Podcasts > Money Rehab with Nicole Lapin > 5 Passive Income Side Hustles You Need To Know About

5 Passive Income Side Hustles You Need To Know About

By Money News Network

Nicole Lapin explores various passive income opportunities in this episode of Money Rehab. From real estate investments like renting out property and crowdfunding to selling stock photos and hosting filming locations, Lapin delves into diverse revenue streams with potentially recurring income. The episode covers the pros and cons of different passive income sources, including the effort required to establish them and their ongoing management needs.

Offering insights into investing strategies like dividend stocks, Lapin also highlights critical considerations like taxation and regulatory compliance. Through her examination of these options, she provides listeners with a comprehensive overview of viable passive income avenues to supplement their financial portfolios.

5 Passive Income Side Hustles You Need To Know About

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5 Passive Income Side Hustles You Need To Know About

1-Page Summary

Real estate-based passive income

Renting Out Your Property

Nicole Lapin highlights renting out your home or spare space as a way to generate rental income. While setting up a rental listing requires some effort, platforms like Airbnb ease the process. Notably, the Augusta Rule allows renting out your home for up to 14 days annually without declaring that income.

Real Estate Crowdfunding

Crowdfunding platforms pool investor funds to finance rental properties like apartment complexes. Investors earn a share of rental income or property sale profits without direct property management responsibilities. While taxable, crowdfunding allows leveraging deductions like depreciation.

Investing-based passive income

Selling Stock Photos

Lapin suggests selling stock photos online through sites like Shutterstock as a passive income source. Proper keyword usage and identifying in-demand niches are key, and photography-related expenses can offset taxable income.

Listing Your Home for Filming

With a unique home, listing it as a filming location can provide substantial one-time payments from production companies. Understanding local regulations is necessary, and related expenses may be tax-deductible.

Dividend Investing

Investing in dividend-paying stocks generates regular payouts, often taxed favorably. A significant upfront investment is required, but reinvesting dividends can compound earnings over time.

The Pros and Cons

Effort vs. Rewards

While passive income sources demand substantial initial effort to establish, the appeal lies in generating recurring revenue with relatively less ongoing work.

Elusiveness of "True" Passivity

Truly passive income is rare, as most streams require some level of maintenance and management, even if less intensive than active work.

Tax Implications

Understanding tax nuances across passive income types is crucial. Certain deductions can reduce tax liability, so seeking professional guidance is advisable for optimization.

1-Page Summary

Additional Materials

Counterarguments

  • Renting out property on platforms like Airbnb may not always be straightforward due to fluctuating market demand, unexpected property maintenance, and potential legal or zoning issues that can complicate the process.
  • The Augusta Rule, while beneficial, applies to a very specific situation and may not be applicable to most people looking to generate rental income.
  • Real estate crowdfunding involves risk, as the success of the investment depends on the performance of the rental market and the management of the properties.
  • Selling stock photos is highly competitive, and the market is saturated, which can make it difficult for new photographers to stand out and earn significant income.
  • Listing your home for filming can be disruptive to personal life and may not be a consistent source of income due to the sporadic nature of film production schedules.
  • Dividend investing requires a well-thought-out strategy and carries the risk of stock market volatility, which can affect the stability of dividend payments.
  • The concept of passive income often downplays the amount of work and risk involved in establishing and maintaining income streams.
  • Tax implications for passive income can be complex, and the potential for deductions may not always outweigh the tax responsibilities associated with these income streams.
  • Professional tax guidance can be costly, and the advice received may not always result in significant tax savings.

Actionables

  • You can diversify your passive income by exploring local demand for unique rental experiences, such as themed stays or wellness retreats, and tailor your property to meet these niches.
    • Research what's trending in your area or what's lacking in the current market. For example, if you live near a beach but notice a lack of family-oriented rentals, you could create a family-friendly space with amenities like games, a secure yard, and family-sized accommodations. This can make your property stand out on rental platforms and attract a specific clientele willing to pay a premium for these tailored experiences.
  • Consider partnering with a local artist or interior designer to create an Instagram-worthy space in your home that can be rented out for photoshoots or small events.
    • This strategy taps into the gig economy and the trend of people seeking unique backdrops for social media content. By offering your space for hourly rentals, you can attract photographers, influencers, and event planners looking for a special setting. Collaborate with a local artist or designer to make over a room or a corner of your home to be visually striking and market it on social media or platforms that cater to creatives looking for shooting locations.
  • You can create a passive income stream by offering storage solutions in your unused space, such as renting out your garage, attic, or basement to neighbors who need extra storage.
    • Many people are looking for affordable storage options outside of traditional facilities. Clean up and secure an area of your home that's not in use, such as a garage or basement, and list it on local classifieds or community boards. Set competitive prices and ensure your space is safe and accessible. This can be a low-maintenance way to earn income from space that would otherwise go unused.

