When people think of Australia’s wealthiest, they’ll often assume it’s their large salaries – or even inheritances – that drive their huge income streams. In fact, it’s usually their investments that generate such high incomes for them. Typically, passive income investments.
Passive income is a new idea for many in Australia, particularly those who have followed the usual blueprint of earning a salary from a job and using that sole income source to save money. Let’s dive deeper into what passive income is, and how you can generate it through investment.
What is passive income?
Passive income is income received from deliberate planning and action. This might be an investment, where the capital you’ve invested earns you an income (whether it be dividends from shares or regular distributions from a syndicated commercial property investment) or it could be from a side business that’s putting cash into your bank account alongside your primary salary.
Retirees, or those approaching their twilights, are generally keen on passive income. This is because their propensity to work is severely reduced in their later years compared to their forties and fifties. These Aussies need another income source to supplement the income they will lose when transitioning to retirement.
This is why it can often be smart – very smart – to consider finding a passive income well before your retirement kicks off. A passive income investment is a great way to do this.
What is a passive income investment?
A passive income investment is any investment that produces a regular, reliable income.
The income from a passive income investment can be in many forms:
- Dividends from shares
- Distributions from an unlisted property trust
- Rental income from a residential property investment, or
- Interest from a term deposit.
It can be smart to look for passive income investments that offer you, the investor, the ability to set and forget the investment.
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What’s an example of a set and forget investment?
Well, you might place your money with a property syndicate. This is where multiple investors pool their money to go after bigger, better real estate investment. (Find out why big league property investments can be more desirable than small property deals.) The beauty is, they are run by property professionals, from start to finish. So you won’t need to lift as much as a finger to reap the many rewards.
Passive income ideas
As mentioned, the set and forget it nature of passive income investing is a beauty in itself. This is where you’ll place money in an investment that is managed by someone else, and the income is merely deposited into your account. No fuss, no hassles.
Passive income investments are unlike, say, day trading on the share market, where the investor will need to spend a significant deal of her time following the stock market through the day and using many share trades to gain an income. This would be an example of active income – you’ll need to spend a significant amount of your time and energy to generate it.
There are many ways to earn a passive income. Here are a few ideas:
- Commercial real estate investment
- Residential real estate investment
- Dividends from share investing
- A side business or freelance operation
- Royalties (from copyrighted music, books, etc.)
- Bond and fixed interest investments
- Managed funds and ETFs (Exchange Traded Funds)
Our preference? Earning a passive income from real estate.
Passive income from real estate
Real estate investment has stood the test of time.
If you look into the history of property investment in Australia, you’ll see that despite the falls and troughs of both local and global economies, real estate has always held its value during a financial crisis. This is in part due to the underlying land value of a real estate asset, as well as the underlying demand from tenants.
Commercial real estate is renowned for being a smart passive income investment. That’s because the yields are so high compared to other mainstream investments (learn more about what is a good return on a commercial property here).
The beauty of passive income from a commercial real estate investment is that the tenant will typically be responsible for your property’s outgoings.
And we’re not just talking about water rates and power.
If the tenant wants to make upgrades to the property, like a new fit out, new carpets, or a new paint job, then the expenses to do so (unless otherwise negotiated) usually fall on them. This leaves more money in your pocket each month.
It’s true that commercial real estate can be a big and often complex type of investment. So, how do you turn the big job of commercial property investment into a set and forget passive income source?
Consider investing with a commercial property syndicate
At Properties & Pathways, we specialise in creating passive income for many Australians. Our commercial property syndicates have generated thousands of dollars in stable income, with our investors receiving this income every month in the form of monthly income distributions.
And what do they have to do to enjoy this income? Nothing.
As the manager of the property syndicate, our job is to acquire, hold, manage and maintain the property, right up until it’s ready to sell.
There’s not many investments like it, particularly because the returns are so impressive.
Commercial real estate investment is known for offering yields (also known as investment income) of between 5 per cent and 7 per cent, and often even higher. Check out our track record to learn more.
Want to invest with us? Just ask. Get in touch with us today or subscribe to our monthly newsletter for expert insights on investing and updates on our next investment opportunities. We’d love to help create your financial autonomy with a stable, secure passive income investment.