Working your 9 to 5 job isn’t the only way to earn money. In fact, most millionaires have seven streams of income, which means you should start adding other income-producing opportunities to your portfolio.
One way to increase your income without putting in any extra work is income-producing assets. They sound more like an investment, and in some cases, they are, but the list we’ve compiled all pays dividends or other forms of regular income to increase your earnings.
We’ve uncovered every opportunity, from opening a savings account or money market account to investing in stocks, bonds, and other investments.
What Are Income Producing Assets?
Investment assets do more than appreciate or earn interest. They can also help you earn passive income. Income-producing assets are a great way to have a diverse portfolio and income. However, relying on one income source can be risky, and it won’t help you achieve your financial goals.
Income-generating investments produce income regularly, such as monthly, quarterly, or annually. A few examples of income producing assetsinclude dividend-paying stocks, interest from high-yield savings accounts, or rental income from a real estate investment.
When you choose the best income-generating assets for you, think about your risk tolerance, financial goals, how much you have to invest, and how you can diversify your risk to get the highest rate of return.
Pros of Income Producing Assets
There are pros and cons of investing in an income-generating asset like any investment or asset. Here are the benefits to consider:
- You receive regular cash flow – Usually, with assets, you have to wait until they appreciate, and you sell them to earn cash flow. However, you earn cash flow regularly with income-generating assets, allowing you to supplement your income or increase your investment portfolio.
- They are somewhat predictable – You probably can’t predict every asset and how much it will pay, but knowing that you’ll receive dividends, interest, or another form of cash flow based on the asset’s history can be reassuring.
- You can reinvest the earnings – If you don’t need the cash flow for your regular cost of living or other financial goals right away, you can reinvest the earnings and let your earnings compound.
- You have endless opportunities – Income-generating assets aren’t one-size-fits-all. There are hundreds of ways to earn money from assets, many of which are passive, so you don’t have to do anything to earn the income except investing your money.
Cons of Income Producing Assets
It’s important to understand the downside of income-producing assets, so you can decide if an investment is right for you.
- Cash flow does not mean high returns – There’s a difference between income streams and positive returns on your investment. It’s entirely possible to invest in an asset that pays dividends or assets that generate cash flow, but that doesn’t provide a high return on your investment.
- You may have a riskier portfolio – Investors that focus only on consistent cash flow tend to overlook the riskiness of the assets, leaving them with a much lower total return than investors that focus on the end result rather than passive income.
- Your tax liabilities could be high – Most regular dividends or passive income streams are taxed at your regular tax rate, which is usually higher than your long-term capital gains tax rate.
21 Best Income Producing Assets
Finding the best income-producing assets to invest in is the key to increasing your monthly cash flow while focusing on your overall investment objectives and portfolio too. Here are the best income-generating assets to consider.
One of the best assets to buy is stocks. Investing in the stock market is the easiest way to generate income when focusing on dividend-paying stocks. While there’s never a guarantee that dividend-paying stocks will pay dividends, you’re on the right track if a company historically pays them.
When you invest in stocks, you invest in a company. If they do well, so do the stockholders. Dividend stockholders are usually the first to get paid should a company go bankrupt, too, so it’s a good position to have when you’re looking for an excellent income-generating asset.
Many companies pay stockholders dividends quarterly, but there are also plenty who pay monthly. In addition, some dividend-paying stocks tend to pay higher dividends over time. This is called dividend growth investing and can be an even greater way to increase your net worth.
Investing in bond funds means you loan money to a government agency or corporation. Government-issued bonds are low-risk and often pay interest. Corporate bonds are riskier and usually rated by their risk level.
Bonds are usually collateralized and can run the risk of default depending on who you buy them through, aka junk bonds versus government bonds.
A bond’s return is usually much lower than a stock’s return, but every portfolio should have a certain amount of conservative investments too. While there’s no guarantee bonds will perform, the chances are much higher than any investments in the stock market.
