Having a cash flow asset that earns money consistently can help you towards financial freedom.
It can also help you beat inflation and build wealth over the long term.
I’m writing this blog post with a personal experience of investing in a few of these myself.
What Is Cash Flow?
In its simplest terms, cash flow is the movement of money in and out of a company.
So for instance if a hair salon makes £6,000 a month. The money comes in through clients paying for haircuts. This money is the cash flow the salon produces.
What Is The Difference Between Cash Flow And Profit?
Okay, using the saloon businesses as an example.
Profit differs from cash flow because it is the profit made after the saloon has paid all of its expenses.
This will include tax, Hair products, salaries etc
A simple calculation to work out how much profit a company makes is Revenues – Expenses = Profit.
What Are Cash Flow Assets?
Cash flow assets are income-generating assets that usually appreciate over time.
They provide a consistent predictable source of income, making them valuable for financial stability and passive income.
For example, a rental property is seen as a cash flow asset.
The tenant pays the landlord consistently on a set date which makes it passive and predictable.
Why Invest In Income-Generating Assets?
Okay, before we dive in and look at the 31 income-generating assets. Let’s look at the benefits and why we should even invest in them.
Steady Cash Flow
Having a steady flow of money coming in can help cover living expenses and also give you the option to invest in more assets… This is what the wealthy do!
Wealth Accumulation
Over time the income that is made from your assets will accumulate and grow your wealth significantly.
It’s a bit like the snowball effect, the more you invest in income-generating assets, the more you’ll see your wealth grow.
Hedge Against Inflation
Inflation is something we can’t avoid, but we can prepare for it.
Income-generating assets such as property and bonds increase in value whenever inflation increases.
Passive Income
Another benefit of income-generating assets is that once the work or money has been paid investing into it, the money can roll in in the background.
Don’t get me wrong, I want to be real, there is no such thing as truly passive income.
There will be maintenance you’ll need to do to your assets and check in from time to time. The great thing is that it’s minimal, this is why it’s almost passive.
Hack: Once your asset is up and running, the wealthy use other people’s time to check that the asset is maintained and constantly producing income.
For example, property managers, freelancers, admin managers etc.
Long-Term Stability
Another advantage of income-generating assets is they often have great stability compared to assets focused solely on capital appreciation.
For example, a dividend-paying stock is relatively resilient to market fluctuations and pays you consistently.
Bear in mind you will still have to check the health and financials of a company from time to time to make sure it’s still performing.
Retirement Planning
More often than not, most people aren’t prepared for retirement.
Yet, if you have income-generating assets you will have consistent reliable income to carry on your standard of living after your working life.
15 Income-Generating Assets
Property Investing
One of the most common cash flow assets is property. This is because it has two advantages, it increases in value over time and it produces cash flow.
The fact that it increases in value over time means that it helps to combat inflation.
Let’s dive in to explore the different types of property investing strategies.
Buy to let
This is simply when you purchase a property and rent it out to a tent.
You get the rent from the tenant monthly which is your cash flow.
This is a relatively safe method of property investing depending you’ve done thorough research before your purchase.
Serviced accommodation
Now this method is almost like having a mini hotel.
The property for serviced accommodation has many individual rooms, usually with an en-suite.
You advertise your property and people book to stay in that property. You can have multiple people staying at this property at one time.
Due to renting out on a room-by-room basis you will have increased cash flow. This is in contrast to the buy-to-let method where you have a single tent or family.
Bear in mind you will have to deal with laundry, and cleaning and have a system in place for tenants to access your property.
HMO (House Of Multiple Occupancy)
Similar to serviced accommodation, HMOs are properties with multiple rooms.
These rooms are rented out to students, professionals or a specific clientele on a contractual basis.
Sometimes this may be on a monthly rolling basis or possibly for the term of a university.
The pros of this strategy are that you receive increased income rather than renting out the property to just one tenant or family.
Furthermore, you don’t have a revolving door of people to clean up after like serviced accommodation.
