It’s 2022 and up until this point, the only way you’ve been cashing checks is by busting your butt at work day in and day out. However, you’ve heard there’s another way. You’ve heard about this thing called passive income and you want your piece of the “make money while you sleep” pie. Well, you’re in luck because we’re about to go over the 5 best investments for passive income in 2022!
Investment #1: Real Estate
5 Best Investments For Passive Income 2022 Look up any list of the top passive income investments and real estate is almost guaranteed to be there. This is for good reason. If you ask me, real estate is one of the most practical passive income investments you can put your money into. Let’s talk about why that is and also go over some of the downsides of this investment option as well!
However, before we begin, when I am referring to real estate in the context of making passive income for the average person, I am referring to leveraging a residential property to generate passive income. Now, of course there are other types of real estate like commercial properties and land but chances are those aren’t assets you have the means or the desire to own and as such we won’t address them.
Now that that’s out of the way, if you ask me, residential real estate is one of the most practical passive income investments you can sink your money into for a few reasons. First, we all need a place to live. Whether you live in the nicest condo building in your city or you are still stuck in your Mom’s basement, we all need a roof over our heads. This means that there will be a perpetual need for the service you provide and with home prices skyrocketing in the past year, there will naturally be a higher amount of renters on the market which is a financial externality that you should be excited to be cashing in on!
Next, let’s talk about sustainability. There are a million and one ways to earn passive income but quite honestly some are more reliable than others. What’s great about a real estate property approach to earning passive income is that the business model never changes. Whether it’s 2022 or 2052, the process of making passive income in this way will always be to acquire a property, find a tenant and exchange your service for money. It’s that simple. Finally, renting out a property is a passive income strategy that most people can wrap their heads around. Unlike setting up a complicated online business, the process of buying a property, advertising it and renting it out is quite simple.
Now, before you call up your agent and become your city’s next real estate mogul, we need to go over a few downsides of this investment option. First, there’s the cost. As I just mentioned, home prices have skyrocketed in the past year and as such acquiring a house you can use to earn passive income can be a financial obstacle for many people. Moreover, earning passive income through real estate does come with it’s own set of challenges. From trying to find a suitable tenant to dealing with repairs and renovations, earning rental income is not as hands off of a process as most people take it to be. However, I still think that if you have the means, and the patience, that real estate is one of the best investments you can make if you’re looking to make passive income in 2022!
Investment #2: Online Businesses
Now, I know this may be hard to believe but there are in fact better ways to use the internet than watching cat videos or visiting the hub. One of these ways is, you guessed it, building an online business!
Now, I know that for some people, the thought of making money online, especially passively, seems like an impossibility. If this sounds like you then don’t worry, none of us were born with internet expertise, however if someone like me can learn to earn money online, so can you. Let me share with you some ways I earn passive income online so that you can get a taste for just a few of the options you have accessible to you.
Presently, I earn online passive income in three different ways. My primary source of online passive income comes via my two YouTube channels. As a personal finance YouTuber, I regularly create content and my videos pay me now and over time. For instance, I have a video that I created over two years ago that still pays me a few hundred dollars a month. When you consider I have published over 300 videos, you can see how that can add up to a good sum of passive income every month.
The second way I earn passive income online is by writing on Medium. While this is a newer online endeavour, it’s an easy way to grow my personal brand while collecting income from the Medium Partner Program while also using my content as a lead magnet to sell my online courses.
Finally, there’s my drop-servicing business. If you’re unfamiliar, drop-servicing involves acquiring contracts for work and then outsourcing that work to someone else and collecting the difference in profits. In my case, this involves finding clients who need animation services and then outsourcing the work to my team.
Now, I know the concept of making passive income through an online business doesn’t come across as an investment in the traditional sense but it is as much of an investment as every other investment I am sharing with you today. Building an online business takes time, money and in most circumstances, both. For instance, on YouTube you are investing money to buy the equipment you need to create your videos. Alternatively, if you are publishing to a blog, you are investing the time it takes to make the content that will captivate your readers attention.
If you ask me, if you’re willing to invest time learning how to leverage an online business to make passive income then there’s no better way to make money while you sleep. From it’s low startup costs to its high income potential, online businesses are another great option for making passive income in 2022.
Investment #3: Peer-To-Peer Lending
You know what feels good? Helping people out. You know what feels better? Helping people out and earning passive income at the same time and with Peer-To-Peer lending this is entirely possible to achieve!
Now, this may be a means of earning passive income that you’re rather inexperienced with and as such let me explain what Peer-To-Peer lending is, how it works and then some of the pros and cons of this passive income model!