3. Investment and Vacation Properties
If you’re looking for income-generating assets that produce income regularly, investment and vacation properties can be a great choice. Of course, owning property means you are a landlord and responsible for all aspects of the property, but they can provide an excellent return on your investment.
The nice thing about income-producing real estate investments is you can leverage your investment by borrowing money to buy the property, investing in a much larger property than you could afford with your own capital. Of course, you’ll need great credit and a decent down payment to be able to buy property, but with the right lender, you can secure financing to leverage your investment.
You can earn rent in investment homes and vacation homes. You can advertise vacation homes on sites like Airbnb or locally. You’re responsible for property taxes, homeowner’s insurance, and overall maintenance and upkeep.
You can charge rent according to the average for the market to stay competitive and to keep your rental income steady. Most investors invest in single-family properties, such as single-family homes, condos, or townhomes, but you can also invest in commercial properties too.
Consider farmland if you’re interested in investing in real estate but don’t want to own a rental property or vacation home. It may sound crazy, but farmland appreciates much like any other real estate investment and can be a great way to supplement your income.
You don’t have to be a farmer or know anything about farming to invest money in farmland, either. You can buy the property and rent it out to farmers, much like renting out a home to tenants.
If you own the farmland yourself, you decide how you’ll accept payment for the farmland. You can earn rental income and a percentage of the proceeds farmers bring in from the crops and livestock they have on the land.
If investing directly in farmland doesn’t interest you, it’s also possible to invest in it with crowdfunding platforms like FarmTogether, or you can invest in real estate investment trusts that focus on farmland.
No matter how you invest in farmland, it’s a form of real estate investing that generates income and typically has capital appreciation.
5. Real Estate
Investing in real estate properties can be anything from buying rental property and finding tenants to buying a commercial property and renting it to small businesses. Real estate (both residential and commercial) often appreciates, helping you earn capital gains on your investment while also earning a regular income.
The income potential from real estate is endless because there are many ways to earn from it, including rental income, equity buildup (used to invest in more real estate properties), and capital gains when you sell the property.
6. Real Estate Investment Trusts (REITs)
REITs are a great way to invest in real estate without owning any properties outright, and you don’t have to be an accredited investor to invest in it. If you don’t want to be a landlord and have the responsibility of physical real estate on your shoulders, you can still invest in real estate with REITs or real estate investment trusts.
Rather than investing in physical property, you invest in a real estate company that buys and manages real estate. They usually operate commercial properties, such as apartment buildings, retail establishments, hotels, offices, and shopping malls.
As an investor, you can invest as much or as little as you want (some platforms allow investments as low as $100), and you’ll earn a prorated amount of the rental income and capital appreciation that the building earns.
Some real estate investment trusts are public, meaning they trade on the stock market during regular trading hours. Others are private equity investing, with less liquidity because there isn’t a secondary market to buy them.
7. Small Businesses, Franchise & Angel Investing
Investing in a small business, franchise, or as an angel investor is one of the best income-generating assets. As a business owner, you are an entrepreneur and get to make all the decisions about the business.
You can build an online business or a brick-and-mortar business. As you grow your audience and clients, you’ll earn more money and can help your business grow. Whether you have an online business or a physical store, advertising on social media and using other advertising efforts can help you grow your clientele and business, leading to more income-producing opportunities.
If you’d rather not have the pressure to own your own business, you can also be an angel investor or an investor who helps new businesses get up and running. You invest your capital but don’t have to worry about managing the business or even making tough business decisions.
8. Peer-to-Peer Lending
Peer-to-peer lending is one of the more unique income-generating assets. This is because you invest in individuals rather than investing in a company as you would with stocks or bonds. These are usually people that were turned down for traditional lending because they have bad credit or other financial issues.
Borrowers apply for funding with a retail lender, and the lender gets the money from investors like you. With traditional peer-to-peer lending platforms, you can invest as little as $25 per loan, allowing you to diversify your portfolio and reach your investment objectives.
