17 Examples of Income Producing Assets You Can Invest In

income producing assets

Income producing assets are businesses and investments that generate a consistent revenue. They often pay monthly, but can also do so on a quarterly or even semi-annual basis. Instead of trying to buy low and sell high, people can enjoy the cash flow that their investments distribute. They don’t need to guess or “play the markets” to create profits. However, many income opportunities can rise in value, too, and offer the best of both worlds.

Acquiring income producing assets is a commonly-followed investment strategy. It’s the method I used when I was a beginner and still is the cornerstone of my portfolio. Focusing on monthly revenue led me to reach financial freedom in three years, by age 26. I wrote a book about that, which you can download here at no cost.

Building passive income through business ownership and investment is an attractive concept to many. People often aim to generate enough revenue from income producing assets to replace their expenses. If they can get to that point, it then becomes easier to quit their jobs, explore new passions or simply live a more flexible, comfortable and enjoyable life. Owning a portfolio that creates monthly income can break the financial chains that weigh most of us down.

17 examples of income producing assets

I originally wrote this article in February 2015. It’s since been edited (May 2017) to reflect updates and advancements in the world of investing. Below are 17 examples of income producing assets that you can purchase, along with several bonus suggestions. Although this list is not exhaustive, it covers many of the options available to investors today. If you’ve got others in mind, please leave a comment at the bottom of this page.

#1: Rent single-family homes and condominiums

Single-family homes and condos that are transformed into rental units can make for great income producing assets. If you purchase a property using only a small portion of your own capital (the rest is a mortgage borrowed from the bank) and rent it to a good tenant, the rental income you receive can create substantial cash flow.

Assuming that what you charge in rent surpasses the costs of your mortgage, property taxes and other expenses, this strategy can be a relatively quick path towards financial freedom. In addition to serving as an income producing asset, the house/condo can become even more valuable as your tenant pays off the bank loan for you. Assuming real estate prices don’t sag, your equity will increase each month. That can create favorable conditions to sell or refinance the asset in the future.

While this is a road travelled by many, you should be aware of some of the risks involved. For instance, if you lose your tenant and can’t replace her, then you’ll be the one stuck with footing the mortgage costs. That can quickly take it from an income producing asset to an income-reducing liability. Try to purchase in an area with a strong demand for rental properties.

#2: Rent your basement, spare room or attic to tenants.

If you own the property that you live in, you could consider renting out your basement, spare room or attic. I even know a guy who paid $500 a month to sleep in someone’s closet in San Francisco. His “room” was literally under someone’s hanger and shirts!

Some people open their homes to tenants when they could use a little more cash. Others view their primary residences as long-term income producing assets and actively promote their availability. You could even go so far as to turn your property into a bed and breakfast, and target higher-priced short-term tenants.

Converting part of your home into an income producing asset is common, particularly if you have a house. However, it can quickly turn messy if your tenant is unruly, so you should take care to screen them in advance. As well, make sure you explore any local laws and regulations before going down this route. You may need permission from your municipality.

#3. Multi-family residential real estate

Make an investment into a duplex, four-plex or even an entire apartment building. Why have one tenant when you can spread your risk among two, four or even 400? In the USA, especially, these have proven to be lucrative investments because fewer Americans can afford housing in a post-2008 economy. The demand for apartments skyrocketed after the Great Recession.

Although the upside can be high, the downside is that the barrier to entry also is. These income producing assets typically require a substantial amount of capital to get involved with.

In spite of their cost, it can actually be easier to qualify for a mortgage to purchase multi-family residential real estate. Unlike single-family properties, where the loan is to the buyer and the property is collateral, apartments are often the reverse. Banks will assess the merit of the asset on its net operating income and essentially treat it like it’s a business. A profitable apartment building can secure favorable loan terms that are guaranteed by the purchaser. The challenge, of course, is coming up with a down payment for one.

Read Ken McElroy’s book, The ABCs of Real Estate Investing, before entering this space.

#4: Commercial real estate

Just like people, businesses need a place to live. Commercial real estate can make for effective income producing assets because you can often charge high sums of rent. However, the risk is generally greater, especially when the economy is slow. If your tenant’s growth declines or becomes insolvent, it may not be able to afford what you’re charging. A good example is the Canadian city of Calgary, whose commercial vacancy rate reached 22% in 2016 after corporations were afflicted by low oil prices.

Many investors are beginning to reconsider commercial real estate as a viable option. As firms increasingly depend on technology rather than on employees, there is question over how necessary large office space will be in the future. Thus, the demand for these types of properties may fall in certain markets. On the other hand, if they are oversold it could present attractive buying opportunities.


