A proposed set of higher risk weights for mortgage-related assets at banks could broadly compound current strains on home affordability and conflict with other policies and rulemaking promoting it, critics testified at a congressional hearing Thursday.
The new rules not only increase portfolio lending expenditures for low down payment loans, but aspects like a possible change affecting servicing rights also add costs for lenders and the market at large, said Bob Broeksmit, president and CEO, Mortgage Bankers Association.
The rights and associated work of handling loan payments are a key cost for the mortgage industry at large and if depositories further withdraw from investments in them, costs for nonbank lenders already struggling to profit due to higher rates could rise, he said.
“The mortgage servicing value is an integral part of how every mortgage is priced, not just mortgages made by these banks,” Broeksmit said at a House Financial Services subcommittee hearing. The subcommittee involved is focused on financial institutions and monetary policy.
Mortgage servicing rights already have a relatively high risk weighting under current bank capital rules that discourage holding them in amounts above 25% of Tier One common equity. The proposal would lower the cap to 10% of common stock or other assets in that category.
Broeksmit also reiterated his past criticisms of moving from a risk-weighting of 50% for most home mortgages outside the income-producing sector, to a proposed step-up of percentages in that category by loan-to-value ratio that’s in excess of global Basel III rules.
“If these increased capital requirements go into effect, banks will make fewer mortgage loans or they will raise the price,” said Broeksmit.
He also doubled-down on his previously stated concerns about the fact that the new requirements don’t account for the additional protection private mortgage insurance can provide to loans with lower down payments.
Others testifying said the capital rules could put a strain on mortgages that have balloon payments due in a higher rate market.
“In a time of historic inflation, the fastest increase in interest rates in modern history, and a growing likelihood of the credit crunch, now is not the time to raise capital levels,” said Committee Chair Rep. Andy Barr, R.-Ky. “Such action threatens to further constrain credit availability and put already-sensitive sectors such as commercial real estate in further peril.”
The new capital rules also could be a constraint on lines of credit used both by businesses and consumers, Broeksmit said.
“If I understand this voluminous proposal correctly, banks would be required to hold capital on the maximum amount that could be drawn rather than the amount that is outstanding. That could have a really chilling effect on … small business credit and also home equity lines of credit where consumers take that out and use it as they need it,” he said.
Other speakers and some Democratic members of Congress debated the assertion that the rule would hurt access to financing.
“We strongly disagree that new capital requirements will undermine credit availability,” said Alexa Philo, senior policy analyst, Americans for Financial Reform, after Rep. Ayanna Pressley, D.-Mass, asked whether the new rules could protect the availability of lending in a downturn.
There’s a significant body of research that has found that domestic financial institutions with higher reserves provided more financing than those with lower capital levels, Philo said.
“Well capitalized, large U.S. banks had higher loan originations and liquidity,” she said.
Here’s what you need to know to secure a home in Austin, Texas.
Welcome to the ever-changing landscape of the Austin housing market. Known for its quirky culture, burgeoning tech industry and eclectic lifestyle, Austin has been a safe bet for real estate investments for the past decade-plus.
However, as we venture past the midway point of 2023, Austin’s real estate climate is experiencing some intriguing twists. Whether you’re a potential homeowner, a first-time seller or an investor eyeing the Austin housing market, buckle up — there’s a lot to unpack.
Median sale price
The median sale price of a home in Austin is a meaty $571,000. This may sound impressive at first glance, but when you stack it against last year’s figures, there’s a 9.94% year-over-year decrease. This pivotal number is a heartbeat monitor for the Austin housing market, and right now, that beat is slowing down a bit.
So, what does this drop really signify? Is it a sign of market stabilization or a canary in a coal mine?
Average time on the market
A home in the Austin housing market now spends an average of 48 days on the market before being sold. This is a significant increase from the 34-day average of 2022. While the Austin housing market remains competitive, it’s evidently losing some of its previous ferocity. If you’re a buyer, you might find this elongated timeline a tad comforting.
Volume of sales
Let’s talk numbers — 883 homes were sold in Austin in July 2023. This is a 3.8% decline from the previous year. Though the decline is marginal, in the world of the Austin housing market, even a small drop can ripple across the real estate pond.
Opportunity in the Austin housing market
In yesteryears, the Austin housing market was practically a gladiator arena for buyers. Homes would receive multiple offers, almost like suitors vying for a rose in a reality show. Now, the terrain seems a bit more even.
Homes in Austin are selling for about 3% below the list price, and the Sale-to-List Price ratio has declined by 2.6 points to 97.5%. To put the cherry on top, only 17.1% of homes are now selling above the list price — a stark contrast to previous years.
Austin housing market migration
Here comes the really juicy stuff: migration patterns. About 29% of Austin homebuyers are planning their exit, while a more substantial 71% are committed to staying in Austin. On the other hand, people are flocking to Austin from metros like San Francisco, Los Angeles and Chicago. It’s a fascinating migration dance that’s shaking up the Austin housing market dynamics.
But where are Austinites going? Turns out, they have their sights set on places like San Antonio, Denver and Corpus Christi. Whether it’s the allure of a different Texas city or the Rocky Mountain high, Austin’s outbound traffic is certainly something to keep an eye on.
The Austin lifestyle
Let’s not forget why people love Austin in the first place. The city boasts schools like Forest Trail Elementary and Canyon Creek Elementary, rated 10/10 by GreatSchools. The Austin housing market remains a family-friendly arena.
However, climate risks, like moderate flood and fire factors, are creeping into the Austin housing market narrative. Plus, a severe risk of heat waves over the next 30 years is something the Austin housing market simply cannot ignore.
The Austin housing market at a glance
The Austin housing market of 2023 is not what it used to be, but it has not entirely lost its luster either. Prices are more balanced, homes are staying on the market a bit longer and new migration patterns are reshaping its demographics.
For buyers, sellers and investors, understanding the nuances of the Austin housing market is essential for making informed decisions. The market may be in a cooler state, but its complex interplay of factors keeps it as fascinating as ever.
Renting in Austin
So far, we’ve been talking about buying and selling homes. But what about those of us who aren’t ready or interested in making a long-term commitment?
The Austin housing market has a lot to offer renters, too. With the city’s unique culture and growing job market, it’s no surprise that renting remains an attractive option for many. But before you sign that lease, let’s delve into what’s happening in Austin’s rental market.
Austin’s average rental prices
When we talk about rentals, the numbers are quite striking. According to recent data, Austin is witnessing some fascinating shifts in average rent:
In essence, while studio and two-bedroom apartments seem to be getting somewhat more affordable, one-bedroom apartments are moving in the opposite direction. So if you’re considering a roommate, Austin might be a good fit for you.
Neighborhoods in Austin
If you’re looking for the perfect apartment, understanding the Austin housing market at a neighborhood level is essential. Neighborhoods like Market District and Zilker have seen a surge in studio apartment rents, with a 24% and a staggering 147% annual increase, respectively. On the other hand, areas like East Austin and Oak Hill are experiencing decreases in average rent for studios by 8% and 17% respectively.
