I think that pipeline today is only going to be added to the 4M to 4.5M loans that were already there pre-COVID.
They are categorized as “passive” because you don’t have to do anything to receive the income. There are different levels of effort required to accumulate passive income. Sometimes you might have to put in a lot of upfront work to receive a subsequent passive income.
For instance, if you were to buy and rent out a property, there would be a substantial amount of work on the front end, including finding a tenant. However, after that, all you would need to do is collect the monthly rent payment. Of course, there would need to be regular upkeep of the property. But you could pay someone to manage it for you to make it as passive as possible.
How Can Passive Income Streams Help You to Build Wealth?
Passive income streams are useful as a wealth creation tool because they don’t require any serious time or labor investments. You can focus your energy elsewhere while your money is working for you.
If you keep reinvesting that money, you can begin to take advantage of what is known as the compounding effect. This is the phenomenon whereby you keep reinvesting your profits to make even more over the long term.
To give you an example. Let’s say you plan to build a portfolio of rental properties. You could start by investing with one property. Over a period of, let’s say, three years, you make enough passive income to have a deposit saved up for a second property. You now have two properties, each giving you double the passive income you started with.
Now it only takes 18 months to save up for a deposit on another property. With three properties under your belt, it takes you less than a year to add a fourth, and so on. Suddenly, with one small investment made at the outset, you can have several properties paying out huge monthly figures while benefiting from the additional capital appreciation of the homes as the years progress.