The last two years have shown us one thing: the importance of being ready for any kind of uncertainty. The Russian invasion of Ukraine shattered supply chains and prices for essential commodities around the globe, just as the global economy was returning to normality after the unprecedented COVID-19 attack.
In these times of economic uncertainty, it’s not exaggerated to say that a second source is almost an essential part of our income. Multi-stream income can reduce the risk of having all your income come from one source. There are many traditional ways to generate a second income. These include renting from residential properties, home-based businesses, online marketing and skill-based digital services. However, each has its own challenges.
Here are four reasons why you should have a second source of income. Fractional ownership of real estate is becoming a profitable option for a second income.
1. Mitigating Rising Expenses & Inflation
While incomes have remained almost stagnant, prices for essentials like petrol, diesel, and LPG have increased dramatically. Fixed deposits (FD) are not viable investments. When people think of a second source of income, they often think of dividends from stocks or rental income from homes. If volatility and the inherent risks of the market are not your cup of tea, or rent isn’t being appreciated at an adequate pace, it might be wise to look into real estate, which offers more stability.
Commercial real estate (CRE), which can provide steady returns and higher risk than residential properties, is a good option. Fractional ownership refers to investors who pool their money to purchase real estate together. This allows them to reduce risk exposure and cost burden, and also shares the rental income.
2. Prepare for an emergency
Over the past two years, financial emergencies like job loss, hospitalizations, and health crisis have seen their worst side. These emergencies are justifiable for the need of a second income.
Stock markets and mutual funds may not guarantee sufficient yield in financial emergencies. You may be required to dip into your provident funds, fixed deposits or face fines.
A steady rental income can be a reliable source of income for such situations. But residential property returns are lower than fractional ownership of commercial real estate. The best thing about fractional property is the fact that rental income is directly sent to investors’ bank accounts. This is especially useful for investors in Grade A Commercial Real Estate, which can cost hundreds of millions but only Rs 25 lakh per investor. These premium CRE typically yields high rental returns between 8% and 10%. This means that an investment of Rs. 25 lakh could produce approximately Rs 1.5 lakh to R 2.5 lakh per year.
3. Funding Financial Goals/Pursue Interests
A second income source is important to help fund your short, medium and long-term financial goals. A second income can help you achieve your goals, such as buying a car, enrolling for an upskilling program, or going on a dream vacation to Machu Pichu.
4. Retirement Fund
Mutual funds are a great way to save for the future and generate wealth over time. A fractional ownership of CRE, which is a form of property, promises better long-term returns than residential properties. CRE has a minimum five-year lease term, which ensures uninterrupted rental income. You can also deal with Grade A tenants, such as banks, IT companies, and MNCs, who have deep pockets and are willing to stay for long periods.
We live in an age where diversifying your income sources is a must, whether it’s to increase savings or accumulate funds for a goal, or for emergency planning. It is wise to look into new avenues and learn how you can use the internet to upskill yourself and find new ways to make money.