Limited partnerships are business entities used to acquire assets by multiple investors. They are frequently sold as securities by private equity companies and exempt market dealers. For example, if 20 investors wanted to pool their money to buy an apartment building, they might form an LP to do so. The real estate would be owned by the LP, but each investor would own a certain amount of units (shares) in the entity and therefore participate in the profits and losses.

Limited partnerships can be lucrative income producing assets, but they can also be disastrous investments. They are heavily dependent on their underlying asset as well as how they are managed. If you’re buying an LP through an investment dealer, read the offering memorandum or prospectus carefully.

Note: LPs can be both privately-held and publicly-traded.

#6: Master Limited Partnerships (MLPs) 

Master Limited Partnerships are LPs that have been securitized and listed on a stock exchange. They are commonly invested in by income-seeking buyers, and have especially risen in popularity in the United States. They are often taxed favorably, too.

#7: Real Estate Investment Trusts (REITs)

Real Estate Investment Trusts are large companies that invest in a portfolio of properties. They generally focus on a specific asset class, like “grade A” commercial office space, and are geared towards creating monthly revenue for their investors. For that reason, they are a favorite among those who look for income producing assets. REITs can be both publicly-traded and privately-held. They are also a great way for retail investors to get involved with massive properties.

Be careful not to be fooled by the glamorous holdings that some REITs possess. Large, big-brand tenants do not automatically equate to profitability. In 2013 a well-known British Columbia REIT called League, with tenants like Subway and Cineplex, filed for bankruptcy. Thousands of people lost their investment.

Read also: The Dirty Little Secret About REITs

#8: Mortgage Investment Corporations (MICs)

Mortgage Investment Corporations are a lesser-known investment vehicle that can serve as an effective income producing asset. MICs pool money together from investors and lend it to borrowers, securing the loans as mortgages against real estate.

Unlike banks, they typically lend to borrowers that seek short term, bridge or mezzanine financing. MICs often charge a higher interest rate than do traditional lenders. Like REITs, MICs can be both privately-held or publicly-traded. Here’s a list of 20 MICs in Canada.

#9: Dividend stocks 

Large blue-chip stocks often pay dividends every three months. While the distance between payments might deter some investors, these can serve as safe examples of income producing assets. If you own a portfolio of securities that make dividend payments at various times, you could end up receiving revenue multiple times a month.

Dividend oriented buyers often use a strategy known as “dividend growth investing.” This concept involves acquiring shares in stocks that not only pay dividends, but that have a long history of raising their payments. The ability to regularly raise dividend payments can be indicative of financial health. It’s also a way to increase your passive income without having to invest more.

#10: Bonds and debentures

Bonds and debentures are loans issued by governments and businesses to raise capital. In exchange for funding, the issuer typically pays interest on the loan, thus making it a popular income producing asset. Interest payments are generally made semi-annually.

Note that the risk profile for these investments can range between very low and very high. It depends on the credit-worthiness of the borrower (e.g. the government of Canada vs. the government of Greece). Companies like Fitch Ratings can help you make your assessments.

Note: bonds are usually secured by specific assets, whereas debentures are unsecured.

#11: Peer-to peer-lending

P2P lending has evolved in the wake of large bank withdrawals from the unsecured loans business. While many traditional lenders are more cautious in a post-2008 economy, companies like Lending ClubProsper and Blackhawk have catapulted to the scene.

P2P lending firms connect retail lenders with borrowers. The credit industry is now no longer solely occupied by banks. For as little as $25, you can invest in an interest-bearing loan, which pays monthly.

Although peer-to-peer lending has garnered popularity, it’s still relatively new and has kinks to iron out. It also hasn’t extensively permeated markets outside of the US. The first to break into Canada was Lending Loop. Given the ease to invest and its broadening of the credit markets, P2P lending will likely become an ever-popular income producing asset in the future.

I recommend Blackhawk Investments as a good peer-to-peer lending platform.

#12: Private or “hard money” lending (secured) 

As this article indicated, there has been an emergence of new lending opportunities in recent years. The business is no longer controlled by banks. But if you don’t want to use “middlemen” like buying bonds, P2P firms and investing in MICs, an alternative option is to issue the loans yourself.

A secured loan is one that is backed by collateral, usually property or an automobile. If the borrower defaults under the loan agreement/promissory note, you can then attempt to recoup your capital by seizing the asset you secured it against.

Secured lending opportunities generally exist for mezzanine financing, real estate construction financing, second and third mortgage deals and higher-risk borrowers. It’s unlikely that you can enter “plain vanilla” first mortgage lending, because that industry is still dominated by banks.

Note: depending on where you live, there may be regulations that govern hard money lending. In most states in the US, you’ll need a license.