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5 Passive Income Side Hustles You Need To Know About

Real estate-based passive income

Generating passive income through real estate offers an attractive avenue for many, with options ranging from renting out personal space to pooling funds through crowdfunding platforms.

Renting out your home or a room can generate passive income, but requires upfront effort to set up.

Renting your home on platforms like Airbnb or VRBO can provide rental income, but involves dealing with renters and cleaning costs.

Renting out your home, or even just a spare room, can turn into a lucrative passive income stream, particularly if the location is desirable or the property is often vacant. Setting up the rental, however, does require some initial legwork. To list your property on platforms such as Airbnb or VRBO, one must prepare the space, which includes taking photos and creating an enticing listing. While this may not necessitate a significant financial investment initially, you should expect to handle aspects like dealing with renters and cleaning after each stay.

The Augusta Rule allows you to rent your home for up to 14 days per year without having to declare the income or pay taxes on it.

A notable perk for occasional renters is the Augusta Rule, which stipulates that if you rent your home for 14 days or fewer in a year, that income doesn't have to be reported to the IRS, thus escaping taxation.

Real estate crowdfunding allows you to invest in rental properties with a smaller amount of capital than buying a whole property.

Real estate crowdfunding platforms pool money from investors to finance properties like apartment complexes or warehouses.

Nicole Lapin highlights the accessibility of real estate investment through crowdfunding platforms, which offer the ability to invest in significant real estate projects without the hefty capital usually needed to buy property outright. These platforms gather funds from multiple investors to back various ventures, such as new construction aimed at the rental market, refurbishments of multi-family apartments, or commercial projects like warehouses.

Investors can earn a share of rental income or profits from property sales, but don't hav ...

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Real estate-based passive income

Additional Materials

Clarifications

  • The Augusta Rule allows homeowners to rent their property for up to 14 days annually without reporting the income to the IRS. This exemption helps individuals who occasionally rent out their homes for short periods avoid taxation on that income. It provides a tax benefit for those engaging in short-term rentals without the burden of reporting and paying taxes on the earnings.
  • Real estate crowdfunding involves pooling funds from multiple investors to finance real estate projects, such as apartment complexes or commercial properties. Investors can earn returns from rental income or property sales without directly managing the properties. Tax implications apply to the rental income and capital gains earned through real estate crowdfunding. Diversification and research are key to managing risks and identifying promising investment opportunities in real estate crowdfunding.
  • Depreciation in real estate investing is a tax benefit that allows property owners ...

Counterarguments

  • Renting out your home or a room may not always be a reliable source of passive income due to market fluctuations, seasonality, and competition from other listings.
  • Platforms like Airbnb or VRBO often charge service fees, which can reduce the overall income earned from renting out your property.
  • The Augusta Rule, while beneficial, may not apply to everyone, as it requires the property to be rented for a very short duration, which may not be feasible or desirable for all property owners.
  • Real estate crowdfunding involves risk, as the success of the investment depends on the performance of the property and the management company.
  • Crowdfunding platforms also charge fees, and these can impact the overall returns on investment.
  • The passive nature of real estate crowdfunding can lead to a lack of control over the investment, which might not be suitable fo ...

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5 Passive Income Side Hustles You Need To Know About

Investing-based passive income

Exploring alternative streams of passive income is increasingly important, and investing your resources strategically can lead to substantial earnings with relatively little ongoing effort.

Selling stock photos online can generate recurring income with minimal ongoing effort.

Selling stock photos online is put forth as a viable method of earning passive income. Platforms such as Shutterstock, Adobe Stock, and Getty Images provide marketplaces where you can upload high-quality photos taken with a good camera. Lapin stresses the importance of conducting market research to determine currently in-demand photo niches and finding the right keywords to make your photos easily discoverable to potential buyers. While earnings from the sale of stock photos are subject to taxation, photographers can reduce their taxable income by deducting costs associated with photography equipment, software, and even travel expenses related to capturing images.