Royalties
In its simplest terms, a royalty is a payment received by someone for work they have previously done.
For example, a musician will receive a royalty payment for a song they’ve sung if it’s used in an advert, movie or commercial.
It’s an amazing income-generating asset as it’s a form of passive income as well.
The most common royalty payments come from book sales, Franchises, Software licenses and Patent royalties.
The easiest way to earn royalties is either to take photographers and upload them to a stock photo website
or
Create an educational product such as an ebook or course and upload it to a platform like Udemy, SkillShare or Amazon. Every time someone purchases your product you’ll receive royalties.
Dividend Paying Stocks
This is another great asset that pays you whilst owning the asset.
Dividends are a portion of a company’s earnings that gets distributed to its shareholders… you!
The amount you get paid depends on the dividend yield of the stock. Dividend yields range from 10% to 1%.
So for example, if you invested £1000 and the dividend yield was 5%, then you would receive £50 a year in dividends.
As you can see you would need a fair amount invested to be able to live off dividends, but it’s possible with consistent investing over time.
How to get started:
Start by looking into dividend kings and dividend aristocrats.
Both are the names given to companies that have been paying dividends for a long time. Kings (50 consecutive years) and aristocrats (25 consecutive years).
High-Interest Savings Accounts
Now this is for all the risk-averse people out there.
You can get a bank account with a high-interest rate and simply deposit your money and watch the interest earned on that money roll in.
More often than not you will have easy access to your money if you ever need it.
Another advantage is that your money is kept safe from volatile market fluctuations and you will never see your money go into the negative.
Some assets cost a lot of money to get started, but this is probably the best cash flow asset you can have with the least amount of money.
How to get started:
Have a look at the most well-known banks in your area. They’re sure to have a savings account that pays interest.
Dividend Focused Mutual Funds
Having a pool of companies that pay dividends periodically is exactly what a dividend-focused mutual fund is.
This is in contrast to owning a single stock which is focused on growth and appreciation.
The beauty of a fund of this nature is that the research has already been done for you.
The companies within the fund will need to meet a specific requirement, such as being a large-cap company (making a certain amount of revenue), being from a certain part of the world or paying a certain percentage dividend yield etc.
Investing in dividend-focused mutual funds is a great way to gain exposure to the stock market.
The way you receive your money (dividend) is the dividend is paid to the fund first and then the fund pays you.
How to get started:
Platforms such as Vanguard, Trading 212 and Hargreaves’s Lansdown all offer Dividend Mutual funds.
Each fund has its description telling you the objective of the fund and what the specific difference is about each fund.
Tip: Fees are part and parcel of investing, the majority of large investing platforms will charge a fee for their service, and this is normal.
The key for us as investors is to pick a fund that isn’t going to charge us a high fee.
You’ll be surprised at how much it can eat into your profit over the years.
You can find the amount a fund charges in the documentation of each fund.
Dividend Focused ETF’s
ETF stands for an Exchange Traded Fund.
An ETF is like a basket of different investments (stocks, bonds or other assets) that you can buy or sell on the stock market, just like a single stock.
Okay, brace yourself for some investment jargon…
The difference between a Mutual fund and an ETF is that an ETF is traded on stock exchanges like a single stock, while a Mutual fund is bought and sold through the fund company at its net asset value (NAV) at the end of the trading day.
I hope that explains the difference between the two! The main takeaway is that you’ll get paid a dividend and both are great from cash flow.
A dividend-focused ETF provides a steady stream of income from the dividends paid by the stocks within the fund.
Needless to say the more invested the more dividends you’ll receive.
How to get started:
As mentioned before, read all the documentation before investing in either.
All funds have different characteristics and objectives. Meaning some have higher charges and investment fees.
Furthermore, they all have different risk levels, so consider that.
The similarities of both are that they are less risky than single stocks and bonds.
Affiliate Websites
First, we need to talk about affiliate marketing. This is when you market a product that isn’t yours and when somebody uses your link to make a purchase, you make a commission from the sale.
