How to invest 50k for cash flow

How can you invest $50,000 for cash flow?

The best way to invest $50,000 for cash flow is to invest in income-producing assets. You can purchase covered call ETFs, dividend stocks or ETFs, Real Estate Investment Trust, real estate crowdfunding or rental properties, websites, and vending machines. 

Imagine, investing $50,000 and receiving between $2,000 and $6,000 per year in income. Build enough cash flowing assets and you’ll be able to retire on cash flow alone.

Building cash flow is possible.

Luckily for you, I’m going to show you how to invest $50k for cash flow. I’ll even show you some of the best investments that produce the highest dividends. At the end of this article, you’ll need to decide which investment style works for you.

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How to invest 50k for cash flow

The best way to invest $50,000 for cash flow is to invest in income-producing assets. You can purchase covered call ETFs, dividend stocks or ETFs, Real Estate Investment Trust, real estate crowdfunding or rental properties, websites, and vending machines. Dividends should be reinvested if you want to further increase your cash flow.

You’re going to need to buy assets that pay you in order to get rich and retire from cash flow. You work a job, get money, and buy things that will keep paying you for owning them.

Ideally, you can separate yourself from the asset – so you don’t actually work for income. Passive income is best done when you get paid, but don’t have to work for the income. In other words, the asset you buy is fully managed by some other process or system you set up.

Make sure you’re reinvesting all your profits when you first start investing. Your dividend income is going to grow significantly faster if it’s reinvested. Eventually, you’ll reach a point where you can stop reinvesting and start living off your profits.

So which assets can help you reach financial freedom? Let’s take a look at some of my favorite ways to build passive income.

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Covered Call ETFs

Covered call exchange traded funds are a new asset which was built for income investors and retirees. Covered call ETFs sell covered call options against an index fund and return premiums and profits to investors. You can find ETFs which have funds fully invested in selling covered calls or a 50/50 covered call/underlying index investment mix.

For example, you can invest in QYLD which writes covered call options against the NASDAQ 100. QYLD writes 100% covered calls, so there is no growth opportunity, but you get a 12% dividend yield.

The downside is that you’re not getting any growth with a fund that writes 100% covered calls. If the NASDAQ 100 grew by 20%, you’re only seeing a 12% return on investment.

However, QYLG is a 50/50 split between covered call options and investing in the NASDAQ 100. Therefore, only 50% of the funds are in call options and the other 50% sees the returns of the NASDAQ 100.

QYLG is a better investment for those who want dividend yield coupled with growth.

Dividend stocks

Dividend stocks are perfect for investors who like to stay up-to-date on company ongoings. As a dividend investor, you find companies that pay a dividend that you’re interested in investing in. Most investors are either a dividend growth investor or a high dividend yield investor.

For example, one investor sees value in finding companies which are currently paying a high dividend yield. Every month they see which companies are paying a 5%+ dividend yield.

High dividend yield investing can be risky. Typically, companies are paying a high dividend yield because there’s an ongoing issue in the company. The company may decide to suspend the dividend if they need extra capital for the benefit of the company.

Dividend growth investors are often looking for quality companies with solid growth. These companies see a good share price appreciation while paying a 1-3% dividend yield. These companies may also increase their dividend payment each year from 4-20%+.

Dividend exchange traded funds

Dividend exchange traded funds make dividend investing simple. Investing in individual dividend stocks can be overwhelming and time consuming to manage. Therefore, you can invest in one exchange traded fund and be instantly diversified to a fund which matches your goal.

Dividend exchange traded funds often pay a lower dividend yield because they offer more diversification. The main benefit to dividend ETFs is that you can pick your funds and just keep buying.

Vanguard offers good dividend funds for both high yield investors and dividend growth investors. For example, a high yield investor could invest in the high dividend yield fund, VYM. A dividend growth investor could invest in the dividend growth fund, VIG.

Real Estate Investment Trusts

Real Estate Investment Trusts (REITs) are similar to dividend stocks, but they invest in real estate. A REIT is required to return 90% of their profits back to investors in the form of a dividend.

Personally, I like to invest in exchange traded funds. Therefore, the Vanguard real estate investment trust ETF (VNQ) offers multiple REITs for one low price.