For the budget-conscious renter, the most affordable neighborhoods for a one-bedroom apartment are Cherrywood, Montopolis and South Austin, with average rents ranging from $1,033 to $1,100. These figures are significantly lower than the Austin one-bedroom average of $1,677.
Breaking down apartment rent ranges
Where does the majority of Austin’s apartment rents lie? According to the data:
$501-$700: 0% of the market
$701-$1,000: A mere 3%
$1,001-$1,500: Occupies 16% of the market
$1,501-$2,100: Commands 22% of the market
$2,101 and above: The lion’s share at 58%
Clearly, if you’re planning on renting in Austin, you’re more likely to encounter higher-end rental costs.
How does Austin compare to other cities?
For those looking outside the Austin housing market, cities like Manor, Round Rock and New Braunfels offer alternatives with differing rental prices. For example, a studio in Manor is going for an average of $3,500, whereas in Round Rock, the average studio is priced at $1,500, a 17% annual decrease.
Austin’s rent trends
Looking at the trend data, rents for all apartment sizes have fluctuated throughout 2023, but one-bedroom apartments have seen a consistent increase. While studios and two-bedrooms show somewhat stabilized rents as of September 2023, only time will tell what the last quarter holds.
The Austin rental market at a glance
Renting in Austin? You’re not alone. Whether you’re here for live music, tech jobs or the infamous Austin weirdness, understanding the rental market is crucial. While Austin’s rental market is complex and dynamic, with neighborhoods and apartment sizes all showing different trends, one thing is clear — the Austin housing market, for buying and renting, remains a topic of captivating shifts and turns.
A native of the northern suburbs of Chicago, Carson made his way to the South to attend Wofford College where he received his BA in English. After working as a copywriter for a couple of boutique marketing agencies in South Carolina, he made the move to Atlanta and quickly joined the Rent. team as a content marketing coordinator. When he’s off the clock, you can find Carson reading in a park, hunting down a great cup of coffee or hanging out with his dogs.
A direct stock purchase plan (DSPP) is a plan that allows investors to purchase stock in a company without a broker and get it directly from the company instead.
With DSSPs, there are often no brokerage fees. Meanwhile, discounts to the share prices may be available for larger purchases. With shares purchased through a DSPP, investors have the same profit and loss opportunities, access to dividends, as well as stockholder voting rights.
However, direct stock purchase plans may not be right for every investor. Learn more about buying stock direct from companies through a DSPP, including the pros and cons.
Direct Stock Purchase Plan, Explained
What is a direct stock purchase plan? Typically, many investors use a broker to buy shares of stock. But you can sometimes purchase stocks directly from companies, no broker required. This is what it means to participate in a direct stock purchase plan.
Many blue-chip stocks tend to offer DSPPs. For example, let’s say Company X offers a plan that allows investors to buy $500 or more worth of company stock directly from it, up to $250,000 a year, with some service and transaction fees.
With a DSPP, investors directly purchase shares, sometimes at a small discount. Discounts can range from 1% to 10% to encourage investors to buy more shares.
However, because many brokerage accounts now waive fees and commissions entirely for many investors, the savings difference is smaller than it used to be. 💡 Quick Tip: Did you know that opening a brokerage account typically doesn’t come with any setup costs? Often, the only requirement to open a brokerage account — aside from providing personal details — is making an initial deposit.
Pros and Cons of a DSPP
Direct stock purchase plans have benefits and drawbacks. These include:
Pros:
• No broker needed. Investors can purchase shares of stock directly from the company.
• Very little money is required to get started, and the process is typically simple to do. Good for long-term investing.
• Some DSPP programs offer dividend reinvestment plans.
Cons:
• An investor may not achieve portfolio diversification because not all stocks offer DSPPs.
• Companies may put maximum limits on how much an individual investor can purchase.
• When selling DSPP stocks, multiple types of fees can sometimes be charged.
How To Invest in a DSPP
Armed with information about how to buy directly from companies, investors may want to explore what specific opportunities exist. Perhaps they already have a publicly traded company in mind. In that case, they can go to that company’s investor relations website to see if the company offers this type of investment opportunity.
They can also search on the Internet to see which direct stock purchase plans are available.
More specifically, if someone wants to buy stocks in this way, they typically open an account and make deposits into it. Usually, these deposits are automatically made monthly through an ACH funds transfer from the investor’s bank account. In some cases you can write checks as well.
Then, that dollar amount is applied toward purchasing shares in that company’s stock, which can include fractional shares. For example, let’s say that one share of a company’s stock currently costs $20. If an investor sets up an ACH withdrawal of $50 monthly, then, each month they have purchased 2.5 shares of that company’s stock.
One of the benefits of investing through a direct stock purchase plan is the ability to incrementally invest in an inexpensive way. This might make it a good choice for some first-time investors with smaller amounts of money to invest, with initial deposits ranging from $100 to $500. In some cases, initial deposit minimums can be waived if you purchase a certain dollar value of stock every month. But again, it may be difficult to achieve portfolio diversification with DSPP.
Companies With DSPPs
A number of large, well-established companies offer DSPPs. Companies with direct stock purchase plans include Walmart, The Coca-Cola Company, Starbucks, and Home Depot, and Best Buy, among others. 💡 Quick Tip: How to manage potential risk factors in a self-directed investment account? Doing your research and employing strategies like dollar-cost averaging and diversification may help mitigate financial risk when trading stocks.
What to Consider Before Buying DSPPs
When online investing was new, people typically needed to pay significant fees to brokers to buy stock. In that era, direct stock purchase plans could be money-savers for investors. Over time, though, fees for online investing have lessened, making this less distinctive of a benefit.
In addition, many DSPPs charge initial setup fees, and may have other investment fees, including ones for each purchase transaction or sale. Although they may be small, these fees can build up over time. And it may be challenging to re-sell shares without the use of a broker, which makes this investment strategy more of a long-term one.
Plus, any time a share is purchased, some degree of stock volatility comes along with it — how much depends upon what is happening with that specific company and the overall levels of turbulence in the market.
Here’s something else to consider: When owning stock in just one company, or only a couple of them, portfolios aren’t diversified. When you diversify your investment assets, it helps to spread out the degree of risk. That’s because, if one stock’s value decreases, others may rise to balance out that portfolio.
The Takeaway
Direct stock purchase plans are when individual investors can directly purchase shares of that company’s stock without the need for broker involvement. The benefits of DSPPs potentially include purchasing company shares at a discount, and not needing a broker to make the transaction.
The downside of DSPPs is that a limited number of companies offer them, which means that an investor who invests solely through DSPPs may not have the best portfolio diversification. Plus, with brokerage commissions and fees rapidly shrinking, in many cases to zero, DSPPs have become a less essential way of cutting down trading costs for investors.
Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).
Invest with as little as $5 with a SoFi Active Investing account.
FAQ
What is the difference between a brokerage and a direct stock purchase?
The main difference between a brokerage and a direct stock purchase is this: With a direct stock purchase, an investor buys shares of one company. A brokerage, on the other hand, offers multitudes of different stock options an investor may choose from.
