There are many opportunities for you to develop your passive income. In this blog, we will look at 7 of these ways.

1. Real Estate – Real estate includes land and buildings. Rental property is ideal for passive income. If you are looking to develop your rental property, identify a location with a high renters population and with reasonable land prices to maximize your returns. You can also purchase houses or office space to rent out. Centum, Tsavo Properties www.tsavo.ke and The Epic Properties Ltd develop small unit houses (bed-sitters and one-bedroom) targeting investors seeking to make rental income.

Advantage – Rental income from real estate protects you against inflation by hiking rent as standards of living rise

Disadvantage – Developing rental property is usually expensive. Furthermore, if you are developing the property yourself, land ownership and developing the property can be hectic especially if you are not experienced.

2. Treasury Bonds – These are government instruments that allow you to invest long-term with a reasonable return of investment of between 9 – 14% per year. You receive interest every 6 months for the term of the treasury bond and at the end of the term, you receive back your investment.

Advantage – High, long term and hustle-free passive returns. Also, long Treasury Bonds of over 20 years (Infrastructure bonds), are tax-free. Treasury bonds are also easy to liquidate (through the NSE) if you wish to sell before the end of the term. They are also affordable at a minimum of Ksh 50,000.00

Disadvantage – The income from Treasury Bonds is not inflation-sheltered and your income remains constant throughout the term of the bond

3. Wealth Management / Cash Management Product - This is an investment opportunity provided by fund managers whereby investors lock funds for periods of 3 months, 6 months or 1 year and receive interest from their investment in agreed-upon periods. The minimum investment is Ksh 1,000,000.00

Advantage – It gives you more control of your funds as topping up and withdrawing funds is easy. You can also arrange with your fund manager to receive your interest every month. 

Disadvantage – The interest rate keeps fluctuating with market performance so mid to long-term earnings prediction is impossible. 

4. Income Earner and Annuities - Insurance companies also provide products for passive income. You give a lump-sum amount to the insurance company and in return receive a predetermined amount of income every month for a specified amount of time. 

Advantage – Monthly income ideal for retired senior citizens

Disadvantage – The returns on your investment are not competitive

5. Private Equity – Private equity is owning a part of a private company that you are not involved in the day-to-day running. You therefore earn dividends based on the performance of the business. You can directly negotiate ownership in a business in exchange of capital funds or go through private equity companies that give you access to businesses needing funding partnerships. If you are a business owner, you can create systems and processes and hire people so that your business can operate without your active involvement. This way, you can convert your business into a source of passive income.  

Advantage – Opportunity for exponentially growing wealth. 

Disadvantage – Long-term passive income is not guaranteed as you are exposed to business risks including losses and closure

6. Royalties and Residue Income Opportunities – Royalties are the money paid for the use of intellectual property.  It includes payment for a franchise and payment for the use of copyrighted content. Software developers and artists such as musicians can continue earning from their intellectual content many years after production and thus passive income.

Advantage – Depending on the value and uniqueness of the intellectual property, it can be quite profitable.

Disadvantage – Income will usually dwindle over time and therefore not a reliable long-term source of passive income

7. Residue Income – Residue income is income that you continue earning long after you have made a sale. Opportunities such as the sale of insurance and investment products, internet affiliates and agency commissions provide residue income -- as long as the client continues to renew the service.

Advantage – You do not need funds to generate this type of passive income flow but rather your sales skills and networks.

Disadvantage – Long-term passive income is dependent on renewals thus requiring some level of customer service input to maintain income. 

We hope that this list will help you as you think through developing your streams of passive income. Please feel free to revert with comments or enquiries by writing to us at invest@rubianiwealth.com.