- Higher Risk, Higher Return Investments
- Investing In Royalties
- Renting/Leasing out Vending Machines
- Property Rentals (Real Estate)
- Car Rentals
- Tax Lien Certificates
- Investing In Timberland
- Rent Out What You Already Have
- Wrapping Cars
- High Dividend Stocks
- Real Estate Investment Trusts (REITs)
- Investing In Billboards
- Peer-To-Peer Lending
- Investing In Farmland
- Laundromat Business
- Car Wash Business
- Buy A Business
- Angel Investor
- Private or “Hard Money” Lender
- Conservative Investments
- U.S. Government Bonds
- High Interest Savings Account
- Certificates of Deposit (CDs)
Investing in cash flow assets that generate monthly income is one of the best ways of building wealth.
Below is a list of practical, tried, and true assets to add to your portfolio to start building up your asset column for cash flow. Categorized into two (2) sections depending on your risk tolerance. They are:
- Aggressive: higher risk, higher return investments
- Conservative: no to low risk, low to mid return investments
Any investment should always be vetted with proper due-diligence and upfront knowledge and/or experience from you and/or your financial advisor(s) before putting your money into anything.
Higher Risk, Higher Return: Cash Flow Assets
Aggressive investments are risker because investors are willing to gamble more risk for more return, as opposed to providing the financial stability and predictable income conservative investments bring.
#1. Investing In Royalties
Investing in royalties is investing in ownership, usually in the form of some type of intellectual property. Once an investor owns the rights, they can then license that property to a licensee for a fee through legally-binding payments called royalties.
These types of investments are one of the best cash flow assets an investor can add to their investment portfolio. Depending on the type of royalty, investors can see double digit returns, if you’re investing in something like music royalties or oil and gas royalties.
Related Article: 8 Types of Royalties That Generate You Monthly Cash Flow
#2. Renting/Leasing out Vending Machines
One (1) vending machine makes roughly $300 in profit per month, according to brandongaille.com. But depending on the type of vending machine, location, and restock frequency, some can earn even more while others can make less.
Investing in commodities such as soda machines, snack machines, candy machines, ice machines, coffee, and ATM machines, you can see a hefty long term ROI on your money if you run your vending machine business the right way.
Reminder: One (1) vending machine makes roughly $300 in profit per month.
#3. Property Rentals (Real Estate)
Investing in rental properties is one of the most tried and true assets to generate monthly cash flow. Real estate, for many, has been the driving force of building wealth.
Depending on the property type and location, you can typically see anywhere from $100-$500 of net cash flow per month per unit.
Most real estate investors aim for a cash on cash return of between 8 to 12 percent, while others may be okay with 5 to 7 percent.
Five (5) types of property rentals are:
- Multi-family (Duplexes, Triplexes, and Quads)
- Apartment buildings
- Vacation/Short Term Rentals
- Mobile Homes (Trailer Park Homes)
Note: Propert rentals are eligible for the 27.5-year depreciation tax benefit.
#4. Car Rentals
Whether it’s your personal car, a few cars, or a fleet of vehicles, a car rental business can be a very profitable business venture that can produce a solid ROI and tax depreciation benefits.
Note: Car rentals are eligible for the 58 cents (0.58) per mile depreciation tax benefit using the Standard Milage Rate method.
Related Article: What You Should Know Before Renting Your Car Out (Checklist)
#5. Tax Lien Certificates
Investors buy tax liens at the auction, paying the full amount of taxes owed on the property. In return, the investor collects back the principal money plus the agreed interest amount from the property owner over a, typically, 1 to 3 year redemption period.
Interest rates vary state-to-state depending on which state the lien is in. For example, in Illinois, the interest rates go as high as 36% while in states like Montana or Missouri it’s 10%. But according to NTLA’s Executive Director Brad Westover, most tax liens purchased at auctions are sold at interest rates between 3 to 7 percent nationally.
#6. Investing In Timberland
Investing in land is always a smart investment and timberland is no different. There are approximately 500 million acres of timberland in the U.S. and 54% of it is owned by individuals.
