When you invest $100,000, you have options available right away. Do you want:
- Passive income
- Monthly cash flow
This article will unpack some historical returns and time frames for different investing strategies that achieve each of those goals. It’s a high level look at your options. We won’t confuse you with the nitty gritty details yet. Those articles are coming though.
For now, let’s see what you can reasonably expect to return from a variety of investing strategies with $100,000 invested.
Invest $100,000 for passive income
You want to put your money to work and you don’t want to think about it often. Giving your money to someone else to manage isn’t appealing. So you’re ready to do some research up front to find sound investments.
There are two investing strategies that require some work up front, but very little attention after the initial investment.
One is building a dividend stock portfolio. The other is private lending on real estate.
Building a dividend stock portfolio with $100,000
A dividend is a small cash payment that companies make to investors at regular intervals (usually quarterly, but sometimes annually or monthly).
Most stock quotes will share the company’s dividend amount per share (ie. $1.00). Find the “Dividend Yield” as well. That’s the dividend’s ROI. Not all companies offer dividends though.
In Canada, an average of 3% – 6% dividend is common. You can find higher dividend yields, just research their payout history – have they been able to sustain that payout?
If you’re getting an average dividend yield of 4.5% across a portfolio of $100,000, your annual return is $4,500.
Now. That cash can be reinvested automatically (it’s called a Dividend Reinvestment Program, a.k.a DRIP). So your portfolio growth can compound.
Lending $100,000 in private mortgages
If you find a mortgage broker you trust to screen borrowers for you, private mortgages can yield between 9% and 15%, depending on the nature of the loan.
Private loans are used to fill financing gaps for borrowers when the banks won’t lend enough. They are also used for renos or short term investments, when the investor intends to buy the property, fix it up, and sell it as quickly as possible.
Higher interest rates usually mean you’re taking on more risk. It could be a short term load, between 12-24 months. Or maybe the borrower doesn’t have a strong credit history. But lower rates don’t mean you’re safe.
As a private lender, you’re probably sitting in 2nd or 3rd position on title, with an A or B lender (a bank or bigger financial institution) holding the 1st mortgage.
In that case, you get paid out after the lenders before you are paid. That can mean you may not see your full investment returned.
This is why screening borrowers is so important. If you can find good borrowers, then private lending can be a generous source of passive income. It just has the danger of becoming active all of a sudden if a borrower defaults.
Invest $100,000 for Cash Flow
You want to get paid monthly from your investments. You’re ready to put in a bit of work, maybe even make this a bit of a side hustle.
You can trade stock options or buy a rental property for cash flow. Both require some education up front. You need to know what you’re walking into or you can get burned.
Trading stock options for monthly cash flow
Using stock options, you can buy stocks at a discount, generate cash flow without ever owning stocks, or generate cash flow from stocks you already own.
Options are contracts, promises to buy or sell 100 shares of a specific stock. If you’re the contract seller, you collect a premium up front. That’s cash in your account right away.
Most people think options are too risky. They can be. But when you know how they work, you can make conservative trades that still yield 10% – 15% annually.
Take the instructor of our Stock Hacker Academy Beginner’s Course, Lee Lowell. He sent our students 31 trade recommendations in 2021. If you know anything about the market, you know how choppy it’s been since September. Through all of that craziness, Lee only took losses on one trade. He went 30 for 31 last year, yielding 12% return.
Options don’t have to be risky. If you want to learn more about options, you can read our Options for beginners series here.
Buying rental properties for monthly cash flow
Real estate is great for building long term wealth. Many look to it for monthly cash flow too, but that is much trickier.
Here are some criteria for finding cash flow in real estate:
- Good tenants who don’t damage your property and pay rent on time.
- A property that is in good condition that won’t require heavy maintenance every year.
- A decent neighbourhood with hard working families that will attract reliable tenants.
- Rent prices to be high enough to cover mortgage, insurance, taxes, and maintenance.
- If you don’t want to manage the property yourself, you’ll need a trustworth property management company as well.
This is all possible. We have multiple properties ourselves, although it’s harder to find cash flowing properties in southern Ontario these days.
Returns on rental properties vary. It largely depends on the rental market – if you can get high enough rents.
We can’t quote you an average return here because it depends on what city your buy properties in. However, we do have a case study that dives into the cash flow numbers for rental properties.
“The Ultimate Side Hustle for Canadians” is a FREE case study that compares, MLM, Amazon eCommerce, real estate investing, and stock hacking (trading stock options). If you want to see those numbers for yourself, click here to sign up and download.
What do I do with this information?
If you’re ready to invest $100,000, you have quite a few options in front of you.
This is just the start of your journey. Some important questions to answer are:
- Do you want active investments or passive income?
- Do you want to make the time to learn active investing strategies?
- What kind of returns do you hope for?
- How much risk are you comfortable shouldering?
Answer those questions and find the investment strategies that fit your answers.
Maybe someday we’ll see you at a real estate or stock hacker meetup!
Your fellow Stock Hackers,
🍒Cherry & Erwin
P.S. These stock options strategies make a great side hustle. If you’re interested in finding a new side hustle, we’ve put together a new case study that examines the four most popular side hustles for passive income in Canada. You can download this case study for FREE right now if you sign up for our email newsletter.