What is direct stock vs portfolio stock?
With direct stock, an investor purchases shares of stock directly from a company. A portfolio refers to a collection of different types of investments an investor may have, including stocks, bonds, or stock funds, to name a few.
What is the difference between DSPP and DRIP?
By using a DRIP (dividend reinvestment plan), investors can buy more stock in companies whose shares they own by reinvesting what they earn from dividends. With a DSPP, an investor can purchase stock directly from a company. Unlike a DRIP, they don’t have to use dividends to purchase shares.
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Retail giant Amazon announced on Wednesday the launch of a new pilot program designed to assist moderate-income families in three different U.S. communities with the purchase of up to 800 homes, in partnership with the National Housing Trust (NHT).
The initiative will include $40 million to assist residents in the Puget Sound, Washington, Arlington, Virginia, and Nashville, Tennessee communities, the company said. Amazon says the investment will “help moderate-income residents in these communities to purchase homes as a path to help build generational wealth.”
The nonprofit NHT will use the funds from Amazon’s program to acquire and build affordable homes for sale in partnership with a network of local organizations in across the three communities.
These include Habitat for Humanity Seattle-King & Kittitas Counties serving the Puget Sound region; the African Community Housing & Development (ACHD) and Homestead Community Land Trust both serving King County, Wash., the Douglass Community Land Trust in Washington, D.C. and The Housing Fund serving Nashville.
Additional partnerships through this program are possible in the future, the company said.
Amazon cites data from the National Association of Realtors (NAR) attributing affordability challenges to the “combination of rising interest rates and increasing home prices” in a majority of U.S. metropolitan areas.
“Amazon and NHT will invest in community land trusts, a model where the land itself will be owned and stewarded by nonprofits and community-based organizations, and where residents will own their physical homes,” the company said in its announcement. “Removing the cost of the land from the total cost of the home allows the price of homes to stay affordable, stabilizing families in their communities while combating gentrification.”
Last year, Amazon made a housing investment of $10.6 million into the Nashville area to build and renovate 130 affordable homes, bringing its then-total investment into that community to roughly $100 million.
Looking to build wealth with the best income-generating assets? As you set out on the path to financial freedom, understanding the different types of income-generating assets can truly change your life. This is because you can invest in assets that will generate you income, earning you more passive income. Today’s article will introduce you to…
Looking to build wealth with the best income-generating assets?
As you set out on the path to financial freedom, understanding the different types of income-generating assets can truly change your life.
This is because you can invest in assets that will generate you income, earning you more passive income.
Today’s article will introduce you to a range of assets that reliably bring in cash, giving you peace of mind and the freedom to live life on your own terms.
From traditional investments like stocks and bonds to more creative options like peer-to-peer lending or real estate, income-generating assets give you the power to diversify your portfolio and build wealth over time.
Related content:
What are income generating assets?
Before we begin, I want to talk about the basics on income-generating assets, in case you are new to the subject or if you want a background first.
Income-generating assets are investments that, as the name suggests, generate income for you. These are assets that provide you with a steady cash flow, allowing you to earn passive income and build your wealth over time.
Examples include rental real estate and dividend-paying stocks (we will go over 17 different types of income-generating assets below in more detail).
There are several benefits of the best income-generating assets such as:
Passive income: You earn money without actively working, and this can provide financial freedom and the ability to focus on other things in life. You can earn money in your sleep, while on vacation, making dinner, and more.
Diversification: You can diversify your investments so that all of your income is not coming from just one source.
Wealth building: Earning income and generating a steady cash flow can help you build your wealth over time.
Note: Please keep in mind that there is no one-size-fits-all approach when investing in any of these income-producing assets. Everyone is different and while one asset may work great for someone, it may not be the right asset for you. I recommend doing as much research as you can if you are interested in one of the asset investments I talk about below.
Types Of Income Generating Assets
There are many types of income-generating assets. Some may be more traditional such as dividend-paying stocks, and others may be more alternative income-generating assets, such as selling stock photos, and even renting out your driveway.
Today, I will talk about 17 different types of income-generating assets, but this is not a full list of the best income-producing assets. There are many, many more!
The different types of income-generating assets that I will talk about today include:
1. Dividend-paying stocks
One of the best assets to invest in are dividend-paying stocks.
Dividends are simply a payment in cash or stock that public companies distribute to their shareholders.
The amount of a dividend is determined by a company’s board of directors, and they are given as a way to reward those who have stock in their company. Both private and public companies pay dividends, but not all companies pay dividends.
How do dividends work? If you own shares of a dividend-paying stock, then a dividend is paid per share of that stock. So, if you have 10 shares in Company ABC, and they pay $5 in cash dividends each year, then you will get $50 in dividends that year. While dividends can be paid on a monthly, quarterly, or yearly basis, they are most commonly paid out quarterly — so, four times a year. In this example, the $5 in cash dividends the company pays each year will most likely be distributed as $1.25 per quarter for each share of stock.
The most common type of dividends are cash dividends. Shareholders may choose to get this deposited right into their brokerage account. Stock dividends are another common type of dividend. In this case, shareholders get extra shares of stock instead of cash.
Both cash dividends and stock dividends are great income-generating assets that will earn more money for you.
As a shareholder, you can earn income when companies distribute profits to their shareholders. Look for stocks with a history of consistent dividend payouts and a high dividend yield. Keep in mind that dividend stocks are still subject to market fluctuations, and just because a company has paid a dividend in the past does not mean that they always will in the future.
Related content:
2. High-yield savings accounts and CDs
High-yield savings accounts and CDs are a great way to grow your savings, but most people have their money in accounts with low rates. Unfortunately, that means many of you are losing out on some easy money.
Savings accounts at brick-and-mortar banks are known for having really low interest rates. That’s because they have a much higher overhead — paying for the building, paying the tellers to help you in person at the bank, etc.
High-yield savings accounts offer an easy option for earning interest on your cash. Online banks often offer higher interest rates than traditional banks. As of the writing of this blog post, you can easily find high-yield savings accounts that can earn you above 4.00%.
Certificates of Deposit (CDs), another form of income-generating assets, are FDIC insured and provide a guaranteed interest rate over a specific term. Remember that access to your money is limited during the term of the CD. You will agree upon the term before putting your money in the CD. The terms typically vary in length from around 3 months to 5 years.
Money market accounts are also offered by banks and often with a higher yield than other types of savings accounts.
3. Real estate
Real estate is one of the most common income-generating assets that people think of.
Investing in rental properties is a popular way to generate steady cash flow. You can earn rental income from tenants, and properties typically appreciate in value over time.
Location and property management are important factors that can impact your return on investment.
By investing in real estate, you may be investing in residential properties, commercial real estate, short-term rentals, REITs, and more.
Recommended reading: How This Woman In Her 30s Owns 7 Rental Homes
4. Real estate investment trusts (REITs)
An REIT is a company that owns and manages income-producing real estate. They then sell shares to investors like stock.
By investing in REITs, you can make money in the real estate market without actually owning real estate.