Real Estate Crowdfunding

Real Estate crowdfunding involves multiple investors pooling their cash to purchase rental properties. Unlike REITs, Real Estate crowdfunding isn’t very liquid so your money may be tied up. However, Real Estate crowdfunding can be a good way to add extra diversification to your portfolio.

Companies like Fundrise allow individual investors to build a crowdfunded portfolio. You can have Fundrise manage your real estate portfolio. Your portfolio can focus on appreciation, dividends, or a balance between appreciation and dividends.

Rental Properties

$50,000 is a significant amount of money which can afford you a down payment for a rental property. You could purchase one or two rental properties where you earn cash flow and equity from rent. As an added bonus, the property should appreciate in value.

The obvious benefit to rental properties is cash flow. Someone pays you rent for living in the house. Ideally, this rent is enough to cover the mortgage and have money left over. This rent is paying off your mortgage and building your equity.

Homes also appreciate in value around 4% per year. You can force appreciation by fixing up your rental and giving it a facelift. For example, you might buy a $100k home, spend $10k to fix it up, and have the home be worth $130k afterwards.

Forced appreciation can increase your cash flow if you do a cash out refinance. In other words, your home value is up so you’re taking money out of your home by refinancing. You can then use the cash from your home to purchase other income producing assets.

For example, you buy a $100k home for $20k down and spend $10k on fixing it up. Your home is now worth $130k because of forced appreciation (fixing it up). You ask the bank to do a cash out refinance and you pocket $30k because of the increase in value.

You essentially got your initial investment back, which can then be used to purchase more assets.

Income producing websites

Income producing websites are inexpensive to acquire and have good profit margins. However, you need to have a good understanding on how websites work to invest.

For example, you can purchase a website on Flippa for $20k, which makes $1k per month in ad revenue. You’re now earning $12k per year, which is a 60% return on investment. You can always sell the website later and get your $20k back.

The main problem website investors have is understanding how to properly vet a website. You wouldn’t want to buy a website and find out they falsified their income reports or website traffic.

Vending machines

Vending machines are a good business to start if you like cash flow. You can buy a vending machine online for cash or payments. Most businesses are willing to let you place vending machines on location for free.

A snack machine costs between $3,000 and $4,000 to purchase. Vending machines make around $100 per month in profit. Therefore you could make back your initial investment in 30-40 months.

Car rentals

Companies like Turo and Hyrecar allow you to rent your new vehicles, like budget car rentals or enterprise. You can purchase a brand new car and let your rentals pay off the car payment. Typically, renting your car works better in highly populated areas like major cities.

How much interest does $50k make?

Most investors make an annualized 10% return on investment. Therefore, a $50k investment should be able to make you $5,000 per year on average between gains and dividend payments. However, some investments pay a higher rate of return, which are typically riskier investments.

Example: Investing $50,000 for income

There are plenty of ways to invest $50k for income. You should pick a strategy that meets your investment risk tolerance and you enjoy. Spending $50k on dividend stocks returns a different amount than purchasing vending machines or websites.

For example, you could purchase 11 vending machines at an average cost of $3,500. You’ve spent $38.5k on machines and have the rest of your $50k for products, getting locations, etc. Your monthly cash flow is now $1,100 if you assume a $100 profit per machine.

Alternatively, you could purchase two income producing websites for $50k that make $1,000 per month. Your monthly cash flow is now $2k with minimal expense and upkeep.

A dividend stock investor might be able to invest $50k in stocks with a dividend yield averaging 6%. Your monthly cash flow would average $250.

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Summary: How to invest $50k wisely for cash flow

As you can see, there are plenty of ways to invest $50k for cash flow. The more work you have to do to upkeep your investment, the higher cash flow the investment often returns. Most income investors are looking to acquire passive income for early retirement.

The most important thing is that you’re acquiring assets that pay you for owning them. The more assets you own, the more you get paid.

You can purchase covered call ETFs, dividend stocks or ETFs, Real Estate Investment Trust, real estate crowdfunding or rental properties, websites, and vending machines. 

Each investment carries risk. You have to find a balance between risk and reward. Always look at diversifying your assets.