Investors can expect to profit anywhere from $500 to $2,000 per acre, depending on the type of trees and how long these trees grow before selling.
** One downside to investing in timberland directly is the amount of time required for the trees to grow. In order to sell your acres for top value, the trees must grow, and these trees can take anywhere from 15 to 26+ years to fully mature before being cut down and sold.
Tip: An alternative would be to invest in timberland REITs if you don’t want to wait 15 to 26+ years to rake in your timberland investment profits.
#7. Rent Out What You Already Have
Investing or “buying income”, for most investments and investors, can have high barriers to entry.
So if you don’t have a lot of capital to work with or much experience investing, start by leveraging and renting out the assets you already have to produce cash flow.
These include things like:
- A spare room
- Your car
- Storage area
- Parking space
Related Article: How To Make Money With Your Car
Tip: Rent it out, save the income from it, and repeat that until you have enough saved to put it towards larger, more lucrative investments.
#8. Wrapping Cars
You can make an extra $200-$500 per month of ACTUAL passive income per vehicle you wrap. This would turn your car(s) from liabilities to assets by having them cash flow month over month.
Luckily, there are a few legit car wrap companies that partner with advertisers that will pay you to advertise on your car.
#9. High Dividend Stocks
Dividend paying stocks work by you, the shareholder, investing your money in a dividend paying company. In return, that company pays out a piece of their profits quarterly, to its shareholders, in the form of dividends.
Contrary to popular belief, the stock market is actually a safe investment if you buy and hold for the long term. If you take the past 100 years and average out, from 1919-2019, the average annual return was 9.4%.
Stock investments are not FDIC Insured.
#10. Real Estate Investment Trusts (REITs)
The three types of REITs are equity REITs, mortgage REITs, and hybrid REITs.
REITs have long outpaced the S&P 500 in total returns since NAREIT started tracking their performance in 1972.
The compounded annual return average for stock exchange-traded Equity REITs over the 20 year period, from 1999 to 2018, was 9.9%. Again, outpacing the S&P 500.
Note: REITs and stocks, along with all other stock market investments show that, according to historic data, long-term holds and far less risky than short-term holds.
#11. Investing In Billboards
Billboard advertising is just one type of ad revenue, which can be a very lucrative cash flowing source of income if you have the right business model that welcomes it.
In 2019, the two largest global outdoor advertising companies, JCDecaux and Clear Channel Outdoor, generated a combined year-end revenue of 6.98 billion.
Now even with a few smaller billboards starting out, you can earn anywhere from $300 to $2,000 per month per billboard, and upwards of $30,000+ per month for larger ones.
** Profitability numbers are vague because there are a lot of variables determining how much a billboard can earn like, the size of the billboard, is it digital or static, the city it’s located in, is it near a high traffic area like a busy intersection or highway.
#12. Peer-To-Peer Lending
Peer-to-peer lending allows you, the lender, to lend money directly to individuals (borrowers) without going through a financial institution. Doing so gives you a higher return on investment but also leaves you more open to risk.
Depending on which lending company you invest your money through, they typically have 3 to 5-year terms to pay back the loan plus interest and anywhere from 5% to 10%+ annual return.
Important: Risks with peer-to-peer lending as an investor are 1) borrowers may default on the loan and 2) these types of investments are not FDIC Insured.
#13. Investing In Farmland
Farmland has always been a gold star investment for investors because of its history of low risks and high returns.
Over the past 25 years, farmland has seen an average annual return of 11 to 12 percent, according to the NCREIF index.
#14. Laundromat Business
According to the Coin Laundry Association (CLA), coin laundries in the U.S. make anywhere from $50,000 to $1 million+ in revenue and generate cash flows between $15,000 to $300,000 per year.
It’s also noted that the laundromat industry sees a staggering 95% success rate during the first five years, way above the 45% success rate for new business over the same period of time.
Note: Coin Laundries can expect to see 35 percent profit margins if the owner runs the laundromat well.
