental still has expensive problems. Even a cute neighborhood can go bad. Just look at all the reality shows about idiots buying homes and fucking them up royally, and how no one ever learns their lesson that real estate is not a quick or easy way to make a buck.

Do as only one genius on here as suggested, and invest in real estate through REITs. You get to be part of the boom, but your personal exposure is less, and you pay professionals to do all the sticky stuff.

R15 sounds like a penniless hippie.

First, talk to a tax advisor about the aforementioned capital gains situation. There is a time limit on reinvesting profits on your home sale. Check out Vanguard or Fidelity for a "balanced" ETF fund, relatively safe passive investment funds with low fees which are weighted heavily towards bonds over stocks. Do not keep the money in your savings account where it won't even keep up with inflation.

R18 sounds like he is (or someday will be) a rich old queen.

R12 is the Senatrice. Hi Lindsey!

I think the whole world os going to grind to a halt at some point for at least a few months. Things are backed up and I’m just not seeing an end to it all. It just seems to keep deteriorating.

Pay off any existing loans you currently have. Eliminating the interest alone on those loans amounts to far more than any interest rate you'll get on a savings or investment account.

R18 You’re incorrect - that hasn’t been the rule since the Clinton administration. If you have owned (ownership test) and lived in (use test) your home as your primary residence for two out of the last five years, then you can exclude up to $250k of gain from capital gains tax if single and exclude up to $500k of gain if married filing jointly. There is no requirement to invest the profit from your home sale in any way - that is not true.

The stock market is the fastest way but the amount u need to clear post taxes is the problem (well over 800k) . there is a dummy proof strat i could give you but i'm not comfortable giving that info on here because we can't delete posts. It would take u 2 years to clear the necessary funds and you just buy the Delta neutral dividend stocks: PG , CLX, JNJ, MCD, WMT, MRK, PEP, KO, and NKE.

I'm trying to think of a way to message u and give u the strategy.

r16 I own two rental properties and I don't know what you're talking about. Almost 100% of what you said is not true. I have a property manager who takes care of everything, including any hassles or headaches, but we've never really had any. I just sit back and cash the checks.

R25 Your manager handles the paperwork, but for a cost. Many young investors don't consider this a necessary expense. They'd rather do it themselves. And you're still the one who has to pay for major repairs - something else many idiots don't consider.

What R25 said. I own rentals, and manage them myself and in over 10 years, I’ve had one problem tenant. They all cash flow, and the rent is direct deposited every month. My return outpaces the stock market every year.

The time limitation someone mentioned for reinvesting money after a sale applies only to rental property, when you’re doing a 1031 exchange.

Develop a severe disease or become physical disabled. Bonus points if you develop ALS or end stage Renal Disease because they get $$$$$ immediately!

R28 is a bloody fool. How can you enjoy the money if you have no quality of life? Spending it all on Amazon and Gofundme?

Municipal bonds. You can get them on Fidelity. The monthly income is then state and federal income tax free (although I believe it can affect your social security being taxable as well).

Pimp

Stop calling your mother until she sends cash.

[quote]If you have owned (ownership test) and lived in (use test) your home as your primary residence for two out of the last five years, then you can exclude up to $250k of gain from capital gains tax if single and exclude up to $500k of gain if married filing jointly. There is no requirement to invest the profit from your home sale in any way - that is not true.

But if you were to realize any gains/profit that exceed those capped amounts, is that excess amount still subject to the capital gains tax unless you reinvest within the time limit (which I think is/was two years)?

R33 No! The reinvestment provision has been dead for decades. Forget it!

Thanks everyone! Some very helpful advice here. I agree I definitely don’t want to leave it in my savings account and CDs aren’t much better. Looks like some kind of real estate investment would be good, but I’ll check out the bonds and investment funds as well.

OP... Diversify. A mixture of investments. Aim for 5 to 9 percent return on your total equity. Anything beyond that is icing.

I think it’s best if you send me all the funds and let me manage them for you. My resume is impeccable.

