What is passive income?
A passive income is one that is derived from an investment in an asset that generates income without having to work on it, from investing time and effort.
You may be wondering if owning a business is a passive income asset because we see that people with the greatest fortunes derive from their business success, but that doesn’t necessarily mean it’s an investment that generates passive income. If you are working all day in the business, it is not so passive, because you are working on it, you are fully involved and you dedicate all your time and effort to make it work.
Another asset that might come to mind is real estate, right? Well, let me tell you that it also depends a lot on your activity in this area to determine if it is passive income or not. If you dedicate your time to looking for properties, buying them, remodeling them and selling them, it is not a passive income asset, it is your job.
But if you buy a FIBER or rent an apartment, things change and now we are talking about passive income assets.
Also read: The importance of Passive Incomes
So, do you earn money without working?
It may be that the definition of a passive income asset is a little strict in saying that it does not require work, time or effort, because the reality is that this is not always the case, despite having passive income sometimes you will have to be aware of it. pending the status of your investments or your assets, somehow you should spend some time.
Here is an example of this, if you have a house and you are renting it, it is a passive income asset because it is generating monthly income and you do not have to be working for it to happen, but of course, it requires you to dedicate some time to it! ! You have to maintain the house, negotiate contracts with tenants, incidents with tenants, among other issues that may arise, and when they do, you will have to dedicate your time to address this situation and do everything possible to continue renting.
But the fact that that happens doesn’t mean that your rental property is no longer a passive income asset, it clearly still is, which is why we comment that the definition is somewhat strict in that regard.
A more realistic definition of passive income assets would be this: that investment that generates recurring income without requiring all of your daily time.
Passive Income Asset Types
We already talked about some examples that can generally be confused with passive income assets, but as we mentioned before, there are some assets that depending on how you work with them, will determine if it is passive income or not, below we will review why.
These are the main 4 categories of passive income assets:
- Real Estate: Not all investment in real estate falls into this category, here we are talking, for example, of an apartment that you own and are renting, an investment in a rental pool of a real estate development, or an investment in real estate schemes where They allow you to buy a token that gives you a proportional part of the performance of a series of properties, similar to a FIBRA.
- Financial: Investments in stock market shares come in here, but not any stock, only those that pay dividends. If you buy a stock that does not pay dividends, you will not be obtaining that recurring income that is part of the definition of a passive income asset. so it is important to identify if the stock you want to buy pays dividends.
Another example of this category is the FIBRAS, which gives you access to the income of a group of real estate through a trust. Another example is the famous CETES or any debt instrument since these pay you interest without the need for you to allocate your time or work on them.
- Businesses: We are not talking about a business that you are just starting up and that clearly needs all your dedication and time to succeed, in this category we refer to any business that you manage to systematize and you do not have to be involved in the operational part and therefore operation no longer depends on you. Or also, if you are a capitalist partner of a business then it is an investment in a passive income asset.
- Intellectual property: With this, we refer to books, photographs, info products, digital courses, and everything active that derives from your creativity and knowledge that you can conceptualize in a creation that you can later monetize without having to replicate it. If you take a series of photos, write a book or take a course, the work is at the beginning when you create it, but once you have it and put it out for sale, it will be recurring sales for something you already worked on and that from now on they will only be sales.
You already know what a passive income asset is, how they work and some examples, now it is time for you to think about which of the 4 categories you think you have the most potential to develop and start to devise and identify how you are going to invest into some passive income asset.
If you were waiting for the right moment to generate an additional source of income, this is it, after reading this blog I hope you immediately get into the search for passive sources of income, you already have a much clearer idea, so go ahead! I am sure that you will find a way to do it and you will start to enjoy the famous “make money while you sleep”.