So, if you don’t want to be a landlord, then this may be something for you to look into. This makes it much more passive than actually owning real estate and having to manage it.
You can even diversify your income stream with REITs by investing in different property types, such as residential homes, commercial office space, industrial, and retail store properties.
5. Bonds
Bonds are fixed-income investments that are issued by governments and companies. If you own a bond, you receive interest payments from borrowers on a regular basis.
An easy way to explain this is: When you buy a bond, you are giving someone a loan and they are agreeing to pay you back with interest.
Bonds with higher credit ratings are generally a safer investment but may offer lower interest rates.
6. Mutual funds
Mutual funds gather funds from investors to invest in stocks, bonds, or other securities. Basically, the funds are pooled together and there’s a fund manager who chooses the best investments.
Income-generating assets like this have multiple types of mutual funds available for multiple types of investors. Some of these fund types include bond funds, stock funds, balanced funds, and index funds.
Mutual funds typically have higher fees because they have fund managers who are actively trying to beat the market.
With a mutual fund, you get diversification because the fund manager mixes the assets in it.
7. Index funds and exchange-traded funds (ETFs)
ETFs and index funds are popular options for those who are looking to diversify their portfolio of income-generating assets.
This is because index funds and ETFs track a specific market index and invest in a wide range of stocks or other assets, instead of picking and choosing stocks in an attempt to beat the market. This is what makes them different from mutual funds.
They often have lower fees and higher diversification compared to actively managed funds.
8. Annuities
Annuities are long-term investments offered by insurance companies that give you a guaranteed income stream to build wealth. In exchange for a lump-sum payment or periodic contributions (such as monthly or annually), you’ll receive steady payments in the future.
The way it works is you pay premiums into the annuity for a set amount of time. Later, you stop paying premiums, and the annuity starts sending regular payments to you. Some are even set up to pay you back with a lump sum.
Annuities can be fixed or variable. A fixed annuity offers a guaranteed payment amount — which means a predictable income for you. As for a variable annuity, the payment amount does vary, depending on how the market is doing.
9. Websites and blogs
Starting a website can generate income through the money-making assets of advertising, affiliate marketing, or the sale of products and services.
Since I started Making Sense of Cents, I have earned over $5,000,000 from my blog through affiliate marketing, sponsored partnerships, display advertising, and online courses. These income-generating assets make sense for building wealth.
Blogging allows me to travel as much as I want, have a flexible schedule — and I earn a great income doing it.
Now, it’s not entirely passive, but I do earn semi-passive income from my blog.
You can learn how to start a blog in my How To Start a Blog FREE Course.
Here’s a quick outline of what you will learn:
Day 1: Why you should start a blog
Day 2: How to decide what to write about (your blog niche!)
Day 3: How to create your blog (in this lesson, you will learn how to start a blog on WordPress)
Day 4: The different ways to make money with your blog
Day 5: My advice for making passive income with your blog
Day 6: How to get pageviews
Day 7: Other blogging tips to help you see success
Recommended reading: The 25 Most-Asked Blogging Questions To Get You Started Today
10. Royalties and intellectual property
Intellectual property, such as patents, copyrights, and trademarks, can generate income through licensing fees or royalties. This particular option is good for creative professionals, such as authors, musicians, and inventors, who are looking for income-generating assets.
Royalties are a way to earn income from your creative work or intellectual property. By granting others permission to use or distribute your intellectual property, you can receive ongoing payments known as royalties.
Whether you’re a musician, author, inventor, or artist, royalties offer a passive income stream as your creations continue to generate revenue over time.
Royalties can be paid out periodically or as a lump sum on these passive income assets, depending on your agreement with the licensee.
11. Stock photos
If you have a talent for photography, you can monetize your skills by selling stock photos on platforms such as Shutterstock or Adobe Stock. The more high-quality images you upload, the more potential passive income you can generate.
With stock photography, you simply upload photos that you have taken to a platform such as DepositPhotos, turning your pictures into income-generating assets. Then, you will receive a commission whenever someone buys one of your stock photos.
Stock photos are used for all sorts of reasons by websites, companies, blogs, and more. Businesses need stock photos because they are not usually in the business of taking photos of everything that they need. Instead, they can use stock photos to make their content, website, or business more visually appealing.
Some examples of stock photography include pictures of:
Travel, vacations, landmarks, outdoor adventures
Family members, such as parents, children, family gatherings
Food and drink
Cars, boats, RVs
Businesses, pictures of people in meetings, in an office.
Sports, professional events
Animals, such as household pets or wildlife
The photo possibilities are almost endless for this type of income-generating asset.
Recommended reading: 18 Ways You Can Get Paid To Take Pictures
12. Crowdfunding and peer-to-peer lending
Crowdfunding platforms enable you to invest in real estate deals with a smaller amount of money than buying real estate up front, giving you a passive income through rental income or even a property increasing in value.
Peer-to-peer lending platforms allow you to lend money directly to borrowers. Typically you can earn higher returns than traditional savings accounts, though there’s always the risk of a borrower not paying you back.
Both of these types of assets — crowdfunding and peer-to-peer lending — use technology to connect investors with those looking for funding.
13. Renting out storage space
If you own unused land or unused space in your home, renting it out for storage can be a simple way to generate passive income.
You can offer storage solutions for vehicles or boats. If you have a smaller space, then offer it to store personal belongings. You can rent out your driveway, closet, basement, attic, and more. You can even rent out a shelf.
A website where you can list your storage space is Neighbor. You can earn $100 to $400+ each month on this platform. This depends on the demand in your area and the type of income-generating assets you are renting out. And, you can choose who, what, and when — who to rent to, what things are stored, and when it will happen.
You can learn more at Neighbor Review: Make Money Renting Your Storage Space.
14. Short-term rentals
Short-term rentals can be a lucrative income-generating asset if you own properties in popular tourist destinations or business hubs.
Websites like Airbnb provide a platform to rent out your property to travelers for short periods, potentially generating higher returns than traditional long-term leases.
Furnished Finder is another website for short-term rentals. This is a way to connect with travel nurses in need of short-term housing.
Keep in mind that rental income can be affected by local regulations, potential vacancies, or seasonal fluctuations.
15. Car rentals
Car rental platforms like Turo allow you to rent out your car when you’re not using it. Assets that generate cash flow include your own wheels, and that means no significant initial investment besides the cost of the car you already own.
Be mindful of risks such as wear and tear, insurance, and potential damage caused by renters.
It’s an affordable alternative to traditional rental car companies for customers, and it’s a good way to make money if you’re already working from home and don’t need your car, or are a two-car household.
Turo is one of a few different places to rent out your car, turning your vehicle into one of your income-generating assets. Your car is covered by Turo with up to a $1 million insurance policy. You can also pick the dates for when your car is available and set your rates.
Turo says you can earn an average of $706 per month by listing your car on their site.
16. RV rentals
Similarly to car rentals, RV rentals can provide additional income by renting out your recreational vehicle when you’re not using it. Your RV could easily become one of your income-generating assets.
You may be able to earn $100 to $300 a day, or even more, by renting out your RV on RVShare.