I agree with the posters who think r16 is unnecessarily pessimistic about real estate investments. I'm on the lower end of income earners on DL, I'm sure, and I have purchased and paid off 3 rental properties over time. (One became a 1031 tax exchange deal). I manage themselves myself, but I do get a management company to screen tenants after one very bad tenant situation. It's crucial to develop a relationship with a reliable handyman if you are not handy yourself. (I'm not). Yes, you have to do more than cash the checks. There's a lot of paperwork involved, especially around tax time, because the best part of real estate investment is all the write offs - depreciation, mortgage interest, legal fees, taxes and insurance, maintenance, cleaning products, replacement of appliances, etc - it's all written off of your taxes. With the right choice of property in the right location, your rents are going to far exceed your expenses, so you can prepay your mortgages and own the buildings free and clear in a decade or so. Whether you own the buildings or not, it's important to keep back some of the profits to pay for maintenance - not only current, but anticipated - because there will be roofs and appliances that need to be replaced every so often, and you don't want to be caught dipping into your own bank account balances when that happens. Usually $1500 -2000/year is more than sufficient to hold out, because in many years you will have very few maintenance expensed, but then, wham, a $10,000 roof replacement is needed.

If you have a ton of extra money to invest, and the hands-on management has no appeal to you, then, like some others have said, invest in a REIT or buy with the intent to use a management company, who will charge 10% to 15% of the rents to shoulder the burden of being the first responders to tenant issues.

Yo soy passivo.

I pay 6% per month to a property management company.. Just FYI.

You could try investing in things that bring down your cost of living like solar panels, a raised garden bed, energy efficient products, a rainwater tank, a well stocked pantry etc. Think of it as passive tax free income.

R40 6% of what? The rent?

Open a shop in Etsy and sell hand-crafted tchotchkes.

Yes, 6% of the rent is standard for property managers. They collect the rent, deduct their fee and write you a check. You have no contact with the tenants.

Why not buy a studio, or one-bedroom condo unit, or two in P'town? They don't need big kitchens, are rentable for a week at a time over the season (five months?), you will always have renters and a local manager can clean between bookings and handle any issues?

If you can purchase them outright it's all profit after your reasonable expenses on your Schedule E on the 1040, and I assume many of the same people will want to rent every year. Hand select the nicest, easiest renters and offer them first dibs each season. A friend of mine does this and he does very well only renting to people more or less within his social/work circle.

Have everyone pay in advance to hold the booking and offer no refunds!

My rental property is a house I inherited. At the time I received it, the value was around $210K, and the mortgage was over $250K (it was purchased at the height of the housing bubble.) I thought about just ditching it, but it is in a nice area and I could afford it, so I kept it and rented it out. I refinanced it over 15 years, and now the mortgage is down to around $80K, and the rent covers the payments and then some. It's gone up in value to over $650K in 10 years. I have a great property manager (she should be--she charges 8.5%!) and the house has never been empty for more than a few days. She's great at finding good, reliable tenants and dealing with all of the other headaches that come with renting out a property.

What r44 said might be true for him, but it is not true for everyone. The following information is from zillow:

"The average cost of property management is between 7% and 10% of the monthly rent, according to Kevin Ortner, chief executive officer of Renters Warehouse — a company that manages around 23,000 properties throughout the U.S. However, the total rental property management cost you’ll incur may be higher if there are any additional fees in the contract for things like evicting a tenant or contracting out repairs."

I love living in a house but HATE having to deal with the upkeep. Why would I want to have to keep up multiple houses? I'll stick with municipal bonds.

Buy Can Al Pet.

Trade stock options. Sell out of the money puts and collect the premium. Although, it's not exactly passive since you have to manage your trades. If the stock drops to the point where the option is in the money you may not want to own the stock and will have to close out the trade at a loss.

Take a writing class with your money. We don't start sentences with "So" in this manner, OP.

RE has its advantages, but I wouldn't recommend it blindly without knowing the OP. Not everyone has the personality to be a landlord. And you have to have a good financial situation overall. Not just to handle the illiquidity of a RE investment but to deal with the possibility of unstable income if the renter defaults or the place is vacant or an unexpected expense, like a pipe burst, arises.

In this life there's nothing really passive OP. All of the investments are going to require some upkeep and vigilance, no matter what, even shares and bonds.

Invest in some product from Avon and start selling! It’s a great way to meet people, make money, and to walk off that CoVid 50+ lb weight gain you have going on, OP (and no, those stretchy caftans do not hide it or that third chin)

Perhaps try Activo Income, or at least Versátil.

