9 Best Alternative Ways to Build Easy Passive Income in 2023
I have $500 on the line so I better be right!
With rising inflation and a rough year for the markets, many investors are looking for alternative ways to invest and build wealth.
Having alternative investments in addition to traditional assets in your portfolio could protect you from market volatility.
Fortunately, alternatives are no longer reserved for the top 1% of the wealthy. Thanks to technology and advancements in the finance industry, you now have access to highly sought-after non-traditional investments.
Nevertheless, figuring out how to invest in alternatives can be challenging. My goal today is to save you some time and nudge you in the right direction.
Project Background
I spent weeks pulling together the following list containing the top 9 non-traditional investments to consider. The list is based on personal opinion after researching, using these platforms, and even investing in 5 platforms with $500 in the last 3 weeks.
$100 per platform as a budget did become a barrier to entry at times, which impacted my personal rankings ahead.
Other factors I considered included:
- potential return
- my risk tolerance (which is high)
- liquidity
- finding assets I was interested in personally
- finding platforms I vetted and trusted
- finding platforms that were easy to use and get started with.
After the list, I’ll share the 5 alternative assets and platforms I’ve chosen to invest in this month for my February passive income challenge.
That’s what I do each month: build new passive income streams in 30 days on my new YouTube channel. If you want to build passive income right along with me, consider subscribing!
9. Farmland
If you want to see a consistent growth rate with relatively low volatility, then you may want to consider investing in farmland.
The increasing value of land has to do with the basic concepts of supply and demand: demand has been building and supply is low, so the value increases.
And the returns have been solid:
Over the last 20 years, United States farmland has offered average returns of 12.24%. At this rate, $10,000 invested in farmland in 2000 would now be worth over $96,149.
You earn money from farmland in two ways: land appreciation and capitalization rates of the property.
Investing in farmland is easier than ever thanks to new platforms and apps. One such platform is AcreTrader.
Unfortunately, it is only available to accredited investors, and the investment minimum is quite high, which is why I have it at #9. Farm Together is another platform to consider with similar barriers to entry.
8. Commodities (such as gold)
A commodity is an umbrella term for economic goods. These include tangible assets such as gold and silver, crude oil, sugar, coffee, and more.
You can buy commodities through ETFs on your investment platform of choice. It’s a great way to diversify your portfolio, adding some protection against a down market.
Precious metals are high in demand, which can make them a valuable alternative resource.
According to Kiplinger, from January 2000 through January 2021, gold generated an annualized return of 9.6%. Adjusted for inflation, that comes to 7.3% annualized.
If you want to invest in gold directly consider Vaulted and OneGold.
7. Real Estate Crowdfunding
This is one of the most popular alternative investments. Similar to farmland, real estate crowdfunding connects investors with real estate builders or buyers looking to loan your money.
With real estate crowdfunding you’re essentially the “bank”. You loan money in exchange for interest payments, plus a return on your original investment.
The barrier to entry can be low — $10 might get you in the door — so you can own a small or a big part of a property if you choose.
Some real estate investment platforms are only open to accredited investors but many are available to the masses. The best platforms vet the rental properties, vet the renters, do home maintenance as needed, and collect rent when it’s due (or handle a flip).
All you do is select which rental property you want to invest in, buy shares in the property, and earn passive income.
Platforms to consider are Arrived, Fundrise, Crowd Street, and Groundfloor.
I also recommend REITs — real estate investment trusts. You can typically invest in REITs within your main investing platform.
6. Collectibles
Collectibles are items with value that increase over time. Examples include Pokemon cards, comics, action figures, and sports memorabilia.
Collectibles that bring in more demand like first-editions, one-offs, and rare items tend to bring better returns.
Collectibles are #6 on my list because of the fun factor! You can combine your interests and hobbies with investing. Passion meets profit.
That said, passion does make it hard to take emotions out of decision-making. I recommend you only invest money in collectibles that you are willing to lose. You could make a lot, or you can lose it all so start small and tread cautiously.
I recommend the platforms Collectable and Rally.
5. Wine
Like most alternatives, the value of wine is independent of the economy and consumer trends. Plus, the performance looks solid:
According to Entrepreneur, this non-traditional investment has yielded a 13.6% annualized return over the last 15 years.
Certain bottles become rarer over time, thereby increasing their value. Having an understanding of different wines and which years were good vintages is important. Proper storage is also very important so the wine doesn’t turn to vinegar.
Luckily there are wine investing platforms that do the legwork for you. They identify good wine, help educate you, store the wine, and insure the wine.