If you have an RV that is just sitting there and not being used, then you may be able to earn an income with it by renting it out to others who are interested in RVing. Cash flow-generating assets like RVs are a win-win for both you and the renter who wants to experience life in a recreational vehicle.
You can learn more at How To Make Extra Money By Renting Out Your RV.
17. Vending machines
With a vending machine business, you can generate income by selling a variety of products, from food to fishing supplies, beauty products to baby items, and more.
You may be able to earn $1,000+ a month by running a vending machine business. That’s enough reason to take a closer look at income-producing assets like this.
You can learn more at How To Start A Vending Machine Business – How I Make $7,000 Monthly.
Questions about income generating assets
Here are common questions that you may have about income-generating assets:
How do I start passive income from nothing?
Starting passive income from nothing requires creativity and resourcefulness. You can begin by identifying skills you possess or interests that can be turned into income-generating opportunities.
What are the assets that generate income?
The assets I talked about above include:
Dividend-paying stocks and stock market investing
High-yield savings accounts and CDs
Real estate
Bonds
Mutual funds
Index funds and exchange-traded funds
Annuities
Websites and online businesses
Royalties and intellectual property
Stock photos
Crowdfunding and peer-to-peer lending
Renting out your storage space
Car rentals
RV rentals
Vending machines
How do I start buying income generating assets?
There are traditional investments or more creative options. Do as much research as you can before deciding which option fits you best.
What are good assets to buy?
After deciding if you want to purchase traditional investments or more creative options, choose an asset that you can afford and best fits your lifestyle.
What are the best assets to buy for beginners?
For beginners seeking income-generating assets, you may want to look into:
Dividend-paying stocks for your investment portfolio
Crowdfunded real estate investing: Platforms like Fundrise allow smaller investments with lower risk exposure.
ETFs and index funds: They provide diversification and passive income through dividends.
What is income generating real estate?
Income-generating real estate refers to properties that produce regular rental income, such as apartments, commercial properties, or short-term vacation rentals.
How do I start passive income in real estate?
There are a few ways that you can earn passive income from real estate, including:
Buying a property, such as an apartment building or duplex, and renting it out to tenants
Using real estate crowdfunding platforms
Investing in REITs
How to make passive income with real estate without owning property?
You don’t need to actually own property in order to make money with real estate. Instead, you can earn passive income from real estate by investing in REITs and using real estate crowdfunding platforms.
This is an option for those who want to be diversified with their income-generating assets but don’t want to spend all of their money or time on a single piece of real estate.
How to make $1,000 a day in passive income?
Making $1,000 a day in passive income with assets that produce income will not be easy. If it were easy, then everyone would be doing it, after all.
Making $1,000 a day in passive income may require a large amount of money up front, diversifying into different assets mentioned above, and lots of patience from you because it will take time to make that kind of money.
You may want to start off by focusing on building multiple income streams and reinvesting your profits as you earn them.
What to think about before investing in income producing assets?
There are many different things to think about when it comes to income-generating assets. You want to find the best assets to invest your money in that will also be the best fit for you.
Remember, as I said at the beginning of this article, not everything will be applicable to everyone. Everyone is different! You may prefer to create a stock photo portfolio and hate real estate, whereas someone else may really enjoy being a real estate investor — or it may even be the other way around.
Here are some of my tips if you are interested in income-generating assets:
Do your research and talk to experts —I recommend researching as much as you can on the asset you are interested in. And, if you still have questions, don’t be afraid to talk to an expert.
Diversify — One of the important parts of building a successful income-generating portfolio is finding ways to be diversified.
Think about the risks —When making money, there’s usually some sort of risk. I recommend evaluating the risks and seeing what you are comfortable with.
What are the best books on income generating assets?
Some highly recommended books on income-generating assets include:
The Simple Path to Wealth by JL Collins
The Millionaire Real Estate Investor by Gary Keller
The Little Book of Common Sense Investing by John C. Bogle
Income Generating Assets — Summary
I hope you enjoyed this article on the best income-generating assets. As you learned, there are many different types of assets that you can invest in so that you can earn an income.
The best income-producing assets, if they’re right for you, can truly change your life.
With these assets, you can build wealth through a reliable passive income, giving you peace of mind and freedom to live life on your own terms.
Are you looking to build income-generating assets? What are your favorite ways?
Northwestern Mutual doubles down on commitment in the fight against childhood cancer, reignites social media #LemonTopChallenge for Childhood Cancer Awareness Month Company announces additional major investments toward cancer research and scholarships and enacts local activations MILWAUKEE, Sept. 14, 2023 /PRNewswire/ — Every day, more than 1,000 children worldwide are diagnosed with childhood cancer. Today Northwestern … [Read more…]
Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “These figures paint a of picture of a disjointed mortgage marketplace reeling from spiralling repayment costs. Although the outstanding value of all residential mortgage loans was marginally higher at the end of 2023 Q2 compared to a year earlier, it represented the largest decrease on the previous quarter since reporting began in 2007.
“High mortgage rates continued to dampen enthusiasm for property in Q2, with gross mortgage advances and new mortgage commitments at their lowest observed levels since the second quarter and the third quarter of 2020, respectively.
“Outstanding mortgage balances with arrears have also ticked higher – although it only accounts for just over 1% of outstanding mortgage balances. The upward trend is worrying but not unexpected. History has shown that the uptick in home repossession typically coincides with increases to the base rate. While higher monthly repayments could lead to a rise in mortgage arrears, the record-breaking wage growth run and relatively low level of unemployment could slow the rise in repossessions. However, with the cost of housing on the up, and many homeowners struggling to repay their mortgage, families would be wary that something like a sudden illness or job loss, could leave them homeless.
“There are signs that the mortgage crisis, which has stopped many from participating in the property market this year, may be turning a corner. Average mortgage rates continue to fall from lofty heights seen in July following sizeable falls in inflation, which could mean that interest rates might not peak as high as feared. This is a confidence booster for those looking to take out a mortgage soon.
“While cuts in mortgage rates will be welcome by would-be buyers and homeowners alike, [people] still face much higher monthly repayments than in previous years – and a return of ultra-low mortgage rates isn’t forthcoming.”
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company’s or index name highlighted in the article.
Asset turnover ratio is a calculation used to measure the value of a company’s assets relative to its sales or revenue. It’s used to evaluate how well a company is doing at using its assets to generate revenue.
Similar to cash flow, the asset turnover ratio compares the company’s total assets over the course of a year to its sales. In simpler terms, it shows the dollar amount the company is earning in sales compared to the dollar amount of its assets. It can be calculated annually or over a shorter or longer period of time.
Why Is Asset Turnover Ratio Important?
Although having cash on hand is important for growing and maintaining a business, other types of business assets are also important, as is how a company chooses to use them. Liquid assets can include cash, stock, and anything else the company owns that could be easily liquidated into cash. Fixed assets are things the company owns that are not as easily turned into cash. This could include real estate, copyrights, equipment, etc.
