What Type Of Income Is Received Through Rent?
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Whether you are new to the world of renting, or simply curious to how things work when it comes to renting and subletting accommodation, this article aims to make it clear.
Renting out homes is becoming something that is more popular now than say 30 years ago. Thanks to the rise of the internet, and accommodation bookers allowing people to book places from the comfort of their phone or laptop, it’s never been easier for owners to find renters.
In this article, we delve deeper into renting and looking at what type of income is received through rent. Hopefully it will make things a lot more simpler, and help you understand the basics.
Types of Income
When it comes to income in general, there are four main types that are commonly known. These include things like earned income, portfolio income, business income and finally passive income.
Earned income describes income which you as an individual work for. This can be in your day-to-day job or through an online venture that you so, such as private lessons or freelance services. In short, earned income related to income that you have to work to obtain.
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Portfolio income on the other hand, is income that is derived from certain investments that you may have, any dividends, interest or any capital gains. Therefore, this is an income that isn’t earned through regular business activities and neither through passive ones.
Business income is any income that is realized as a result of a business activity. This is another type of earned income that is ordinary in terms of tax, and which comes from businesses.
Passive income is slightly different from that of earned income, as it is not worked for and doesn’t fall under business terms either. Instead, it can derive from limited partnerships, rental property as well as an enterprise in which an individual isn’t as involved.
Therefore, in terms of rent, this is usually seen as a type of passive income, as it is derived from the individuals renting the place, and the money doesn’t have to be worked for actively like it would in a traditional job.
Passive Income — Rent
As we briefly mentioned, rent is seen as a type of passive income. This is income which is received on a regular basis. It can either be weekly, monthly, or another setup depending on the contract stipulated between landlord and tenants.
It is known as passive income as there is little effort required to maintain the income as landlords seek their tenants and once they have them take the property, they are tied together in a contract, and will receive their money each month.
Many individuals decide to start renting properties for the simple aspect of passive income alone. This is because it takes an initial effort to get the ball rolling. For example, a couple may decide to invest in a new house in a popular tourist area, simply because they know that renting it out will bring them a good amount of passive income. But when they get things up and running, they will be set for a good while.
Nowadays, many people are turning to hosting sites such as AirBnb and making an income out of renting. There will be those who decide to rent out single rooms in their homes, as well as those who will be renting entire homes. If you’re looking to learn the ropes on AirBnb rentals, I highly suggest the AirBnB Profit Blueprint.
Those with more than one property in their portfolio may be able to rake in various passive incomes from rents at all their places, and thus may be able to live more comfortably without having to rely solely on earned income. As well as this, landlords will have more time to focus on what they like as they have the time (and money) to do so.
Passive Income – Other Examples
Passive income ideas seems to be a hot topic, and one which many people are starting to consider. If you are interested in hearing about other passive income ideas, then the following examples may be something to look into.
Investing is known as one of the most accessible forms of passive income. This is because there are just so many different companies available out there as well as websites that help and advise you through the entire process.
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Starting a business that functions completely online without any main physical work required is another example of generating passive income. For example, you can start to write a blog and then monetize it via affiliate links and driving traffic to your site.
Another good online business idea is to design courses which help people do a certain thing or learn how to achieve a certain goal. The most popular one nowadays are of course the online entrepreneurs themselves who teach other budding entrepreneurs how to make money using their special methods.
Many people are also creating online shops which can be utilized to sell goods to customers, yet without any physical work to be done by the creator. Sites like Shopify allow sellers to outsource all the product and shipping, and simply take the cut of the sale home as they sleep. All their job is to simply set up the shop site, choose a few products and promote them.
So there you have it. Hopefully, you can now understand the answer to the question, ‘what type of income is received through rent?’ and have an idea of the various types of passive incomes available nowadays.
Many people are choosing to rent rooms and properties to receive passive income, and we think it’s definitely a good idea. We that you can hopefully start finding a suitable passive income, whether it’s rent or something else.