So, what is Peer-To-Peer lending? Peer-To-Peer lending is when two individuals come together to meet a lending and borrowing need. For instance, if your Uncle Frank needs money and you lend him money, this is technically a Peer-To-Peer lending transaction. Simply put, peer-to-peer lending is any lending transaction that doesn’t involve a bank. Now, while you may not charge good old Uncle Frank interest to borrow your money, when it comes to lending money to others, passive income via interest is yours for the taking. How do you go about doing this? Let me explain.
There are numerous online platforms like LendingClub and UpStart which connect borrowers and lenders. On these sites, you can review borrower needs and invest as little as $25 into a borrowing fund.
Now, the pros of this passive income approach are that like I just said, the initial investment can be very low and once you hand over your money, any interest you earn requires no effort on your part. Not to mention, returns from lending can be quite lucrative, often being well into the double digit range.
However, while the returns can be enticing, Peer-To-Peer lending is not a perfect passive income investment. First, many of the borrowers on Peer-To-Peer lending platforms are coming to these sites because of their lack of creditworthiness which means that you’re going to be required to take on a large amount of risk to make this means of earning passive income worthwhile. Moreover, there generally is no secondary market for peer-to-peer loans which means that if you invest your money, the only way to get it out is to let the loan time period elapse therefore peer to peer lending is not likely to be a passive income option you’ll want to consider if liquidity is something you require.
Investment #4: Dividend ETFs
Look at any list of the best passive income investments and 100% of the time dividend stocks will be there. Well, I’m not about to change that so let’s talk about why dividend-producing assets are another investment you should consider in your hunt for passive income.
You see, in the last few years, dividend investing has become one of the most popular topics in the world of personal finance. This is because, most people have been sold the dream that if you build up a large enough dividend portfolio, then you can live the rest of your life drinking Pina Coladas on the beach in Mexico while dividend checks come rolling in on the daily. While I’d hate to perpetuate this dream that only about 1% of people actually have a chance of achieving, it’s true that earning passive income through dividend-assets can be this easy so let’s talk about how you can go about making money in this way.
The foundation of any dividend investing approach is selecting companies that will continuously provide value to you as a stakeholder in the form of a regular dividend check.
However, there are thousands of companies that pay dividends, so how do you know which ones to invest in? While there are some ways to simplify this selection process such as by investing in the dividend aristocrats which are stocks that have consistently paid out and raised their dividends over the past 25 years, even with a shortened list, choosing 3M or Coca-Cola is a decision you’ll have to make. So, how do you choose the right company to invest in amongst a group of winners? Simple, you don’t!
This is why I’m bullish on investing in dividend ETFs over individual dividend-producing stocks. Let’s face it, most people can’t distinguish one good company over another and by buying into an ETF that owns numerous dividend-producing companies, you gain the benefits of diversification and passive income with little research time required.
Investment #5: Productized Knowledge
If you’ve made it this far then you’re in for a treat because one of the best passive income investments in 2022 is investing in knowledge that you can productize to make money while you sleep.
So first off, what is productized knowledge? I know it sounds a bit complex but trust me, it’s not. Productized knowledge is simply knowledge that you possess that is transformed into a product that you can distribute at scale.
You see, what most people fail to understand is that making large amounts of income requires two key elements: value and reach. Whenever you create something people are willing to pay for, it’s indicative that you’re providing value. Then, there’s reach. Simply put, the more people you can provide value to the more money you will make. While most people have value to provide, the reach is often where they falter and I can tell you this from personal experience.
A little while ago, I started offering one-on-one YouTube coaching for people who wanted to start and grow their own YouTube channels. While it was great to work so intimately with my students, I ran into an issue almost instantly. Simply put, the demand for my time exceeded my time availability. As such, I had to start turning down clients which meant squandering the YouTube progress of those who wanted to work with me as well as simply leaving a ton of money on the table. This is when I knew I had to change my approach to how I shared my YouTube knowledge and expertise.
Instead of getting on hour-long calls with my students, I instead decided to create a course that would provide all the same knowledge but would allow me to separate my time from my income. By doing this, I was not only able to share my knowledge with more people but was able to make this service more affordable given my time involvement was not constantly required.
Therefore, if you are looking to invest in a means of making passive income in 2022 then ask yourself what knowledge you can acquire that can be transformed into a passive income asset. For me, it was an online course. For you, it could be a web-series you host, an e-book or even an informative app. Regardless of the channels you use to share your expertise, acquiring valuable knowledge and creating a means of disseminating it takes an upfront investment of your time and money but once that passive income starts to flow, all your efforts will have been worth it!