Tops are in higher demand than bottoms.

I'm fascinated as to why OP would see his home on the cusp on what tons of commentators are saying is going to be a massive housing boom. If you don't want to live in a house, just move out, and rent it out. When you dispose of assets and aquire new ones you take a big $ hit: work out how long it would take you to earn the money it cost to sell the asset, and I think you'll be surprised. Far better to keep the existing asset and leverage off it, to build further wealth.

see = sell

R56 Given the particular house and market, renting may not be practical. And the OP, if he's in the U.S., may want to take take advantage of the capital gains exclusion on sale of a principal residence.

We just came out of a pandemic where a LOT of people suddenly stopped paying rent. You should already be well disciplined about spending AND saving if you get into real estate and not rely on the income entirely from 1-2 apartments. Also, pay attention to your local market and neighborhood- a 300 unit condo complex built next door, your neighbor renting an identical apartment for less, or beach erosion/ chronic red tide WILL affect AirBnB and seasonal rentals and the unit’s appeal.

Insurance and HOA regulations are thorny and a having a drunken frat party, or suddenly your great tenants both lose their jobs and decide to stop paying means you should have a cushion of cash, compressive insurance, and a plan. I’d also avoid partnering with someone to buy property as it always ends in tears. My brother and I had to sell valuable property because we both have very different outlooks and it was too far from where I live.

It's amazing how the OP said he doesn't want to buy property or do the stock market yet that's all posters have suggested. And, I agree - I don't know how else you can get 'passive' income?

Index tracker funds are supposed to perform well over the long term and you don't have to deal with tenants and repairs, so that would be my choice.

You could advertise as "bottom only" on Rentmen. That's pretty passive.

OP, are you artistic or creative? If so, maybe you could write a book, for example, that can then be exploited in terms of copyright for translations, audiobooks, merchandising, films, series, etc.. and finally garner royalties from all that. But for this to be effective you would need to produce an undisputed bestseller or even a textbook people needed to buy because of its uniqueness.

Or maybe build an art collection and get paid everytime you loan out one of your art works or they are reproduced somewhere (e.g. publications, T-shirts, posters, etc...) Although, I must say maintenance of an art collection and logistics are terribly expensive and profits when you finally sell seldom offset the costs.

Write an ebook.

Proctor exams.

R62 That's the opposite of 'passive' income.

R65, it is passive income, but a lot of hard work must come first. Then maybe your kids once you are gone will enjoy the passive income from your estate.

R66 Yeah, still not passive income if you have to write a book and then do the work of trying to get it published. Plus the chances of it being a huge bestseller are vanishingly slim. Most books barely make much even if published.

Venture capital.

OP how much is your investment nest egg?

R46 How do you inherit a mortgage?

In the UK they have insurance policies attached that clear them at the death of the mortgage holder.

You can get lifetime mortgages when you are older (60 +) that repay on your death here, but they are never above 25 percent of the property value.

Spend it all on PowerBall.

R70 beat me to it , R46. You can’t inherit a mortgage. What are you talking about?

Pssst, OP: If you want to invest in a real estate stock that's a real market mover, check out ticker OTCMKTS: EGRNF

R70, it must be different in the UK than in the US. I'm 70 and Chase just last week approved me for a 30 year mortgage. No insurance policy attached. I don't expect to ever pay the loan off and neither does Chase. Title to the property I'm buying (vacation property) will be held by my trust and when I die, my trustee will sell off the property and repay the loan.

R74 The difference in the UK would be that it would be a lifetime mortgage of no more than 25 percent of the value.

No repayments would need to be made in your lifetime (or admission to a permanent care facility).

The total outstanding would be settled when your home was sold at your death or permanent incapacity.

You cannot inherit a mortgage. Your Executors would sell your home and doing distribute the funds accordingly.

It's a bit of a ruse to release money for your retirement and avoid large care home fees.

r70 r72 r75 I never said I inherited a mortgage--I inherited a house that had a mortgage. I was the executor/administrator of the estate and the sole beneficiary. It was up to me to decided whether or not to sell the house to satisfy the mortgage or keep it. But the mortgage definitely DOES not go away unless one has purchase mortgage insurance that pays off the debt when the mortgagor dies. That is not very common in the US.

Ride a buzzer while you package Avon orders!