Passive income is defined as a stream of income earned with little effort from the individual receiving the income. When you read almost any book on how to become a millionaire, it is suggested that for one to become such, it is important to establish alternate streams of income besides earned income.
1. Earned Income – Income from working a job
2. Profit Income – Income from buying and selling
3. Interest Income – Income from lending money
4. Residual Income – When you continue to get paid after the work is done
5. Dividend Income – Income from owning stocks
6. Rental Income – Income from renting a home
7. Capital Gains – Assets increasing in value
8. Royalty Income – Income from others using your ideas
Of these eight income streams, five of these alternate income streams can be achieved by investing in income-producing real estate whether its residential real estate or commercial real estate. Let’s examine each of those five income streams.
First, real estate offers profit income, the income achieved from buying and selling an asset. Second, if you’re a lender, real estate can provide the opportunity of receiving interest income that comes from lending money. Third, if want to continue to get paid after the work is done, real estate provides the best opportunity to achieve this income stream. Fourth, rental income is achieved from renting a home or a commercial property. And, fifth, capital gain income occurs when assets increase in value over time due to appreciation which can result from increased demand or inflation.
If you’re an investor who is a millionaire or wants to become one, real estate investing is a great choice when it comes to creating alternate passive income streams.