Listing your home as a filming or photo shoot location can earn you substantial one-time payments.

If you have a particularly unique or aesthetically pleasing home, listing it as a potential location for film or photo shoots can be quite profitable. As production companies and photographers are often on the lookout for the perfect setting for their projects, they are willing to pay generously to use private homes for their shoots. To take advantage of this income stream, it's necessary to get acquainted with local regulations and procure any required permits. Expenses related to the ...

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Investing-based passive income

Additional Materials

Clarifications

  • When photographers deduct costs associated with photography equipment, software, and travel expenses, they are essentially subtracting these expenses from their total income to reduce the amount subject to taxation. This practice is common among self-employed individuals and small business owners to lower their taxable income and potentially owe less in taxes. By deducting these necessary business expenses, photographers can effectively reduce their tax burden and keep more of their earnings from selling stock photos.
  • When it mentions "procure any required permits," it is referring to obtaining official permission or licenses from the relevant authorities to allow the use of your home as a filming or photo shoot location. This process ensures that you are legally compliant and authorized to host such activities on your property. Permits may be necessary to ensure safety, manage potential disruptions to the neighborhood, and adhere to local regulations regarding commercial activities in residential areas. Obtaining permits is essential to avoid legal issues and ensure a smooth and legitimate process for renting out your home for filming or photography purposes.
  • Dividends are distributions of a company's earnings to its shareholders. These payments are taxed at a lower rate than regular income to encourage investment in stocks. The tax rate on dividends is typically lower because the governme ...

Counterarguments

  • Selling stock photos online often requires a significant initial time investment in taking photos, editing them, and understanding the stock photo market, which may not be minimal for many people.
  • The market for stock photos is saturated, and it can be challenging to stand out without a unique style or niche, potentially leading to lower than expected earnings.
  • Listing your home for shoots involves risks such as property damage and privacy concerns, and the income may not be as passive or reliable due to the sporadic nature of such opportunities.
  • The process of getting your home listed and noticed by production companies can be competitive and may require ongoing marketing efforts.
  • Dividend investing is subject to market risks, and dividends are not guaranteed; companies can reduce or eliminate payouts depending on their fin ...

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5 Passive Income Side Hustles You Need To Know About

The pros and cons of passive income

Passive income presents opportunities for financial growth and freedom, but it's not without its challenges, which range from substantial initial efforts to complex tax considerations.

Initial Effort vs Long-Term Rewards

Passive income streams often require significant upfront effort to set up. Whether it involves writing a book, building an app, or investing in rental properties, there's usually a lot of work and possibly financial investment that happens first. The appeal, however, is that once established, these sources can provide recurring income with relatively less ongoing work compared to traditional active income jobs.

The Elusiveness of "True" Passive Income

While the idea of earning money with little to no daily effort is appealing, achieving "true" passive income is difficult. Most passive income streams, even after being established, require some level of ongoing attention or management. This could involve updating and marketing a digital product, managing property rentals, or rebalancing investment portfolios.

Tax Implications and Deductions

Understanding the tax implications and potential deductions is crucial when ...

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The pros and cons of passive income

Additional Materials

Clarifications

  • Passive income is money earned with minimal ongoing effort once the initial work is done. While it offers financial benefits, achieving truly passive income is challenging as most streams require some level of ongoing management. Understanding the tax implications of passive income is crucial, as different sources are taxed differently and may have deductions that can impact overall tax liability. Seeking advice from financial professionals can help optimize passive income strategies and navigate complex tax considerations.
  • The distinction between "true" passive income and other forms of passive income lies in the level of ongoing effort required. While all passive income streams involve some initial work, "true" passive income implies minimal ongoing involvement once set up. In reality, most passive income sources, even when established, demand varying degrees of attention or management over time. This ongoing engagement can range from updating digital products to managing investments, making them less "truly" passive.
  • Different passive income streams, ...

Counterarguments

  • The initial effort and financial investment for passive income may not be feasible for everyone, potentially exacerbating socioeconomic disparities.
  • The concept of "less ongoing work" can be misleading, as some passive income streams may become active involvements due to market changes or additional requirements.
  • The term "passive income" might oversimplify the complexities and risks involved, such as market volatility or property damage in rental investments.
  • Tax implications can sometimes be overstated; for some individuals, the tax benefits of passive income may not be as significant as suggested, especially after accounting for all applicable taxes and fees.
  • Seeking professional advice can b ...

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