A common way affiliate marketers make money is through websites. They create lots of content around the product they’re selling, such as product reviews, blog posts and informational articles.
They then leave a link in natural places on their websites and make a commission if someone uses the link.
The great thing is that once you have enough content coming to your website the affiliate income becomes predictable and passive. This is why it’s a great cash flow asset to have.
Here are some examples of affiliate websites, Money Saving Expert, Skyscanner, Golf Monthly.
How to get started: The hardest part about making money from affiliate websites is building the website. If you’re not a techy then you can easily hire someone to create one on Fiverr or UpWork.
The next step is looking into SEO and learning how to create articles that get the right traffic from Google.
Start A Blog
Similar to affiliate websites, but there are a few key differences. Blogs can be monetised in multiple different ways.
The key ones are:
- Advertising
- Sponsored Posts
- Affiliate Marketing
- Selling Digital Products
- Coaching
Blogs have evolved over the years from online diaries to online money-making machines.
Bloggers Produce epic long-form content that solves people’s problems. Once enough content is on their blog, the idea is for the articles to appear on the first page of Google.
The traffic from Google is then monetised with the methods I mentioned before.
Just like affiliate websites, once you have enough content on your blog the money that comes in is predictable and passive. This makes it a great income-generating asset.
Did you know blogs can sell for 6 figure sums? Yes, that’s right.
How to get started: I have written an in-depth guide here to start your blog.
Youtube
Now, if you’re not shy of getting in front of the camera then YouTube may be the right income-generating asset for you.
Most people think of YouTube as a type of social media where you go for your daily dose of entertainment or a “how to” video.
Whilst this is true, people are making 6 figures + from their YouTube channels.
For all the smart cookies out there, YouTube is a marketing platform.
Here are the methods YouTubers use to make money:
- Sponsored Posts
- Ad Revenue
- Courses
- Memberships
- Affiliate Marketing
- Super Chat
- Merchandise
- Super Thanks
The key part of being a successful Youtuber is making content that people are searching for.
A shortcut to finding what people are searching for is done by using software such as Tube Buddy and Social Blade.
How to get started:
First, you’ll need a Google account to set up your YouTube channel. It’s free and easy to set up.
Decide on the niche you’ll be talking about and create a content schedule and plan.
The only equipment you’ll need is your phone and editing software. You can use iMovie or any other free software to get the ball rolling.
Now get creating!
Digital Products
Did you know a digital product can be a great way of using your knowledge and creativity to produce cash flow and passive income?
The beauty of a digital product is that you make it once and can sell it an infinite amount of times.
A digital product can come in the form of an Ebook, Course, Printable and many more products.
With the help of a solid marketing plan, your digital products could produce cash flow from sales all year round.
This goes without saying that if you’re able to build an audience, selling your products will be much easier.
Hack: Creators can make cash flow from digital products by creating a digital product that solves their audience’s problems. This is the key to making a digital product that sells like hotcakes!
Rent Out Your Car
Do you have a car that you don’t use? Or have periods where you don’t use your car? Why not turn your car into a cash-flow asset?
This has become a popular way to make money without the need for any initial investment.
Companies such as Turo, Hiyacar and Getaround pay you to rent out your car. They take a cut as the middleman between you and the person renting your car.
How to get started: Decide what period you’d like to rent out your car. Think of how much you want to charge. Get in contact with one of the companies mentioned and away you go!
Invest In Small Businesses
How about investing in a business that we use every day?
For example a dry cleaner, a furniture shop or your local florist.
They can generate consistent income through dividends or profit sharing, thus creating cash flow to investors.
Here are a few other reasons to invest in small businesses:
- Growth potential: Small businesses often have significant growth potential, which can lead to higher returns on your investment as they expand.
- Diversification: Diversifying your portfolio by including small businesses can help you spread risk, as they may not be as affected by market volatility as larger companies.
- Local impact: investing in local small businesses can have a positive impact on your community while providing a source of income.
