What is Passive Income?
- May 19, 2020
It’s no secret that the Coronavirus has affected the economy in more than one way. Businesses are failing, companies are closing, millions of people have lost their jobs. All this probably means that people have lost their active income. There is reduced hands-on work that gets you paid, which means people have to turn to passive income.
Passive income simply means finding alternative ways for you to get income either through investments, working on your blog, or renting out your asset. It’s all about finding another revenue stream that doesn’t require your time or too much effort to get paid. Working from home can give you one of the best opportunities to explore these passive income ideas.
If you’d like to know more about them, keep reading as we explore nine assured ways to get yourself passive income right from your home. But before we start, let’s first look at the benefits of passive income;
SOME AMAZING BENEFITS
- It requires little to no attention to the job. Juggling between your day to day work and including another active revenue stream can leave you exhausted and you’ll probably not have the time for anything else. Passive income eliminates such stresses.
- Increased revenue stream. It’s just another way to earn you more money from the comfort of your home.
- Offers a financial Cushion. If you have passive income, it means you probably already have some form of insurance coverage for yourself and your family in case you lose your active income.
- Freedom of career. With passive income, you alleviate yourself from complete dependency on one income source leaving you to explore your hobbies and other career ventures.
- Stress reduction. One of the most popular issues arising in homes especially during harsh economic times is their financial constraints. Having such issues often leads to stress, anxiety, depression, and worse suicidal attempts. With a passive income, you have a better chance to deal with financial pressures.
PASSIVE INCOME IDEAS
Now that you know about these benefits, let’s have a look at these passive income ideas. They have been divided into three major sections;
- Investment Opportunities
- Online Opportunities
- Asset Actualization
INVESTMENT OPPORTUNITIES
01. REITs
The real estate business sees as high returns as 25%. Performing fairly well as an investment, it’s a lucrative investment to get into. It’s reliable and has relatively high yields. With REITs (Real Estate Investment Schemes), a trustee acquires property and holds it on behalf of the investor or beneficiaries. The trustee then appoints a manager who will oversee the asset following the Offering Memorandum.
This is similar to a landlord-tenant relationship where the landlord will delegate agents of a house caretaker to attend to tenants while they get a return on investment in terms of rental income.
There are three types of REITs;
- Income REITs (I-REITs) – investors pool together and acquire an income-generating real estate property which in turn will offer them capital appreciation and rental income. The appreciation is usually distributed to unit-holders at their agreed duration.
- Development REITs (D-REITs) – the purpose is only to acquire the real estate land to construct and develop their project. After construction, it then becomes an I-REIT. Furthermore, investors can choose to convert, sell, reinvest, or lease their shares.
- Islamic REITs – with its strict standards, this REIT invests primarily in income-producing, Shari’ah-compliant real estate.
REITs are considered very profitable and worth your investment
Common advantages of REITs;
- They’re exempt from double taxation. REITs have simple tax treatments. You only need to pay withholding tax on the interest income and dividends received. No paying of a corporation or income tax.
- Access to capital and investments
- Higher returns on investments. REITs are long term predictable income generating streams that have positive returns of 10.0%, 8.9%, and 5.6% for commercial, retail, and residential respectively
- Access to liquid cash. They function similarly to mutual funds.
- Portfolio Diversification. This simply means there are a variety of real estate properties and projects you can join, commercial or retail.
- Transparency
- Professional Management of real estate property. You won’t need to worry about any agency issues or fund managers taking advantage.
2. Collective Investment Schemes
Also known as mutual funds, these are also great investment platforms. They’re managed by fund managers and regulated by the Capital Markets Authority. They allow you as the investor to pool funds along with other investors to gain greater returns.
They can be in multiple types including;
- Money Market Funds
- Equity Funds
- Balanced Funds
- Dividend Funds
Collective investment Schemes offer relatively low costs, ease of entry into the scheme, and above-average returns. It’s also not limited to large investments so low-income earners can join. Examples of entities that have such collective investment schemes include Cytonn, CIC, Britam, Sanlam, among others.
3. Equities & Dividend-Paying Stock
Next, we have equities also known as share and stocks. Investing in the national securities exchange market can assure you returns in terms of dividends earned every year. Investing in companies as shareholders mean you only attend their AGM, besides that, you don’t play any active roles in the day to day running of the company.