For business owners, asset turnover ratio can be important when applying for loans and learning about their company’s cash flow. A higher asset turnover ratio indicates that a company is efficiently generating sales from its assets, while a low ratio indicates that it isn’t. A higher asset turnover ratio also shows that a company’s assets don’t need to be replaced or discarded, that they are still in good condition.
A higher ratio is preferable for investors, as well. Investors can look at the asset turnover ratio when evaluating the risk of investing in a company, or when comparing similar companies to one another. Each industry has different norms for asset turnover ratios, so it’s best to only compare companies within the same sector. For instance, a utility company or construction company is more likely to have a higher number of assets than a retail company.
Know, too, that asset turnover ratio is only one of many calculations that comprise the list of financial ratios that investors can employ. 💡 Quick Tip: How do you decide if a certain trading platform or app is right for you? Ideally, the investment platform you choose offers the features that you need for your investment goals or strategy, e.g., an easy-to-use interface, data analysis, educational tools.
Formula for Calculating Asset Turnover Ratio
It’s fairly simple to calculate asset turnover ratio, which is one reason it’s such a useful tool for investors. Asset turnover ratio can be calculated using the following formula, which divides total (net) sales or revenue by average total assets:
Net Sales = Gross annual sales minus returns, allowances, and discounts. Total sales can be found on a company’s income statement (typically part of an earnings report).
Beginning Assets = Assets at the beginning of the year
Ending Assets = Assets at the end of the year
Total Assets = Generally a company will include calculated average total assets on their balance sheet. However, sometimes additional calculations will need to be made.
Calculating Total Assets
The value of a company’s total assets includes the value of its fixed assets, current assets, accounts receivable, and liquid assets (cash).
• Accounts receivable are accounts that hold expected revenues that come from when customers use credit to buy goods and services.
• Fixed assets are generally physical items such as equipment or real estate.
• Current assets are things that the company predicts will be converted into cash within the next year, such as inventory or accounts receivable that will be liquidated.
The formula for calculating total assets is:
Total Assets = Cash + Accounts Receivable + Fixed Assets + Current Assets
Example of Calculating Asset Turnover Ratio
To give an example of the ratio calculation, if a company has $2,000,000 in average assets and $500,000 in sales over the course of a year, the calculation of its asset turnover would be:
500,000 / 2,000,000 = 0.25 = 25% asset turnover ratio
Interpreting Asset Turnover
Sticking with the example above, we’ve calculated a 25% asset turnover ratio. What that means, exactly, is that the company’s assets generated 25% of net sales over the course of the year. In other words, every $1 in assets that the company owns generated $0.25 in net sales revenue. Again, this can be helpful when using various business valuation methods and trying to determine whether an investment fits your overall strategy.
Factors that can Cause Low Asset Turnover
There are several reasons why a company might have a low asset turnover. These include:
• More production capacity than is needed
• Inadequate inventory management
• Poor methods of customer money transaction
• Poor use of fixed assets
The ratio can also change significantly from year to year, so just because it’s low one year doesn’t mean it will remain low over time.
What Is a Good Asset Turnover Ratio?
Investors can use the asset turnover ratio as part of comparing and evaluating stocks. But what is considered a good number for asset turnover?
In general, the higher the number the better — and a number higher than 1 is ideal. This is because a value greater than 1 means the dollar value generated by assets is greater than the dollar amount that the assets cost. A higher number means a company is generating sales efficiently and not wasting assets.
Conversely, a number less than 1 means that assets are generating less than the amount of their dollar value. If a company isn’t effective at generating sales with its assets, it most likely wouldn’t be a great investment — which, again, is important to know if you’re building an investment portfolio.
Since each industry has its own standards for a “good” asset turnover ratio, there isn’t one specific number to look for. For companies in the utilities industry, ratios are generally lower than companies in retail.
Companies can work on improving their asset turnover ratio by increasing sales, decreasing manufacturing costs, and improving their inventory management. Other ways they can improve include adding new products and services that don’t require the use of assets, and selling any unsold inventory still on hand.
What Does a High Ratio Imply About a Company?
If you’re using technical analysis techniques to get some clarity around a company as a possible investment target, you’ll want to get down to brass tacks: What, exactly, is a high ratio telling you?
The answer is that a high ratio implies that a company is in good standing. It’s generating value with its assets, which can signal that it may be a solid investment. But, again, there are no guarantees.
Limitations of Using Asset Turnover Ratio
While asset turnover ratio is a useful tool for evaluating companies, like any calculation, it has its limitations. It is useful for comparing similar companies, but isn’t a sufficient tool for doing a complete stock analysis of any particular company.
Also, a company’s asset turnover ratio could vary widely from year to year, making it an unreliable measure for potential long-term investments. Even if the ratio has been similar in years past, this doesn’t mean it will continue to remain consistent. However, investors can look at the long term trendline of the ratio to get a general indication of whether it’s improving or not.
Since asset turnover is typically calculated once a year, if a company made even a few large purchases this could skew their ratio. This is fairly common, as companies might have certain monthly expenses but occasionally need to invest large sums of money into equipment, office renovations, or other common business needs. 💡 Quick Tip: The best stock trading app? That’s a personal preference, of course. Generally speaking, though, a great app is one with an intuitive interface and powerful features to help make trades quickly and easily.
Drawbacks of Asset Turnover Ratio in Stock Analysis
The limitations outlined above play into some of the potential drawbacks of the asset turnover ratio when analyzing stocks, too. Mostly, it comes down to the fact that as a single ratio, which doesn’t reveal the total health or financial picture for a single company. For that reason, it’s probably a good idea to use the ratio in tandem with other analysis tools and methods.
For instance, other ratios that can be used to gain an understanding of a company’s financials are the debt-to-equity ratio, its P/E ratio, and even looking at its net asset value.
The Difference Between Asset Turnover and Fixed Asset Turnover
Fixed asset turnover and asset turnover are two different ratios that can tell you about a company, and for investors, it’s important to understand the difference between the two.
In short, and to recap, asset turnover ratio looks at average total assets of a company — “total,” in this case, being the important qualifier. On the other hand, fixed asset turnover ratio looks at a company’s fixed assets to measure performance.
Investing With SoFi
Knowing how to calculate asset turnover ratio can be useful for investors who are evaluating companies as they start building an investment portfolio. While the formula is simple — Asset turnover = Net Sales / Average Total Assets — it’s important to remember that the calculations work best when comparing companies within one industry, rather than across various industries.
Additionally, there are other metrics by which to evaluate a company or value its stock. The asset turnover ratio can be helpful, but it has its limitations. As always, speak with a financial professional if you feel like you’d benefit from more guidance.
Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).
For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.
FAQ
How can you improve asset turnover ratio?
Some ways that a company can improve its asset turnover ratio include increasing its revenues, selling some of its assets, renting or leasing assets rather than purchasing them, and optimizing its inventory and ordering systems.
Is an asset turnover of 1.5 good?
Yes, an asset turnover ratio of 1.5 is a sign that a company is on solid financial footing. It indicates that a company’s total assets are generating enough revenue from its current assets.
Can asset turnover ratio be negative?
