- Financial planners claim that their clients earn passive income from two main sources.
- Real estate is one of the primary ways clients earn passive income, owning a variety of types of property.
- Business owners earn passive income through their business distributions and dividends.
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Passive income is a goal for many, but there isn’t just one way to earn it.
It can come from a variety of sources, ranging from affiliate marketing to rental real estate. To find out how people earn passive income, Insider asked two financial planners how they most often see their clients earning this type of money. They shared two main sources: real estate and distributions and dividends.
Real estate is a common type of passive income, but not everyone is a homeowner
Real estate is a popular way to generate passive income.
John Bovard, financial planner at Incline Wealth Advisors in Cincinnati, Ohio, says his clients’ biggest source of passive income is real estate.
He quotes a client who owns several types of real estate. “He owns warehouses where he is a sponsor, so he owns a small percentage of that warehouse. He owns single-family homes, multi-family homes, and he also only owns raw land that will likely be developed at some point.” said Bovard. He distributes some of these assets among a group of investors.
Real estate can be a tricky source of income – it can involve work if you choose to manage it as an owner. But, commercial properties and properties managed by a property manager can be very different and much more passive.
Dividends and distributions are a powerful source of passive income for business owners, but dividends aren’t limited to CEOs
Financial planner Kenneth Chavis IV of Lourd Murray in Beverly Hills, Calif., Says his clients mostly create wealth through businesses and stocks.
“We have a good number of business owner clients, as well as executives,” he told Insider. “We see a fairly large percentage of our clients’ income being passive income from distributions. If they own shares of a publicly traded company, then [they receive] dividends, mainly.
However, dividends are not only available to business owners and executives. Dividends are investment income that comes from owning stock in a company, and anyone who invests in a stock offering a dividend can receive this type of passive income. While not all stocks offer dividends, those that provide recurring income whenever a dividend is made available. The more shares you own, the more dividends you receive.