If someone promises that you will make money without bothering, then there is a high chance they are not being completely honest. You may have heard that some of your friends are living on passive income, but we can assure you that you will have to work hard first to reap the benefits.
If you don’t want to wait any longer to buy a car or a new TV, and we can assure you that you won’t make a lot from passive income to begin with, you should consider losing weight cheaply and evaluate personal loans instead.
On the other hand, if you consider yourself to be quite patient and keep making good decisions, your financial situation could improve significantly. In a nutshell, we will explain what passive income is and what are the most common sources of passive income that you should consider.
What is passive income?
In its simplest sense, passive income is when you make money while you sleep. It’s a steady stream of income that can potentially flow in even after you’ve finished work on something. This is usually the result of another business structure, such as a franchise or affiliate marketing program.
What are the most common types of passive income?
There are three common sources of passive income:
Passive income through franchises
Getting started in a franchise business can be challenging, but once you grow and build a solid reputation, it becomes easier to find new prospects. Most franchises require you to sign an agreement that promises to pay a percentage to the franchisor for every sale you make.
Passive income through a Real Estate Investment Trust (REIT)
A REIT is a trust for real estate investments. You can use this investment vehicle to invest in real estate. The profits generated in this way are then distributed annually to the shareholders in accordance with their shareholdings. There are different types of REITs that we will talk more about later.
Important Things to Consider Before Investing in Passive Income Opportunities
There are a few things that you should know before getting started with a franchise or REIT. We will discuss them all in the following lines.
You have to take risks
Before investing in anything, it is important to fully understand the risk factors involved. The last thing you want is to lose your investment because you didn’t know what you were signing up for. It may be tempting to put your money in the hands of an expert and let them take care of your investments, but remember that this is your money and if something goes wrong, you are the one to be affected.
Be aware of the tax implications
In case you didn’t know, passive income is subject to taxation and the rate of taxation depends on your tax class. That said, if you invest in a franchise or a REIT, there is a good chance that you will have to pay tax on the money you make from it. In some cases, the amount you have to pay is covered by the company you have invested in.
Negotiate and negotiate even more!
You definitely don’t want to pay full price for a franchise or REIT. If multiple offers are available, choose the ones that offer the lowest price and the best possible terms. The last thing you want is high interest rates and high fees. Always choose the best possible offer!
Once you find out the price of a franchise or REIT, contact them and let them know why you think it is too high. Then ask them if they can offer a better price or better terms. Most likely, they will accept your offer and allow you to negotiate further. Never stop negotiating until they match your offer!
Final thoughts
It can be tempting to invest all of your money in a business opportunity, but it’s not always the best decision. It is always best to diversify your investments so that your risk is minimal. What do we mean by diversification? Well, instead of investing in a single business opportunity, consider investing in two or three different ones. In the event of failure, there are other activities that you can support financially.
Having three different sources of passive income sounds like a great idea, but it also takes a lot of work and possibly experience. So it’s better to start with a source of income and then work on your skills and take bigger risks. Because the greater the risk, the greater the reward – just remember to stay sensible!