Plus, with some platforms, you can choose to simply drink your investment if you’d rather. But if you do, it won’t taste like profit…
The platforms I recommend are VinoVest and Vint.
4. Art
Art as an alternative investment is also steadily growing in popularity. Art appreciates in value over time as a commodity the same way gold does.
As an asset, art is typically extremely expensive — hundreds of thousands or even millions of dollars apiece. It’s also a high-performing asset class.
Historically, fine art investing is a closed club, much like fine wine and fancy cars. Today, you can buy shares of art through online platforms, which makes it accessible even if you don’t have the connections or loads of money.
Masterworks is a popular platform to check out but here are two caveats to consider:
1. You have to go through an interview screening process — which I found to be more of a sales pitch.
2. At the end of the interview I was told the minimum investment was $500 even though I read $100 online.
Consider Rally for a lower barrier to entry for art.
3. Peer-to-Peer Lending (personal loans)
Peer-to-peer lending is an alternative investing strategy where P2P platforms connect borrowers directly with lenders and cut out the middleman.
The P2P platforms set the terms, and individuals looking to borrow are pre-qualified. Some sites focus on returns, others focus on safe returns.
Do your homework and know your risk appetite.
As with most alternative investments, there is the risk of losing everything. The people who are borrowing your money may not have the best credit, so you run the risk of never having your money repaid.
There are many platforms but start by looking into Lending Club, PeerStreet, and Prosper.
2. Small Business Debt
This alternative caught my eye for similar reasons as collectibles — I find it interesting!
As an entrepreneur myself (and someone who appreciates platforms like Kickstarter), I love the idea of investing in new small businesses — especially if you can find them locally.
By investing in small business debt, you can invest in your community and help business start-ups succeed.
Brick-and-mortar Business examples include breweries, restaurants, coffee shops, dispensaries, and more.
Mainvest is a platform I recommend and enjoy browsing. I found dozens of stores on the platform across the US, and even some in my backyard.
Alternatively, you can invest in venture capital via platforms like Sweater.
1. Your Own Business
Starting your own business can be one of the most rewarding alternative investments. It’s important to do lots of research and create a business plan. Think through start-up money, how much you need, and how to get a hold of it.
Work through potential profit models and always “measure twice, cut once” before pursuing a new business venture.
The great news is that you no longer need to spend thousands to become a business owner. There are plenty of ways you can earn money (business or not) and spend little to no money upfront.
You can go the service-based route such as an email marketing agency, social media consultant, or business/life coach.
Online examples include YouTube, TikTok, blogging, affiliate marketing, consulting, selling digital products, writing books, web design and lots more I typically talk about on my new passive income YouTube channel.
My resolution this year is to build passive income fast, do it on the cheap, and show you how. Check it out!
Alternative Investing Themes
Alternatives are unique and fun, they’re more accessible than ever, they are a hedge against a down market via diversification, and they can work as a hedge against inflation.
On the flip side, liquidity can be low and they are risky. There’s no guarantee you’ll earn money.
Invest cautiously, stick with what you enjoy and understand, and only invest money you are willing to lose.
How I Invested $500 into Alternatives
Investment #1
I started with what is popular and felt relatively safe. That led me to real estate and I used Fundrise to invest $100 into a standard fund they offer.
Invesetment #2
Second, I dug into peer-to-peer lending (again because of its popularity). I landed on Prosper as my platform of choice because it’s one of the oldest and most-trusted P2P sites. I invested $100 total into two low-risk loans.
Investment #3
Next, it was time for some fun — collectibles! I wanted to use the site Collectable but I hit a bug and got stuck on the signup screen. I went with Rally and I love the platform. So much so, I plan to write a full review breakdown about that platform and my investments soon!
Investment #4
My wife has a sommelier certificate so it was a no-brainer to invest in wine. I wanted to use VinoVest but the minimum was out of budget. Research led me to Vint. I invested $100 into a rare burgundy bundle.
Investment #5
Finally, I loved the small business idea and I found a taproom an hour and a half away on the platform Mainvest. I invested $100 into the business and plan to attend their grand opening in a couple of months. Fingers crossed for a free drink!
Let me know if you have any questions! I’m debating a second dedicated review after Rally so let me know if any of the other 4 platforms I chose caught your fancy.
This took a long time to pull together so I’m grateful for you reading until the end!
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Disclaimer: This article is for entertainment purposes. Always do your research as I did before investing and consider consulting with a financial professional. All opinions are my own.
Frankie Calkins (M. Ed) is a Digital Marketing Director by day. On nights and weekends, he’s an author, YouTuber, and finance course creator. He lives in the Seattle, Washington area. Contact: [email protected]
