Yes, But What Does It Mean to Invest Passively?

Posted By: Sarah Shellam ICOR Blog & News,

Passive income has become a buzzword in recent years, and for a good reason. Building wealth through passive income streams using a Self-Directed IRA can provide financial security, freedom, and flexibility. Whether you are looking to build wealth for your future or are simply looking for an investment that isn’t as demanding and active, there are countless passive income ideas that can help you achieve your financial goals. In this blog, we will explore five passive income ideas that might not be on your radar yet that are designed to help you build wealth and create a stable financial future.

Invest in a Private Fund

A private fund can be a good investment for building wealth long-term because of the many benefits it offers that can help you achieve your financial goals. Private funds are typically managed by experienced investment professionals who have a deep understanding of the market and can identify profitable investment opportunities that may not be available to individual investors. One key advantage of investing in a private fund is that it can provide diversification of your portfolio. Private funds often invest in a variety of asset classes, such as real estate or private equity, which can help reduce risk and increase returns over the long term.

Additionally, private funds typically have a long-term investment horizon, which means that they can hold investments for several years or more. This can help minimize the impact of short-term market volatility and provide consistent returns over time. Another benefit of investing in a private fund is the potential for higher returns. Private funds often have higher minimum investment requirements and may have more stringent regulations compared to traditional investment vehicles, such as mutual funds or exchange-traded funds. This can result in higher returns for investors who are willing to commit to the fund over the long term. A private fund can be a good investment option for building for retirement, especially for those who have a high risk tolerance and are willing to commit their capital to a professional management team with a proven track record of success.

Invest in Private Lending

Private lending has emerged as a popular investment option for building wealth, and for good reason. Private lending is an online platform that connects borrowers with individual lenders, cutting out the traditional banking intermediaries. Here are some reasons why private lending can be a good investment option for building wealth. As mentioned above, private lending can also offer diversification to your investment portfolio.

As a self-directed IRA lender, you can position yourself in a place of safety by doing secured loans that can mitigate risks. Private lending is accessible to anyone with a self-directed IRA, making it an attractive option for individuals who may not have access to traditional investment options or who want to diversify their portfolio beyond stocks and bonds. Since the terms of the private loan are decided upon between the borrower and self-directed IRA lender, they can be done with small dollar IRAs, making it easy for individual investors to start investing with a relatively small amount of money.

Invest in Storage Space

Self-storage facilities provide a steady cash flow through rental income. The demand for storage space is generally consistent, regardless of economic conditions, which means that investors can count on a steady stream of rental income. They also generally have lower maintenance costs than other types of commercial properties, such as office buildings or retail spaces. This is because tenants are responsible for maintaining their own storage units, which reduces the need for landlords to spend money on maintenance, making this a great passive investment.

Self-storage facilities often have high occupancy rates, particularly in areas with high population density or limited space for storage. This means that investors can expect a low vacancy rate and a steady stream of rental income. Plus, self-storage facilities can serve as a hedge against inflation because rental rates can be increased over time to keep up with rising costs and inflation. Self-storage investments also provide easy possibilities for scalability. Investors can scale their investment in self-storage facilities by purchasing multiple facilities or expanding existing facilities. This can help investors build wealth over time by increasing their cash flow and asset base.

Invest In a REIT (Real Estate Investment Trust)

REITs generate rental income from a diversified portfolio of properties, such as residential, commercial, and industrial properties, distributing a large portion of their income to shareholders in the form of dividends, which provides a steady cash flow to investors. REITs are professionally managed by experienced real estate professionals, who are responsible for acquiring, managing, and disposing of properties in the portfolio, which help provide comfort to you knowing that you are minimizing risk with a more secure investment opportunity. As with many of the other investments mentioned in this article, REITs have the potential for capital appreciation over the long term, as the value of the properties in the portfolio increases over time.

Invest in a Carwash

Compared to many other businesses, a carwash is a pretty unique investment that also has relatively low overhead costs. The primary expenses are the equipment, utilities, and employee salaries, which can be managed efficiently to maximize profits. For example, the carwash owner can install energy-efficient equipment to reduce utility bills or use automation to minimize the need for additional employees. Additionally, a carwash business can generate significant revenue from add-on services such as waxing, detailing, or engine cleaning, which can further increase profitability and reduce overhead costs. In some areas, there may be few carwash options, providing an opportunity for investors to fill a gap in the market and generate steady revenue. This is particularly true in areas with a growing population or a high concentration of vehicles. A carwash that offers high-quality services, competitive pricing, and a convenient location can quickly gain a loyal customer base and achieve a competitive advantage over other carwash businesses in the area.

A carwash business is relatively recession-resistant, too, as car owners will continue to require regular maintenance and cleaning services for their vehicles regardless of the economic conditions. In fact, during economic downturns, people may even be more inclined to keep their existing cars clean and well-maintained, rather than purchasing new ones. This means that a carwash business can provide investors with a steady stream of revenue and minimize the impact of economic fluctuations on the business.

Ready to Start Investing Passively?

Passive investing is a great approach for those looking to build wealth over the long term, because passive investors can benefit from market growth while avoiding the costs and risks associated with trying to beat the market through active investing. While it's important to understand the risks and limitations of passive investing, many investors have found success and achieved their financial goals using their self-directed IRA to passively invest! To learn more about how to use a self-directed IRA to invest in one or all of these passive investments, schedule your free consultation with an IRA Specialist today HERE.