You might not have the rights to your favorite artist’s songs, but you can buy royalties to various songs, movies, or even trademarks on sites like Royalty Exchange.
You’re buying rights to future profits from the sale of the song, movie, or trademark you invest in. Of course, like any investment, there’s no guarantee that it will be an income-producing asset, but the risk makes the asset worth more.
Each time someone buys the song, movie, or trademarked item, you earn income. The opportunities to invest in royalties spans a large market, giving you many chances to earn money.
10. Your Own Product(s)
If you own an online business or not, you can sell products and earn money. Of course, it’s best to have a website or direct business, but if you’d rather not deal with the hassle, you can generate income by selling your products on sites like eBay, Etsy, or Facebook Marketplace.
Selling your own product gives you limitless opportunities. You can sell arts and crafts you make, a printable product you’ve created, courses you’ve created, or even your services.
11. Certificates Of Deposits
If you want a low-risk investment, consider a certificate of deposit or CD. You can get them at your local bank or an online bank. CDs typically pay higher interest rates than savings accounts, but you must commit your funds for a specific period.
The longer you tie up your funds, the higher the interest rates you’ll earn on your deposits. So don’t withdraw your funds early, or you’ll pay a penalty that is usually equal to 3 months of interest.
12. Savings Accounts
You might not think of a bank savings account as a way to earn money, but they generate passive income for literally doing nothing. You have to deposit funds and leave them there to grow.
To make the most money, it’s best to shop around for banks with the highest interest rates, which you can usually find online in high-yield savings accounts. Even though savings rates are low today, they are an income-producing asset that requires no work from you.
13. Private Equity Investing
To help small businesses get up and running, private equity investing can be a great income-producing asset. Before you jump in head first, though, know the risks.
Most startups are risky. Make sure you’re working with a company that has done their due diligence, has a great management team, and a solid business plan. Also, understand that you might have to tie up your funds for the long term. Most new businesses don’t have enough capital to cash out for several years.
The risk of new companies failing is pretty high, so understand the risk of investing in companies and doing as much research as possible before choosing where to invest your money.
Annuities can generate income throughout your retirement years. However, the money you invest in this income-generating asset is locked up for life. Therefore, you cannot withdraw the funds early.
When you buy an annuity, you purchase an insurance product that produces income. You earn a portion of your money back plus interest in predetermined frequencies, based on the interest rate determined at purchase.
Keep in mind that annuities do not protect against inflation. If inflation gets out of control, you may lose purchasing power with this income-producing asset.
Websites can be a great income-producing asset too. Whether you own an online business that sells products or services or you own a blog, there are ways to monetize your site and make passive income.
The obvious way to make money with websites is to own a business with inventory, selling it to your customers. However, you can own a blog and make money with affiliate links and sponsored posts. Each time a reader clicks on one of your links and makes a purchase, you make money.
Another way websites can help you generate income is through drop shipping. As the website owner, you do the marketing for the products sold by the drop shipper, but the drop shipping company handles everything from order processing, payment, and order fulfillment.
You make money by charging a higher price than the drop shipping company charges you, which are usually wholesale prices.
16. Self-Storage Units
If you rent a self-storage unit and don’t need it, you can sublease it to tenants and make rental income.
This works well with actual storage units or even areas of your home, such as attics, basement space, or even crawl space. You determine how much space you can offer for rent and the price. Then, you can advertise the space locally and collect rent. This is another way to take advantage of real estate investing without the hassle of being a landlord for a full physical property.
Private art investments can be great income-producing assets. You can invest in art directly or use platforms like Masterworks to invest in blue-chip art deals. However, keep in mind that art investments are often illiquid, so make sure that the capital you invest is not money you need.
18. Crypto Interest Accounts
You’ve heard of regular savings accounts, but now there are crypto interest accounts, aka crypto savings accounts, to help you earn more passive income. While they don’t have the backing you’d get with a regular savings account (FDIC insurance), the returns can be higher because of the higher risk.
