Money Rehab with Nicole Lapin - 5 Passive Income Side Hustles You Need To Know About
Episode Date: July 31, 2024Today, Nicole explains five opportunities to build passive income, the benefits of these five income streams, and what to watch out for. All investing involves the risk of loss, including loss of pri...ncipal. Brokerage services for US-listed, registered securities, options and bonds in a self-directed account are offered by Public Investing, Inc., member FINRA & SIPC. Public Investing offers a High-Yield Cash Account where funds from this account are automatically deposited into partner banks where they earn interest and are eligible for FDIC insurance; Public Investing is not a bank. Brokerage services for alternative assets are offered by Dalmore Group, LLC, member FINRA & SIPC. Brokerage services for treasury accounts offering 6-month T-Bills are offered by Jiko Securities, Inc., member FINRA & SIPC. Banking services are offered by Jiko Bank, a division of Mid-Central National Bank. Securities investments: Not FDIC Insured; No Bank Guarantee; May Lose Value. Brokerage services for Regulation A securities are offered through Dalmore Group, LLC, member FINRA & SIPC. Risks at public.com/disclosures/alts-risk-and-conflict-of-interest-disclosure See public.com/#disclosures-main for more information.
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Money rehabbers, you get it. When you're trying to have it all, you end up doing a lot of juggling.
You have to balance your work, your friends, and everything in between.
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bfa.com slash newprosmedia. I'm Nicole Lappin, the only financial expert you don't need a
dictionary to understand. It's time for some money rehab.
it's time for some money rehab. Who wants passive income? We all do, right? Well,
here's the hot take. Passive income, also known as mailbox money, is a little bit of a scam.
It is so hard to truly find passive, passive income as we usually think of it, where money just falls out of the sky with
little to no work on our end. But there are some ways you can build passive income streams for
yourself. And the operative word here is build. For passive income streams to be truly successful,
some heavy lifting is involved in the beginning, but it can be a lower lift over time once you get
to the point where you can just rinse and repeat. But instead of me just telling you that, let me show you how. Here are five popular side hustles with minimal upkeep.
Number one, renting your home. Renting out your home or even a spare room can be a lucrative way
to generate passive income, especially if you live in a touristy place or if you travel frequently
so your house sits empty a lot. While you probably won't need to invest money up front in order to
rent your home, although you can if you want to make some snazzy upgrades, it will take some time to set up the
framework for your rental listing. For example, in order to put your house on a platform like Airbnb
or VRBO, you're going to need to take photos of the space. While some people like to have those
professionally taken, others might not find it necessary. But taking the extra time to make your
home look extra rentable will set it apart from other rental properties in your area. Income from renting your
house is subject to income tax, but you can deduct expenses like mortgage interest, property taxes,
utilities, maintenance, and even depreciation. And there's a lovely loophole that allows you
to rent your home for less than two weeks a year, totally tax-free. Yes, of course it is legal. It's called the Augusta Rule. It allows you to rent your house for 14
days or less without having to declare that income to the IRS, and therefore, you don't have to pay
any taxes on it. So if you're interested in renting your house on a small scale, taking
advantage of the Augusta Rule is a must. I'd call this a pretty passive income stream because you
only have to list your
house once and then it will be set up for renting. And assuming you're paying a mortgage anyway,
renting your house won't necessarily involve recurring extra expenses. However, you will
need to deal with renters themselves, which can be not so passive depending on whether or not your
renters are a pain in the butt. And unless you include cleaning fees in your booking price,
you'll either have to cover that cost yourself or just do it yourself. If that sounds not passive enough for
you, then think about number two, real estate crowdfunding. Real estate crowdfunding allows
you to invest in real estate projects with relatively small amounts of money. You've
probably heard of companies like Kickstarter, where founders can invite users to invest in
their companies in small amounts, real estate crowdfunding
is the same idea. Real estate crowdfunding platforms pull money from a bunch of investors
to finance properties. On these platforms, you'll find opportunities to invest in new construction
of buildings designed to be rentals, multifamily apartment renovations, industrial properties like
warehouses. The potential upside for investors is that you can earn a share of the rental income or profits from sales. On some platforms, you can start with as little as $10,
which to state the obvious is a whole lot less than it would cost you to buy a rental property.
To get started, you'll want to choose a trustworthy real estate crowdfunding platform.
Investopedia and NerdWallet have good lists on these types of platforms that can help you decide
which one you want to use. Once you pick the platform, you'll want to review the projects
that are available there. Just like an investment in the stock market, you'll want to select the
real estate investment that aligns with your investment goals and, of course, your risk
tolerance. And also, just like the stock market, I wouldn't focus your energy on finding just one
property that you think is going to be a big winner and putting all of your money in there.
I'd look at making multiple smaller investments so you can diversify across different types of
properties and different locations. While you do have to put in some work to determine which
properties would be good investment opportunities for you, this becomes a passive way to benefit
from real estate. And as I mentioned a second ago, you don't have to do any of the communication with
renters or cleaning out spaces between short-term rentals that you would have to do if you're listing your home on Airbnb.