How to get started: Some small businesses are riskier than others so it’s vital to do thorough research.
When considering small business investments it’s crucial to assess the business’s current financial health, management team, competitive landscape and market trends.
Read up on what makes a good business. Here’s a great book to get you started.
Fixed Term Deposit Savings
Do you have savings that you don’t need to touch for a while?
Well, a fixed-term deposit savings account could be a good fit for you.
The interest that is paid is usually higher than your average high-interest savings account due to the fact you can’t withdraw the money for a set period.
Whilst this isn’t necessarily producing cash flow that you can access straight away, it’s a nice way to lock in some return on your money.
How to get started:
Most online and well-known banks offer fixed-term deposit savings accounts.
They vary in the amount of interest that is paid and the time that your money is locked away.
REITs (Real Estate Investment Trusts)
Have you ever wanted to get involved in property investing but don’t have the money for a deposit? Well a REIT could be a great option for you!
You see a REIT is a company that owns, operates or finances income-producing properties. These properties may include medical facilities, hotels, apartment buildings and warehouses.
It’s similar to investing in a dividend stock. A REIT pays its shareholders a dividend periodically, this makes it a great cash flow asset.
In fact, by law REITs must pay out 90% or more of their taxable profits to shareholders in the form of dividends.
You could say a REIT is an income-producing asset, yet you don’t have to own the asset and deal with the inconvenient parts of the property like maintenance and unruly tenants.
How to get started:
Most large investing platforms have REITs that you can invest in.
Check to see the property which is held in a REIT.
This may sound simplistic, but shopping centers have been on the decline, so it may be wise to instead go for trendier properties such as apartment complexes, as these are more popular (not investment advice*).
Be aware of fees when choosing your REITs. Most charge an upfront fee of between 9-10% and sometimes up to 15%.
Not all REITs are the same. So make sure you read the documentation and do your research.
Rent Out Your Parking Space
Did you know some people are making £400 and above a month from renting out their parking space?
You could have a cash flow asset that you didn’t even know about.
Companies such as www.yourparkingspace.com, www.justpark.com and www.parkonmydrive.com give you the ability to use your parking space as an income-generating asset.
The people who want to use your parking space range from working professionals to seasoned partygoers.
The amount you get paid depends on your location. If you’re near a stadium or place where events take place, then you’ll likely have an in-demand space and therefore earn more.
How to get started:
Check out the websites mentioned and fill in all the information they require.
All websites have different terms and conditions, so be sure to read them.
What Are The Most Profitable Assets That Produce Income?
The most profitable assets that produce income are affiliate websites and blogs.
You will need to churn out lots of content in the beginning.
For the price of hosting (£10-£40) for larger websites. You could be making 6 figures plus.
After time and a library of content, you can spend a few hours a week and even have time off and your asset will still produce money.
This asset requires upfront time to benefit from passive income later.
What Assets Can I Buy With The Least Amount Of Money?
The asset you can buy with the least of money is a dividend-paying stock.
You can invest in a dividend-paying stock from less than £1.
Frequently Asked Questions On Income Generating Assets
Income-Generating Assets For Beginners
The best income-generating assets for beginners are:
- Dividend Stocks
- YouTube
- Affiliate websites
- Blogging
All of these pay consistently. Each requires either your time or money invested.
Ready To Pick Your Favorite Cash Flow Asset?
I hope this list of the best cash flow assets for passive income has given you a taste of what you could invest in.
All of the assets above can aid us in our journey to become financially free and design a life where we’re not slaves to a job.
The main takeaway I want you to take away from this post is that the average person like you and me can invest in.
My favorite cash flow assets (mostly because of the low cost and low barrier to entry) are:
- Index Funds
- Creating A Blog
- Selling Digital Products
My future cash flow assets I want to own:
- Property (Serviced Accommodation)
- Affiliate Websites
Remember, if you want to achieve financial freedom and live life on your terms then you need to start thinking about having a cash flow asset to make money outside of your day job.
I wish you every success, good luck!
