3 Simple Ways To Earn Over $25,000 In Passive Income | personal financing

It’s possible, depending on your circumstances, that you get to the point where you earn more than $25,000 in passive income—each year. Here are ideas on how to achieve this.

Dividend-paying stocks are a great proposition for nearly any investor, not just those close to retirement or have retired. That’s because they pack a one, two, or three punch: When the dividend payer is healthy and growing, it will provide reliable income through dividends, no matter what the economy or stock market does. This return is also likely to increase over time. The value of the stock itself is likely to rise over time.

Dividends are very passive income. Simply buy dividend-paying shares, and then you can just start seeing the dollars build up in your investment account – or you may choose to automatically reinvest them in additional shares of stock.

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

Data source: Yahoo! Financial issues.

Real estate investment trusts (REITs) are also dividend-paying stocks, but they are a special type of stock. They belong to companies that have bought a lot of real estate — often in one or more places, such as apartments, industrial sites, or medical buildings — that they rent to tenants. (Some REITs are invested, instead, in mortgages.) REITs are also required by law to pay out at least 90% of their income in the form of dividends.

Here are a few of the highly regarded REITs:

Data source: Yahoo! Financial issues.

Finally, you might consider investing in actual rental properties. This involves much more than just buying shares of dividend-paying stock, or REIT. You will need to do a lot of research first, learn a lot about real estate investing, and you will need to be able to buy such property or real estate as well.

If you’re going to be an owner, make sure you know what that involves, to get an idea of ​​whether it’s right for you. Some personalities are not well suited to dealing with tenants who do not pay rent or who do property damage. (Yes, you can hire a management company to handle such things, but then you give them a portion of your earnings.)

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

It may take a while to reach $25,000 and above in passive income per year, unless you have a lot of money willing to go in right now. If you invest in a group of dividend payers and the average total dividend return is 3%, 4%, or 5%, here’s what you can expect in dividend income annually (remember that healthy, growing dividend payouts tend to increase their payouts now and later):

Data source: author accounts.

You will see that amounts much larger than $25,000 are quite possible – although it may take some time to put together 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 stocks, or if you are retired, you can simply use the money for living expenses.

It is also possible to make $25,000 a year with rental properties, but it all depends on a range of factors, such as the rent you can charge, the reliability of the tenants, the value of the property, the costs you incur, etc. .

There are plenty of other ways to set yourself up for passive income generation, and the above ideas are among the most popular that people follow. Find out which ideas make the most sense for you.

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Celina Marangian has positions at Digital Realty Trust, Medtronic, Realty Income, Starbucks and WP Carey. Motley Fool has and recommends positions at American Tower, Digital Realty Trust, Intel, Prologis and Starbucks. Motley Fool recommends Verizon Communications and recommends the following options: long January 2023 calls $57.50 on Intel, short January 2023 calls $57.50 on Intel, and July 2022 short calls $85 Starbucks. Motley Fool has a disclosure policy.