#13: Unsecured private lending

An unsecured loan is not directly backed by collateral. But it can make for a lucrative income producing asset because the interest rates charged are generally high. Although these loans are riskier than others, there are plenty of ways to mitigate exposure. Moreover, if the borrower has assets you can attempt to seize them in default, even if they weren’t listed in the loan agreement.

Note: here’s an article about how to lend money as an investment. It can apply to both secured and unsecured loans.

#14: Royalty trusts 

Royalty trusts are popular income producing assets in North America. They usually own the rights to royalties from resource-based ventures, like mines, pipelines and energy projects. These securities typically distribute most of their profits to investors each month. They can trade publicly or be privately held and sometimes come with tax advantages.

#15: Mutual funds

Mutual funds invest in a basket of securities, usually stocks, bonds and even other mutual funds. There are plenty of options that focus on generating income for their investors. They often are lower-risk and concentrate on bonds and dividend stocks.

Note that mutual funds usually automatically reinvest income rather than distributing it to unitholders. You may need to contact your brokerage to request that cash is paid directly to your account.

#16: Exchange-Traded Funds (ETFs)

Exchange-traded funds are an alternative to mutual funds. While they still invest in other securities, they are not actively-managed. Instead, they usually attempt to replicate an index (NYSE, gold bullion, etc.). Their fees are therefore typically a fraction of their counterparts’, potentially leaving more room for investors to profit. Not all ETFs are income producing assets. However, they are commonly found in sectors like real estate, energy and financial services. Moreover, there are ETFs with a specific mandate to pay revenue each month.

#17: Short-term rentals

Online services like Airbnb, FlipKey and Tripping make it easy to rent your home for short periods of time. If you’re leaving town for a week, why not turn your property into an income producing asset for a few days?

As with all rentals, your experience will often be determined by your tenants. On balance, people usually have good things to say about those services. There have been some pretty disastrous stories, though, so approach this strategy with caution. If you live in a condo or townhouse complex, check your bylaws to see if you are able to rent your property. If you’re renting, check your lease agreement to verify that you can sublet.

Bonus #1: Invest in student housing

College and university attendance has never been higher. Investing in student housing can be lucrative. You’re almost guaranteed to have tenants in college towns.

Although many look to student housing for income producing assets, there are risks involved. First, college kids are well-known for wild parties, keg stands and smoking indoors. This can cause substantial damage to your property.

Second, students often return home for the summer. This can cause rental shortages for a third of the year.

Bonus #2: Network marketing

Network marketing is a popular choice for those looking to start a side-business. While it generally requires intense effort for several years, it can eventually become a passive income producing asset. Multi-level marketing is also a good way to develop leadership and management skills, and to gain mentorship and personal development opportunities. More about network marketing here.

Beware of scams and shady schemes, however. The network marketing/MLM industry can be a hotbed for bad ideas.

Bonus #3: Syndicated mortgages

A syndicated mortgage is a real estate-secured loan that is owned by multiple parties. For example, a group of 10 people might pool $50,000 each and create a $500,000 loan. As with other mortgages, the lender(s) profit through fees and interest payments.

Though syndicated mortgages have grown in popularity as investors seek property-backed income producing assets, there is some controversy about them. Retail buyers are often led to believe that they’re low-risk deals. But depending on the opportunity, syndicated mortgages might be in second or third position, thus reducing security. The risk profile of a syndicated mortgage should be assessed on a case-by-case basis.

Bonus #4: Rent-to-own real estate investments

Rent-to-own ventures can not only be good income producing assets, but there’s also often room for a healthy capital gain. As an investment partner, you can fund real estate deals that use lease options to lock in returns and hedge against risk. Some rent-to-own opportunities require the investor to purchase a property, which might mean applying for a mortgage. Others amalgamate capital from several partners.

Bonus #5: Monthly income stocks

Unbeknownst to many investors, there are hundreds of stocks that pay revenue each month. Many of these companies are closed-end companies, which only have a limited number of shares available. They are usually actively-managed and focus on a particular sector (municipal bonds, dividend stocks, mortgages, etc.). However, they can be effective, high-yielding income producing assets.

Bonus #6: Property crowdfunding

Crowdfunding is no longer just for charitable causes and start-up products. Such online platforms allow investors to participate in large real estate offerings for as little as $5,000. People can log into the site, view available deals and invest at their discretion. Aside from being a good income producing asset with a low entry barrier, property crowdfunding provides capital to real estate managers who were previously dependent on private equity. It helps levels the playing field for both investors and developers. In my view, it’s probably the future of real estate.   

My favorite property crowdfunding platform is RealtyShares.

