3 Simple Ways to Earn Over $25,000 in Passive Income | personal finance

(Selena Marajin)

Passive Income: Who Wouldn’t? While you have to work for your salary and might also be working a side job for extra money, passive income quietly flows to you without much effort on your part.

It’s possible, depending on your circumstances, to get to the point where you’re amassing more than $25,000 in passive income each year. Here are ideas of how you can achieve it.

Image source: Getty Images.

1. Stocks that pay dividends

Dividend-paying stocks are a great proposition for almost any investor, not just those approaching or retiring. That’s because they offer a one-two-three punch: When a dividend payer is healthy and growing, they’ll generate reliable income through a dividend, no matter what the economy or stock market is doing. That dividend is also likely to grow over time. And the stock itself is likely to increase in value over time.

People are also reading…

Dividends are extremely passive income. You just need to buy a stock that pays dividends, and then you can start to see the dollars accumulate in your investment account, or you can choose to automatically reinvest them in additional shares.

Here are some well-known companies and their recent dividend yields:

Values

Recent Dividend Yield

Verizon Communications

5.2%

IBM

4.9%

Intel

3.8%

Pfizer

3.3%

Medtronic

3.1%

PepsiCo

3%

starbucks

2.6%

Data source: Yahoo! Financial.

2. REITs

Real estate investment trusts (REITs) are also dividend-paying stocks, but they are a special type of stock. They are owned by companies that have purchased a large amount of real estate, often in one or more niches, such as apartments, industrial sites, or medical buildings, which they rent out to tenants. (Some REITs alternatively invest in mortgages.) The law also requires REITs to pay out at least 90% of their income in the form of dividends.

Here are some well-regarded REITs:

REITs

Recent Dividend Yield

W. P. Carey

5.1%

Real Estate Income

4.6%

Digital Real Estate Trust

3.9%

public storage

2.6%

Foreword

2.5%

american tower

2.4%

Data source: Yahoo! Financial.

3. Rental Property

Finally, you might consider investing in real estate, to rent it out. This is much more complicated than simply buying dividend-paying stocks or a REIT. You’ll need to do a lot of research first, learn a lot about real estate investing, and you’ll also need to be able to purchase such a property or properties.

If you’re going to be a landlord, be sure to learn what that entails, so you’ll have an idea of ​​whether it’s a good fit for you. Some personalities are not suited to dealing with tenants who do not pay rent or who damage property. (Yes, you can hire a management company to take care of those things, but then you’re giving them part of your profit.)

Understand, too, that while many people have made a lot of money owning rental properties, it’s not always as lucrative as you might think. You’ll probably have to pay a mortgage on it, along with taxes and insurance. You will also need to pay for maintenance, repairs and upkeep.

How to get that $25,000 in passive income

It can take a while to get to $25,000 and up in annual passive income, unless you have a lot of money ready to go right now. If you invest in a group of dividend payers and your overall average dividend yield is 3%, 4%, or 5%, here’s what you can expect in dividend income per year (remember healthy, growing dividend payers will tend to increase your payment from time to time):

portfolio value

3% Average Dividend Yield

4% Average Dividend Yield

5% Average Dividend Yield

$100,000

$3,000

$4,000

$5,000

$250,000

$7,500

$10,000

$12,500

$500,000

$15,000

$20,000

$25,000

$750,000

$22,500

$30,000

$37,500

$1 million

$30,000

$40,000

$50,000

$1.5 million

$45,000

$60,000

$75,000

$2 million

$60,000

$80,000

$100,000

Data source: Author’s calculations.

You will see that sums much larger than $25,000 are very possible, although it may take a while to build up a large enough investment account. Once you have passive income, it can really help you financially. For example, you can reinvest those dollars in more stock, or if you’re retired, you can simply use the money for living expenses.

It is also possible to reach $25,000 annually with rental properties, but it will all depend on a variety of factors, such as the rent you can charge, the reliability of your tenants, the value of the property, the costs you incur, etc. .

There are plenty of other ways to set yourself up to collect passive income, with the ideas above among the most common ways people look for it. See which ideas make the most sense to you.

10 Stocks We Like Better Than Walmart

When our award-winning team of analysts has investment advice, it’s worth listening to. After all, the newsletter they have published for over a decade, Motley Fool Stock Advisorhas tripled the market.*

They just revealed what they think are the top ten stocks for investors to buy right now…and Walmart wasn’t one of them! That’s right, they think these 10 stocks are even better buys.

Stock Advisor returns as of 02/14/21

Selena Maranjian has positions at Digital Realty Trust, Medtronic, Realty Income, Starbucks, and WP Carey. The Motley Fool has posts and recommends American Tower, Digital Realty Trust, Intel, Prologis, and Starbucks. The Motley Fool recommends Verizon Communications and recommends the following options: $57.50 January 2023 Long Calls at Intel, $57.50 January 2023 Short Calls at Intel, and $85 July 2022 Short Calls at Starbucks. The Motley Fool has a disclosure policy.

Add Comment