Like regular bank accounts, every account has different requirements. For example, some accounts don’t require a specific minimum deposit or lock-in period, while others do. Some accounts also offer promotions that pay you a bonus for a certain size deposit or for keeping your money invested for a certain amount of time.
19. Index Funds
Consider index funds if you’d rather have a passive income stream versus actively watching the stock market. The funds’ return mimics that of the stock market without the risk. When you buy index funds, you buy a basket of securities that either mimics an index, such as the S&P 500, or a specific industry.
20. Money Market Accounts
Money market accounts are a step up from savings accounts. They usually pay a higher interest rate but have higher minimum deposit requirements. In addition, most money market accounts are FDIC insured, so your money is safe should the bake go out of business.
21. Real Estate Crowdfunding
Real estate crowdfunding is another way to invest in real estate. You, along with hundreds of other investors, invest money in commercial real estate properties. For example, you might invest on the equity side, owning a part of the property and earning income from the rent, or on the debt side, acting as the lender and earning interest payments regularly.
Investing in real estate with real estate crowdfunding is a great way to get your foot in the door with real estate investing without the need for a lot of capital or the stress of owning physical real estate yourself.
Income Producing Assets and Taxes
With any investment, it’s important to consider your tax liabilities. Most income earned from income-producing assets is taxable at your regular tax rate unless you invest in them using your tax-advantaged accounts such as an IRA or 401K.
Your tax advisor can help you determine the best way to invest in income-generating assets before you invest so you’re aware of how they’ll affect your tax liabilities.
If you’re taxed at your regular tax rate, this will increase your tax liabilities and could even affect your tax bracket, which is why it’s important to understand how you will be taxed on the income you earn.
Income Producing Assets FAQ
Which Income Producing Asset Brings the Greatest Return?
All investments have different returns. How much you earn depends on your location, how much you invest, and the state of the market. For example, today, you could say that dividend stocks are the best investment, but in a year or two, if the market crashes but the real estate industry is thriving, you might say that investing in real estate is a much better option.
The best income-producing assets fit within your risk tolerance, pay the income in intervals you need, and have the greatest return based on how much you can afford to invest.
How Frequently Do Income Producing Assets Pay Income?
Every income-producing asset pays income at different intervals. The most common way to earn income from income-producing assets is monthly or quarterly. Other assets, however, pay semi-annually or annually.
Do your research ahead of time to determine how often an asset pays income to see if it fits within your investment strategy. For example, some assets, such as individual stocks, don’t have a predetermined time they payout. Instead, it is dependent on the company’s performance.
Do Income Producing Assets Depreciate in Value When Interest Rates Increase?
When interest rates increase, income-producing assets become less favorable. It sounds backward, but here’s the reasoning.
Investors take the path of least resistance. Why would they risk a total loss in an asset like dividend stocks if interest rates are high and they could earn the same money in money market accounts or other ‘safe’ investments?
Increased interest rates also mean a higher cost of capital, which negatively affects companies. If labor and supplies are suddenly more expensive for companies, they become less profitable and are unable to pay out dividends or even have as high of profits.
What Does It Mean When an Asset Stops Paying Income?
Most people have first thought when an asset stops paying income is that the company is doing poorly. That’s not always the case, though.
Sometimes though, companies choose to reinvest their earnings to grow the company or even to save it. While there are times when an asset stops paying income, it signifies trouble, but don’t always assume the worst.
Income-producing assets are a great way to diversify your income and get more money coming in without adding to your workload. Whether you invest in a real estate investment trust, stocks, bonds, or real estate, the opportunities for extra income are endless. Even a savings account or money market account can count as additional income, especially if you find high-yield accounts that are low risk yet pay well.
Samantha uses her BS in Finance and MBA to help others control their finances through budgeting, saving, investing, side hustles, and travel hacking. Due to following the FIRE Movement’s principles, she was able to quit her high-stress job in the financial services industry in July 2019 to pursue her side hustles. She is now a full-time entrepreneur, freelancing coach, and blogger.