Bonus #7: CDs and GICs

Certificates of Deposit (CDs) and Guaranteed Investment Certificates (GICs) are ultra-low-risk income producing assets in the USA and Canada. The investor locks up her capital for an agreed-upon period of time (6 months, 1 year, 5 years, etc.) with a financial institution, who, in turn, makes monthly interest payments. She can retrieve her money only once the term comes to maturity and there is no opportunity for a capital gain.

GICs and CDs are guaranteed by the respective federal governments (up to $250,000 in the US and $100,000 in Canada). As such, the bank usually pays an interest rate only slightly above what it would on a savings account.

Bonus #8: Mortgage REITs

A mortgage REIT, or mREIT, is a REIT that lends money to real estate projects. Similar to mortgage investment corporations, they profit by issuing loans and charging interest on them. Mortgage REITs often participate in shorter-term commercial projects, rather than long-term residential mortgages. They are popular income producing assets in the USA.

Bonus #9: Hybrid REITs

Hybrid REITs combine the mandates of “regular” REITs and mREITs by participating in both the equity and debt sides of real estate. They can be good income producing assets for investors who want dual exposure to property.

Bonus #10: Annuities

An annuity is an insurance product that can be an income producing asset. The annuitant (you) deposit funds with an insurance company, which then guarantees a fixed amount of payments to you. In essence, the company gives your money back, plus interest, over a period of time. For example, you might request monthly payments for 20 years or for the rest of your life. Annuities are commonly used for retirement planning. They are illiquid and cannot be cashed out.

Bonus #11: Drop Shipping

Drop shipping is a supply-management technique, which has evolved into a popular online business. The seller (you) sells a product that it does not keep in stock. It only purchases the item after it has received an order, and then has it delivered directly to the buyer. As such, the seller never even sees the product. Drop shipping allows the seller to avoid the cost of having inventory, which is often the most expensive part of owning a business.

For example, let’s say that my business was selling t-shirts online. Instead of buying 100 t-shirts and keeping them in my office, I would wait until an order for one was placed. Once I’ve made a sale, I would purchase the t-shirt from a trusted wholesaler and instruct it to ship it to my buyer. I’d earn the difference between what I received from my buyer and what I paid to the wholesaler.

Conclusion: the power of income producing assets

As mentioned earlier on, acquiring income producing assets caused me to reach financial freedom at 26 years old. By that point, my portfolio paid more than most earn from employment. I wrote a book, called Rich At 26, to discuss how I did it. The e-version is available for you to download right here.

Financial advisors often recommend targeting revenue securities as you age. In your younger years, you should instead focus on equities that have a good chance for capital appreciation. I disagree. Since most expenses like rent, mortgage payments and phone bills are payable monthly, I think it’s prudent to build a portfolio that can support your lifestyle. I didn’t consider exotic investments or ones that require capital gains to profit until after reaching financial independence. Still to this day, the bulk of my holdings are comprised of income producing assets.

Final bonus: Learn what I’m doing to build wealth here.

Note: this post contains sponsored links from RealtyShares and Blackhawk

About The Author

Alexis Assadi

Alexis Assadi is an investor, entrepreneur and writer, who advocates for making high-performing income investments and the lifelong pursuit of financial intelligence. He is a shareholder and director in three companies that provide funding to small businesses, entrepreneurs and real estate projects. His most recent venture is a firm called Pacific Income LP.

Facebook Comments

7 Comments

  • Igoni Igoni

    Reply Reply November 20, 2016

    Great ideas, thank you.

  • Earl Lewis

    Reply Reply December 2, 2016

    Great Information. Would love to continue learning from you. I’ve signed up to your email listing. How can I continue to learn the way you are learning and invest in the areas you’ve mentioned above to create these passive incomes. Thanks for being a shed of light on financial freedom. Something long needed.

  • casquette ymcmb

    Reply Reply January 10, 2017

    Merci pour cet article
    casquette ymcmb http://www.paristyle.fr/index.php?main_page=index&cPath=157

  • Renovie Voordelen

    Reply Reply January 14, 2017

    I blog frequently and I seriously appreciate your content.

    This article has really peaked my interest.
    I am going to bookmark your website and keep checking for new
    information about once a week. I subscribed to your Feed
    too.

  • Alex Maphosa

    Reply Reply May 16, 2017

    I look up to guys like you! Great example of a good mentor and a brilliant article. I’ll take on your advice.

  • dominic tay

    Reply Reply June 1, 2017

    Highly descriptive post, I liked that a lot. Will there be
    a part 2?

  • Mark61

    Reply Reply June 7, 2017

    Hi, do you allow guest posting on alexisassadi.net ? 🙂 Let me know on my email

Leave A Response

*

* Denotes Required Field