Why Passive Income Weighs more than Active Income
Classic Granny Flats Address: 37 Winton Road, Joondalup WA 6027 Phone: (08) 9301 2122
Retirees and budding investors are making smarter financial decisions these days. That is, choosing to make money work for them rather than working for it. Passive vs. Active Income In financial terms, making money by being employed or by hands-on managing of a business is earning an active income. On the other hand, gaining money without the direct or regular participation of the investor gives passive income. Comparing these two vehicles, it makes a lot of sense that more and more Australians are looking into passive income as a retirement solution. Active income requires time, effort and capital just to generate a profit or earn a salary while passive income can kick off with capital alone. Active income requires consistent dedication and thrives in skills, build-up and in-depth trade knowledge. With enough effort and some luck, the employee will gain promotion while the business owner will expand the company. Dividends and Rent Passive income is a breeze. The Escapologists lauds passive income as the holy grail of wealth. It comes in many forms largely through dividends and rent. Both of these sources require putting up some cash and studying market trends. Their main difference lies in the amount of effort in procuring the first income stream. While an investor can virtually ‘set and forget’ dividend-based investments such as stocks and bonds, it takes months and years to grow, and these are largely dependent on market performance.
The Strength of Rent Collecting rent from tenants in a property earns money fast or at least within the short waiting period of a month or a week. YourInvestmentPropertyMag.com.au gave an example of how renting provides ROI. Building a $100,000 granny flat on Sydney’s north shore may yield a weekly income of $450. With an interest rate of 7 percent, the owner would be paying the mortgage off at approximately $200 per week. This is a gross rental yield of 23 per cent or around $13,000 directly in the investor’s pocket annually.
The best part is that running this business can be delegated to a property manager and never require an investor to lift a finger. Passive income is never easy money as its name would suggest, and active money should never be taken for granted as it can jumpstart investments. Investors should be brave and diligent enough to learn how to earn from passive income and they are set for a better financial state. Resources: http://www.classicgrannyflatswa.com.au/ http://www.yourinvestmentpropertymag.com.au/property-development/a-clevertrick-you-didnt-know-could-triple-your-rents-147500.aspx http://escapologist.com.au/category/wealth-building/passive-income/