If you are looking to build wealth and achieve financial independence, getting a high-paying job or a second job is not the way to do it.
As any financially independent person can tell you, passive income sources are the key to build wealth in the long term.
Here are five proven passive income ideas that can help you build long-term wealth.
Buy dividend-paying stocks
The benefits of dividend paying stocks are two-fold. First, they pay dividends at regular intervals, which can be an excellent source of passive income for you.
Second, as your stock holdings increase in value over a period of time, you can sell them for a substantial profit — commonly referred to as capital gains.
By investing in large corporations with a long history of paying dividends, you can expect to make money on a regular basis for the foreseeable future.
Invest in rental real estate
Investing in rental real estate is a tried-and-tested way to earn passive income and build wealth in the long term. You have two options when it comes to investing in rental real estate.
First, you can buy physical properties that you can rent out. These include independent housing units, apartments, retail space, office space, and commercial buildings.
Second, you can invest in what are called real estate investment trusts (REIT), which invest in rental real estate properties and split the rental income evenly among the investors on a quarterly or monthly basis.
Become a silent business partner
Entrepreneurs and business owners are always in need of capital so that they can take their venture to the next level. You can invest money in one such business and offer to be the silent business partner.
The active partner will run the business and take care of the day-to-day operations and will pay you a share of the profits on a regular basis.
Build an app that fulfills a latent need
If you have a background in programming, you can build an app and earn residual income from it. Building an app can require a substantial amount of effort on your part, so you need to make sure it is worth it.
There is no point in building a clone of an already existing app. You need to make sure you have a unique idea that will benefit users and design an app stands out from the rest in order to be able to make money from it.
Peer to peer lending
Peer to peer (P2P) lending is the practice of lending money to those who are unlikely to qualify for a traditional loan.
You can sign up with a P2P lending platform, pick and choose the loans you want to fund, and invest. You earn passive income in the form of interest payments.
Remember, P2P loans are unsecured and riskier than traditional loans. So, you need to vet the borrowers properly and choose the right people to lend to.
To reduce the risks associated with the borrowers defaulting on loans, you can make multiple, small investments, rather than making one large investment.