Yes, and a negative asset turnover ratio would be a signal that a company lost money during the year, rather than earned it. A negative number represents that its liabilities or expenditures exceeded its assets.
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Another independent brokerage has chosen to align with RE/MAX. Yakima Valley, Washington-based The Real Estate Collective, is RE/MAX’s latest franchise, according to an announcement on Tuesday. The brokerage will now operate under the name RE/MAX The Collective.
The new firm is owned by Haley Larson, who joined RE/MAX with her 17 agents. In 2022, Larson’s agents achieved $55 million in sales volume, according to the release.
“The education, the systems and the years of tried and true behind the RE/MAX brand is nothing short of excellent,” Larson said in a statement. “I love the RE/MAX values and the company’s emphasis on technology while not replacing the agent.”
Larson started her career in real estate as an agent at a large national franchise in 2014. After building her own team at the franchise, she set out to open a boutique firm in 2022, before ultimately deciding to align with the RE/MAX brand.
“I know this decision will fast track the growth of the office and fill a national voice here in Yakima,” Larson said.
RE/MAX The Collective will serve buyers and sellers throughout Yakima, Ellensburg and Cle Elum and it will specialize in rural and residential properties as well as large agricultural farms.
Larson said she is currently looking to grow the firm by bringing in more real estate agents.
Last week, California-based RE/MAX Proper, another RE/MAX franchise affiliate, announced that it had acquired All Nations Realty and Investments, an independent brokerage in Rancho Cucamonga.
Want to learn how to invest in self-storage? I have stored boxes of my stuff plenty of times over the years and there’s a good chance that you have as well (or perhaps you know someone who has). Investing in self-storage facilities can be a relatively low-risk asset for people looking to diversify their income…
Want to learn how to invest in self-storage?
I have stored boxes of my stuff plenty of times over the years and there’s a good chance that you have as well (or perhaps you know someone who has).
Investing in self-storage facilities can be a relatively low-risk asset for people looking to diversify their income streams. Or, perhaps you’re looking for a full-time income and are looking for your own business to start!
So, what exactly is investing in self-storage?
It is when you put your money into self-storage facilities and rent out units to renters.
I have personally used self-storage facilities for many reasons over the years for a short-term period, and nearly every single time I think about the profitability of it all and how passive it seems to be a self-storage owner or self-storage investor.
There are usually no customers at the facility (I’ve almost always been the only one there when dropping off or picking up), but every unit is being rented. Seems like an interesting way to make money with not too much work!
Plus, over 9% of households pay for self-storage units, and there is a lot of demand for new facilities.
Quick Summary
Self-storage investing can be a way to make money and run a business with low expenses
There is a lot of demand for storage units, with many businesses having a very long waitlist
If you don’t want to run a business, you can also buy shares in an REIT or even just rent out your garage or basement
What is Self-Storage Investing?
To put it simply, self-storage investing is when you invest in storage facilities.
More and more people need storage units for many different reasons such as moving, downsizing a home, needing a place to store something that a person doesn’t have room for (such as an RV or boat), or even businesses that are storing extra inventory.
For example, someone might need a short-term lease to store their belongings due to being in between homes (like if they are moving but their next home isn’t ready yet). Or a person on a long trip may decide to sell their home, but they need a place to store their important items.
If you decide to invest in self-storage, you have a couple of options. You can start by purchasing and owning a facility yourself or passively invest by buying shares in a self-storage REIT (Real Estate Investment Trust). I will be going over each of the options further below.
Related content:
Is Self-Storage a Good Investment?
Yes, deciding to invest in storage units can be a good idea.
According to Neighbor, the average profit margin on a self-storage unit is around 41%, and they typically have high occupancy levels of around 92%.
One of the main positives of investing in self-storage is being able to earn income with less work (you’re not dealing with customers all day long – people tend to store their stuff and not visit it often).
Self-storage facilities usually have low expenses compared to other types of commercial real estate investments. Also, self-storage is usually recession-resistant as people still need to store their stuff.
Another benefit of investing in self-storage is the flexibility it offers because you don’t need very many employees to run a storage lot. Some lots that I’ve been to don’t even have any employees – instead, you call the owner when you want to get your stuff and they then send someone down. People tend to store their stuff and not touch it for a while.
Related: 18 Passive Income Ideas To Earn $1,000+ Each Month
Types of Self-Storage Facility for Investment
When investing in self-storage facilities, you may not know that there are a few different types.
This section will discuss the different self-storage facilities you can invest in.
1. Climate-Controlled Storage
Climate-controlled storage is something that more and more people want these days because it can protect their belongings from temperature changes and humidity.
After all, many places get very hot weather, and storage units can get quite hot inside. You don’t want your things to melt into each other.
These types of units are good for storing items like electronics, artwork, or documents.
Now, your location is important in deciding if you need climate-controlled self-storage, as areas with extreme temperatures or humidity obviously will need AC more. For example, a storage facility in Florida may be more likely to have air conditioning than a facility in Alaska. And, a facility in Alaska is more likely to have heat than a storage unit in Florida.
2. Mixed-Use Storage
Mixed-use storage facilities combine multiple types of storage units in one location.
For example, these types of facilities may have climate-controlled, drive-up, boat, and RV storage all in one place. Many storage facilities are like this. They cater to different customer needs and tend to have a broader target market due to being able to store so many different types of items.
People tend to like these forms of storage as they can store all of their belongings in one place, instead of having their stuff scattered across town.
3. RV and Vehicle Storage
With so many people owning RVs and extra vehicles, the demand for storage has increased over the years.
Also, many neighborhoods simply do not allow for RVs or extra vehicles to be parked in front of their home (or even in their driveway, backyard, etc.), so a storage lot is needed.
Some storage facilities may even just be massive warehouses where people can store their RVs, valuable cars, and boats inside.
We have stored an RV in a place like this many times. We have found the typical rent to be around $5 to $10 per foot for our RV in an indoor parking lot, so you can see how quickly storage revenue can add up! Some businesses even have private RV units, and those fetch a much higher rate, such as $400-$600+ per month.
4. Boat Storage
Boat storage facilities specialize in safe storage for boat owners during the off-season or when not in use. These types of facilities typically have long waitlists too.
Boat storage businesses sometimes have both indoor and outdoor options (or they may focus on one or the other), as well as extra services like boat maintenance, hauling, launching, and more.
Coastal regions or areas with nearby water access (such as Florida) are usually good locations for investing in boat storage facilities as there are more boats, of course.
We have used boat storage facilities many times over the years to store our own boat. The amount you can make per boat can be anywhere from a couple hundred to a couple thousand dollars each month, depending on the location and the type of boat (catamaran vs. small fishing boat, for example) you can store. We have paid anywhere from around $1,200 to over $2,000 a month in the past for boat storage.
5. Drive-Up and Outdoor Storage
This is the type of storage that pretty much everyone has seen, as they are very common.
With this type, customers can drive directly to their storage unit, making loading and unloading much easier. These types of facilities are usually single-story buildings. Many times they do not have AC or heat.
Drive-up and outdoor storage facilities give renters an easily accessible storage solution.