#15. Car Wash Business
Another commodity business to get into is the car wash industry. There’s a reason why car washes are everywhere you look – they are recognized for being cash flow machines.
According to the U.S. Census Bureau, an in-bay automatic car wash makes about $139,000 of revenue with a net profit of $86,531 per year. While a tunnel car wash had an annual revenue of over $680,000.
The U.S. Census Bureau also released data in 2017 noting consumers nationwide spend an estimated $5.8 billion at the car wash every year, and that number is growing.
#16. Buy A Business
Buying an existing business vs starting one from scratch can save you a lot of upfront sweat equity, cost, and time. But most importantly, you will decrease your chances of business failure.
The survival rate of a new business, according to the U.S. Bureau of Labor Statistics (BLS) is:
- 20% of new businesses fail during the first two years opening
- 45% fail during the first five years
- 65% fail within the first 10 years
- And only 25%, or 1 in 4, make it to 15 years or more
So, statistically, if you buy a business that is at least two years old, you bought yourself a 20% higher chance of survival. If you bought a 5 years old business, you reduced your risk by 45%, so on and so forth. Now of course there are other variables that play into why businesses fail – but by buying a more mature business, you’re buying more mature systems and safeguards they already put in place (or you would hope so) and that’s why it’s you’re job to do your due diligence and vet if that’s the case or if it is a sound and secure business.
** The average small business owner in the U.S. makes about $71,900 per year.
Tip: Buying a more mature business will drastically decrease your risk of business failure.
#17. Angel Investor
Instead of buying a business, invest in start-ups in exchange for equity in businesses you believe to have long-term growth potential.
With that said, the barrier to entry is higher to be an accredited investor, according to the Securities Exchange Commission (SEC), a person must:
Have made at least $200,000 a year (or $300,000 for a couple) for the past two years and must have an expectation of making that amount again.
Have a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence).
#18. Private or “Hard Money” Lender
Hard money lenders offer short-term bridge loans (typically used in real estate investing) that are not backed by a borrower’s credit score and income, but rather, the real property as collateral.
The lender makes their money off the interest and points on the loan.
These loans are often paid back within six (6) months with interest ranging from 7-15% depending on the lender and risk ratio of the loan. And points be anywhere from 2-10% of the total amount loaned.
Perfect for fix and flip borrowers who need to renovate the property quickly, put it back on the market, and sell it for a profit.
Conservative: Cash Flow Assets
These types of investments prioritize preserving the capital over ROI. Some are FDIC Insured, government debt, and non-FDIC Insured but have a strong history of long-term return.
#19. U.S. Government Bonds
You can buy Treasury bonds, bills, and notes online by opening a TreasuryDirect.gov account with a minimum of $100.
- Bonds (T-bonds) pay a fixed rate of interest every six months until they mature and are issued for a term of 20 years or 30 years.
- Bills (T-bills) are issued for terms of 4, 8, 13, 26, and 52 weeks.
- Notes (T-notes) earn a fixed rate of interest every six months until they mature and are issued for terms of 2, 3, 5, 7, and 10 years.
Note: U.S. government debt may be the safest and most secure investments available.
#20. High Interest Savings Account
Currently, the most you can earn from a national bank savings account is 1.00%.
Though it’s not a high annual interest return, it’s safe. Your money is FDIC-insured up to $250,000. Meaning, if a bank goes out of business – the United States Government guarantees they will give you back all of your FDIC Insured deposits. “No depositor has ever lost a penny of FDIC Insured deposits”, says FDIC.
Important: Before opening an account, check to see if that bank institution is FDIC Insured and for how much.
#21. Certificates of Deposit (CDs)
“A certificate of deposit (CD) is a savings account that holds a fixed amount of money for a fixed period of time, such as six months, one year, or five years, and in exchange, the issuing bank pays interest. When you cash in or redeem your CD, you receive the money you originally invested plus any interest. Certificates of deposit are considered to be one of the safest savings options.” – investor.gov
The national average for a one-year term is 0.17% and 0.35% for a five-year term, though you can find FDIC Insured banks that yield much higher rates with a bit of digging.