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Are you looking for a way to diversify your income and protect yourself from economic downturns? An excellent solution is to create passive income streams.
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For this reason, it is worth exploring some practical ways to generate passive income and achieve stable returns in difficult markets.
Real estate investments
When it comes to real estate, it can be as passive or as practical as you want it to be. But the beauty of real estate is that there is limited correlation to financial markets. This means that real estate investing typically avoids most of the market volatility, even when the economy and stock market hit a rough patch.
“Real estate has long been considered a sound investment, and for good reason,” said Dana Ronald, president of the Tax Crisis Institute. “Even during a recession, people still need a place to live and businesses still need space to work. This creates demand for rental properties and makes real estate investing a reliable source of passive income.”
There are many options available to real estate investors. If you prefer a more straightforward approach, you can purchase real estate through a real estate investment trust (REIT). While some REITs are private, most trade on public exchanges.
Real estate crowdfunding websites are another way to indirectly invest in real estate. Sites like Fundrise allow you to invest for as little as $10.
You could also choose to invest in a physical property where you deal with tenants.
“With rental properties, you can generate passive income through rent payments from tenants,” explained Ronald. “However, it is important to carefully research and analyze the market and potential tenants before purchasing.”
Ronald also said that REITs tend to be more passive and less risky during a recession than owning physical real estate.
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Rent your stuff
When recessions occur, people become more conservative with their spending. They are less likely to hire help to do things around the house and more likely to do the work themselves.
However, many people do not have the necessary tools to complete some projects. That’s where you come into play. If you have tools at home, you can rent them out to others and make a quick, passive income.
For example, you might have a post digger that others would like to rent if they were replacing their fence. You could even rent out your snow blower to someone who doesn’t want to buy one for themselves.
About dividend stocks
High-dividend stocks can be a great way to generate passive income, even during a recession.
“These stocks pay regular dividends to shareholders and provide a steady stream of income regardless of market conditions,” said Andrew Pickett, senior litigator and founder of Andrew Pickett Law.
“When selecting dividend stocks, it is important to research and invest in stable and well-established companies with a history of regular dividend payments.”
Invest in self-storage
Another popular investment option? Self-storage building. These tend to be very recession-proof as people are always looking for somewhere to store their items, especially when they are moving and need a place to temporarily store items.
You can invest in self-storage units through a REIT or purchase a self-storage building directly. Self-storage buildings do a great job of self-management. You need someone to handle sales and someone to handle maintenance. Additionally, they are incredibly passive for investors.
Peer-to-peer lending
Whether the economy is booming or in recession, lending to others can be a big money maker. Some people would prefer to avoid going to a bank or financial institution when taking out a loan. While peer-to-peer lending involves risks, it can also offer high return potential.
Companies like Prosper and Funding Circle provide a platform that allows you to find different investment opportunities and understand their risks before jumping in.
Create an online course
If you have something you are passionate about and can teach it to others, you could create an online course. Platforms like Teachable give you all the tools you need to create a course, even if you’re not very tech-savvy. Building an online course requires a lot of work upfront, but once launched, it can be a huge source of passive income.
Open a savings account
By opening a savings account, you won’t get rich, but you will get a passive return on the money you save. According to the FDIC, the average APR on a savings account is 0.46%. However, many high-interest savings accounts have an APR between 4% and 5%.
If you can live without the cash for a certain period of time, you might consider a certificate of deposit (CD), which typically has a slightly higher APR.
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This article originally appeared on GOBankingRates.com: 7 Recession-Proof Passive Income Streams You Can Count On, According to Experts
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