How to Invest in Self-Storage
If you want to invest in self-storage, there are a few different ways to do so.
1. Buy an Existing Self-Storage Facility
One of the easiest ways to enter the self-storage market is by purchasing an existing business, such as those for sale by mom-and-pop operations.
This can save you time as everything is in place and you already have customers with rented units. Yes, you can improve some of their processes, but a lot of the hard work is already done for you.
But, purchasing a facility can be expensive upfront, though, because you will be buying a business with land, a building, and an existing customer base.
Just as an FYI – As you’re looking for storage facilities that are for sale, you may come across different classes. Class A facilities usually are higher-quality climate-controlled storage units, whereas Class B and Class C facilities may be lower-quality.
Buying an existing storage lot can possibly make you more money than investing in REITs (discussed further below), but it also means more hands-on management and responsibility because you will be actively running a business and managing employees.
2. Build a New Self-Storage Facility
There are around 2 billion square feet of storage space in the U.S. alone, but there is a high demand for more. Many self-storage facilities have long waitlists even!
I have called many storage lots only to find out that they had waitlists that were years long. I have even several times called every single lot within a few state radius, and found that every single one had a waitlist.
Yes, the storage business is really in that much demand!
As a self-storage investor, you can take advantage of this high demand and build your own storage facility.
To create a self-storage facility from the ground up, you will need to do the following:
Find land to buy – Once you know that an area needs a storage facility, you will need to find land to buy to build on. You will also want to make sure that it is easy to drive to (for example, if you are building an RV storage lot, you don’t want low bridges as the only way to get to your lot because no one will be able to get there then).
Build – After you buy the land, you will need to think about what you want your facility to look like, then hire a construction company to build your plan.
Open up for business– Once the facility is built, you will need to market it and get customers. You will also want to set up the systems to manage daily operations effectively and as passively as possible.
Self-storage is in demand, so building a new storage business can be a way to get started and make money.
3. Buy Shares in a Real Estate Investment Trust (REIT) That Focuses on Self-Storage
If you want to invest in self-storage without actually owning and managing a business, one way is to invest in an REIT.
REITs are a type of investment that allows you to buy shares in a company that owns self-storage facilities. Think of it like shares of stock in a company that you can buy.
With REITs, you can invest in a portfolio of self-storage properties without physically owning or managing the facilities yourself.
This is more passive because you don’t need to hire employees or do maintenance checks.
4. Rent Your Space on Neighbor.com
If you have extra space in your own home such as a garage, closet, driveway, or spare room, you can rent it out as storage space through a platform like Neighbor.
With this site, you can earn $100 to $400+ each month (the rate you can get depends on demand in your area and the type of storage you are renting out).
Here’s how Neighbor works:
Sign up for a free account – Create an account on Neighbor by clicking here.
Describe your space – Write a detailed description of your space, including the dimensions, location, and any features (such as air conditioning or heat). Add pictures of the space as well so that potential renters can see what you are renting out.
Set your price – Choose how much you want to charge for renting your space.
Manage rentals – Connect with interested renters, agree on terms, and manage ongoing rental contracts, all through the Neighbor platform.
You can learn more at Neighbor Review: Make Money Renting Your Storage Space.
Advice for managing a self-storage facility
If you decide to run your own storage facility, then here are my tips for new self-storage operators.
Making money from self-storage
To make money from your self-storage facility, you need to think about what your customers want. So, you may sell amenities to your renters, such as vehicle washing, starting up their vehicle or checking on it, electrical plugins to charge vehicles or RVs, and so on.
You’ll also want to think about how much money it will cost you to actually run the business. Will you need to hire workers? How much will maintenance cost you so that you can keep the facility in good condition?
Security in self-storage facilities
Security is very important for customers when choosing a self-storage facility. Customers care about their stuff and they don’t want anything happening to it, such as it being stolen.
So, you will want to make sure that your facility has a lot of light (especially at night time), security cameras aimed at different angles, and gates with codes. This helps your customers feel safer about leaving their stuff at your storage facility, and also helps to protect your business from liability issues and bad reviews (for example, if a person has their stuff stolen from your facility, they are likely to leave a bad review and this can cause others to not use your storage units as well).
Frequently Asked Questions About How To Invest In Self-Storage
Here are answers to common questions about investing in self-storage.
How can I find a self-storage business for sale?
To find a self-storage business for sale, you can start by searching on websites like LoopNet and BizBuySell. I took a quick look at both of these sites and found many for sale quite easily from anywhere in the hundreds of thousands to in the millions of dollars price range.
What are the best self-storage stocks to invest in?
The best self-storage stocks for you to invest in will depend on your own money goals and the amount of risk you want to take on. Unfortunately, I cannot tell you which is the best self-storage stock, as I am not your financial advisor and I do not know your specific situation. But, I can tell you which ones are popular.
Some of the most popular and best self-storage stocks include Public Storage (PSA), Extra Space Storage (EXR), and CubeSmart (CUBE).
Which self-storage REITs have the best returns?
Real estate investment trusts (REITs) are a popular way to passively invest in self-storage facilities. Several well-known self-storage REITs include Life Storage (LSI), National Storage Affiliates (NSA), and Simply Self Storage (SSS).
Keep in mind that past performance and dividends do not mean that the same will be true in the future, so it’s important to do your own research.
What risks are there with investing in self-storage?
Like with all businesses, there are risks when it comes to self-storage. Some risks include competition, changes in demand, and possible natural disasters that could hurt the facility (such as a severe storm or a flood).
Also, managing a self-storage facility will, of course, require at least some time from you and may even require employees, so you should also think about operational costs and business management.
How profitable can a self-storage business be?
The amount of money that a self-storage business can make depends on many things such as location, demand, and operating costs.
Can owning a self-storage unit generate passive income?
Having a self-storage facility can earn you passive income through rental fees. But, managing a self-storage facility also requires that someone works at the business, to check people in, show units, and check on the property. You could hire employees so that it is more passive for yourself.
You can also earn passive income by investing in self-storage REITs or stocks instead of owning and running a storage facility.
Does self-storage do well in a recession?
Self-storage in the past has performed relatively well during recessions, as people often downsize their homes or need temporary storage. Of course, though, the past doesn’t mean that it will always do well. So, it is always best to do your research and prepare as best as you can.
What is the future outlook for self-storage?
The future for self-storage looks to be positive, as there is a lot of demand for storage units and I’m still constantly seeing waitlists everywhere. In fact, whenever I need to store something even for just a few months, I’m always being told that I need to call a year in advance for a spot.
Many storage facilities have a high occupancy rate, long waitlists, and cannot keep up with demand.
How To Invest In Self-Storage – Summary
I hope you enjoyed today’s article on how to invest in self-storage.
If you are looking to add a new asset class to invest in, becoming a self-storage investor can be an interesting way to bring in a stable cash flow and make more money.
Self-storage is in high demand too, with many businesses currently having a long waitlist.
Factors such as location, demand, the quality of facilities (Class A, Class B, and Class C), and the type of storage lot all can change the success of a self-storage investment.
Are you interested in learning how to invest in self-storage?