At the end of the year, the annual dividend is calculated per share and you will be awarded for being a shareholder. The more you invest, the more you earn. However, the investment is high risk due to the rate of uncertainty in the securities exchange market. So only go for high performing stocks.
Investing in equities also means investing in government bills and bonds. Government Securities, also known as TBills and TBonds are investment options offered by the government to its citizens. They are the most secure type of investments since they’re safely managed by the central bank of Kenya.
TBills are short term investment options for 3 months (91 days), 6 months (182 days), and 12 months (364 days) with varied interest rates, usually between 8% and 12%. The minimum investment here is Ksh 100,000. On the other hand, TBonds are slightly different, in that they are a more long term investment, say five years, ten years, or more. Their profit margins will be slightly higher.
The best thing about these investments is that they are tax-free.
4. High Yield Investments
As the name suggests, the investment has above-average returns to a tune of over 18%. These high yield investments are best known as high yield savings accounts offered by multiple banks in the country. Examples of such include;
- Zidisha account by Absa Kenya
- Simba account by KCB
- Crossover savings account by HF group
Such savings accounts also have additional benefits such as no maintenance costs.
ONLINE OPPORTUNITIES
5. Affiliate Marketing
The internet of things opens a whole new world of endless possibilities. Examples of ways to earn money are by simply using affiliate marketing. Using your website or blog, advertise a certain product, and earn a commission for doing so.
Once you identify the product you would like to market from a site (say Amazon) get a unique affiliate link from the site and embed that in your blog/ website content. This way, any time someone clicks or purchases something from your link, you will earn a commission.
The amount you can get from affiliate marketing is varied depending on the product or terms of commission.
6. YouTube
YouTube celebrates content by rewarding people who offer lovable content. They have a YouTube Partner Program that ensures you get paid once you join the program and get in line or acquitted with their business model.
Earning from their partner program can also be diversified using these features;
- Advertising revenue: Get ad revenue from the display, overlay, and video ads.
- Channel memberships: Your members make recurring monthly payments in exchange for special perks that you offer.
- Merchandise shelf: Your fans can browse and buy official branded merchandise that’s showcased on your watch pages.
- Super Chat & Super Stickers: Your fans pay to get their messages highlighted in chat streams.
- YouTube Premium Revenue: Get part of a YouTube Premium subscriber’s subscription fee when they watch your content.
For each of these features, there are eligibility requirements and view count requirements. YouTube however had the power to decide who can switch on a feature or not.
7. Selling E-books and Courses
Lastly, under online opportunities, you could write an ebook or create online courses for people to enroll. The more people buy and enroll, the more you earn. Videos and podcasts as well earn royalties which can be a form of passive income. Sell your ebooks via Amazon prime and your courses on udemy for a chance to earn more.
ASSET ACTUALIZATION
8.Lease Your Room, Car, or Land
The definition of an asset is anything that gains value or appreciates over time. A good example is land. Instead of letting it lie idle, lease it out to someone for a certain period as you wait to see if the price will eventually appreciate or depreciate.
You could also lease your car and use it as a taxi or just a car hire. Multiple firms can do the job for you as you wait to receive money back. Expected returns can be between Ksh 2,000 to Ksh 12,000 a day. Examples of company rental businesses you could work with include, Kayak, Hire N’ Drive, Avis.
The same strategy can be used in your room. If you have a spare room in your house, rent it out and earn something in return. The best example is Airbnb, commonly known to offer such opportunities.
9. Money Lending
The last assured way to earn passive income is by being a money lender. There are several peer to peer lending institutions coming up including UbaPesa and Pezesha. Being a lender ensures you receive interest from any amount you lend. The process is low risk since you can choose your borrower. In return, the lender receives a whopping interest rate of up to 55.25% of the total interest on any borrowing. It doesn’t get any easier than that.
Less Work, More Income
The greatest impact of passive income presents is economic sustainability. Even with the economic hurdles recently felt due to Covid19, having passive income doesn’t cause strain as much as it would otherwise. Even with the loss of salary, jobs, and active incomes, passive income allows for one to sustain their livelihood.
Another positive and long term impact is financial independence. Everyone is encouraged to save for retirement, pension is one of the best ways to invest in passive income as it eliminates the need to work in old age.
Unfortunately, there can be negative impacts such as market saturation. Especially with online opportunities, if we all looked to delve into selling ebooks and courses the market will lose its value. Therefore, diversity is key!
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