Also, you're going to pick up quickly on the theme here, which is taxes. And yes,
there are tax implications for real estate crowdfunding. Rental income and capital gains
from real estate investments can be subject to taxes. And while the amount you can invest in
real estate crowdfunding can be much lower than what you'd have to put into your own rental you don't get any sweet augusta rule-esque tax breaks however there are also possible
deductions and benefits to investing in real estate like depreciation when you're exploring
real estate crowdfunding opportunities you'll be able to see the information on tax implications
and depreciation in the description of the investment opportunity, so be sure to look over those details before deciding to invest. Number three, selling stock photos. If you have an eye for a good photo,
selling stock photos online can be a great way to earn passive income, and it really isn't that
complicated once you get it up and running. Websites like Shutterstock, Adobe Stock,
Getty Images allow you to upload and sell your images to a global audience.
If you don't have a camera, you're definitely going to need one. You can't just take photos
on your phone and expect Adobe Stock to come knocking on your door. So this is one opportunity
where the startup costs could be heftier than monetizing what you already have. But the cool
thing about selling stock photos is that once you're set up on the marketplace and you're
available for purchase, your work is done.
Well, with that photo anyway. One photo can potentially earn you money over and over again
for as long as it's available on the photo marketplace. Before going all in on this side
hustle, you'll want to do some market research and figure out what kinds of keywords you'll
need to use when uploading your photography to make them super discoverable in that marketplace.
You'll also want to figure out which niches are in the most high demand. If nature shots, when uploading your photography to make them super discoverable in that marketplace you'll
also want to figure out which niches are in the most high demand if nature shots for example are
in high demand that's pretty easy go for a walk call it a day but if it's editorial shots of
people posing in studios you're going to need to pay models rent studio space which adds to the
list of startup costs unfortunately there is no aug no Augusta-type rule for photos. You
will be taxed on the income that you make selling stock photos, but you can deduct expenses related
to photography equipment, software, even travel, which is a great excuse to take a dream trip and
let Uncle Sam give you a discount. Number four, listing your home as a film or photo shoot
location. This is one of my favorites because you'll be surprised how much you can make by listing your home as a location for film or photo shoots. Production companies and
photographers are always on the lookout for interesting locations for shoots. This actually
happened totally serendipitously to our executive producer Morgan. She came home to her apartment
in Brooklyn one day to find a flyer on her door from a location scout from Law & Order asking her
if they could vet her apartment as a potential place to film a portion of an episode. She agreed
to the visit, and the location scout came over to see if her apartment would work for that
particular episode. When it came to the question of compensation, the location scout did tell her
that she could expect to be paid over $1,000 every day that her apartment was used. As part of the
visit, they took a ton of
photos of Morgan's apartment, which is totally normal. But also, saying you're a location scout
would be a perfect ruse to case an apartment for a burglary. So in retrospect, Morgan told me that
she probably felt like she could have done a little more due diligence beforehand and checked
out the location scout's IMDB page, let's say, before agreeing to
the visit. She did check the IMDb page later, and luckily the Location Scout was legit and not a
thief in disguise, but probably would have made more sense to do the research beforehand.
To get started with this side hustle, you can register your home with location agencies or
listing websites that specialize in this kind of thing, like Peerspace. In order to stand out from
the crowd, you should take professional photos of your home highlighting unique features. You'll also need to
know what your local regulations are and the permit situation for filming, so this isn't
necessarily turnkey. Income from renting your home for filming for photo shoots is taxable,
but you can also deduct the related expenses. Same story here, income from renting your home for filming or
photo shoots is taxable, but you can deduct related expenses. And last but certainly not
least, number five, dividend investing. Dividend investing involves buying stocks that pay out a
portion of their earnings to shareholders on a regular basis. This can be a great way to generate
income with minimal effort and make money from your investments without having to sell shares. The upfront resources here, once again, time and money. You'll want to look at
what are the best dividend paying stocks at the moment. Big popular ones are Verizon, Pfizer,
Johnson & Johnson. And then, of course, you'll need to buy the actual investment, and that's
cash that you need to have tied up for as long as you want to be earning dividends. And when you do
invest, if you really want to focus your investment strategy for that particular stock on maximizing
dividends and you're in it for the long haul and you don't need that dividend money right away,
you're going to want to opt into reinvesting your dividends to compound your returns. Again,
dividends are typically taxed at a lower tax rate than regular income, but again, we can never get
away from our
bestie, the taxman. So please be sure to understand the tax implications and keep good records.
For today's tip, you can take straight to the bank. If you're really into the idea of rental
properties and are even considering buying a rental property, there are websites completely
dedicated to helping you project how much rental income you can make on Airbnb based on the zip code you're looking to buy in. One website is AirDNA. This is not an ad at all.
I just find it so fascinating because this is really niche, but also really helpful. So if
you're dreaming about buying a property and you want to figure out if it could be a lucrative
rental someday, use this website for your research.
Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin.
Money Rehab's executive producer is Morgan Lavoie. Our researcher is Emily Holmes.
Do you need some money rehab? And let's be honest, we all do. So email us your money questions,
moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us
on Instagram at moneynews and TikTok at moneynewsnetwork for exclusive video content.
And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in
yourself, which is the most important investment you can make.