Calgary, with its vibrant economy and entrepreneurial spirit, presents a excellent place to build wealth for those seeking to diversify their income streams and secure financial stability. In a world where financial independence is increasingly valued, creating passive income sources is a path that many are exploring.
Whether you're a seasoned investor or a novice looking to dip your toes into the realm of passive income, this comprehensive guide will provide you with insights and strategies tailored to Calgary's unique opportunities.
Introduction
We are Calgary bookkeepers and tax preparers with 30 plus years of combined experience. Through the years, we’ve seen how many hold passive income streams in Calgary. This article is for informational purposes only and does not constitute financial or tax advice.
Because everyone is in their own unique financial situation, some of these passive income ideas may be great for one crowd, while they may be a detrimental investment for others. Timing also plays a huge part of whether an investment is a success. Please do your own research and contact a professional for help. We can help you when it comes to filing your taxes and getting the accounting in order.
Understanding Passive Income
Before diving into the details, let's clarify what passive income is. Unlike active income, which requires continuous effort to earn, passive income flows in with minimal ongoing involvement once the initial setup is done. Keyword being minimal.
Even if you had a money tree, you’d still need to water it and prune it once in a while. No investment goes without some effort involved.
What makes passive income different is that you do not need to always be present to be earning an income. So essentially, it's the money that works for you while you sleep, providing financial security and freedom.
Why Calgary?
Calgary's dynamic economy, diverse industries, and growing population make it an ideal environment for generating passive income. The city's robust real estate market, thriving tech sector, and abundance of natural resources offer a myriad of opportunities for investors and entrepreneurs alike.
Calgary has always been known as the energy capital of Canada. Calgary is home to numerous Oil and Gas outfits and mining companies. It is known as a white-collar town with high-paying jobs. This creates a trickle-down effect where money flows a little more than elsewhere in Canada.
Just remember, with more opportunity comes more competition, so knowing which passive income strategies to look out for can save you from making a bad investment.
5 Passive Income Strategies for Calgary Residents
1. Calgary Long-Term Real Estate Investments
Calgary has been known as a boom and bust town, so timing is very important when buying investment real estate. Investors may want to wait out the concerns of a coming recession. Then again, if one is already in the market, there are still deals to be had. It depends on the investor’s financial situation.
2. Dividend Stocks for Calgarians
Invest in dividend-paying stocks of companies with a strong track record of performance and stability. Dividends provide a steady stream of passive income, and reinvesting them can compound your returns over time. Diversify your portfolio to mitigate risks and capitalize on opportunities across different sectors.
When investing in dividend stocks, you don’t have to search locally. If you want to invest in Calgary based companies, some of the largest Calgary-based companies are:
1. Suncor Energy Inc.: Suncor is one of Canada's largest integrated energy companies, involved in the exploration, production, refining, and marketing of petroleum and energy-related products.
2. Canadian Natural Resources Limited (CNRL): CNRL is a leading independent crude oil and natural gas exploration, development, and production company. It operates a diversified portfolio of assets in North America, the North Sea, and Offshore Africa.
3. TC Energy Corporation: Formerly known as TransCanada Corporation, TC Energy is a major North American energy infrastructure company. It operates natural gas pipelines, liquids pipelines, and power generation assets across Canada, the United States, and Mexico.
4. Enbridge Inc.: While headquartered in Calgary, Enbridge is one of North America's largest energy infrastructure companies. It operates a vast network of crude oil, liquids, and natural gas pipelines, as well as renewable energy projects.
5. Imperial Oil Limited: Imperial Oil is a Canadian petroleum company engaged in the exploration, production, refining, and marketing of petroleum products. It is a subsidiary of ExxonMobil but operates independently in Canada.
6. Precision Drilling Corporation: Precision Drilling is a leading provider of drilling and well services to the oil and gas industry in Canada, the United States, and internationally.
7. Shaw Communications Inc.: Shaw Communications is a Canadian telecommunications company offering a wide range of services, including cable television, internet, home phone, and satellite television.
8. Canadian Pacific Railway Limited (CP Rail): While CP Rail's headquarters are in Calgary, it operates rail networks across Canada and the United States, providing freight transportation services.
9. Cenovus Energy Inc.: Cenovus is an integrated oil company focused on the development of oil sands projects and conventional oil and natural gas production in Canada.
10. Husky Energy Inc.: Husky Energy is an integrated energy company engaged in oil and gas exploration, production, refining, and marketing. It operates primarily in Western Canada, the United States, and the Asia Pacific region.
3. Peer-to-Peer Lending
Platforms like peer-to-peer lending allow you to lend money to individuals or businesses in exchange for interest payments. While it carries some level of risk, proper due diligence and spreading your investments across multiple loans can help minimize potential losses while maximizing returns.
If you are in a specific industry and understand it better than a lender would, you have the potential to see some winners that can benefit from peer-to-peer lending. You will receive interest payments while your money is borrowed out. You will typically be getting higher interest than a bank loan since the borrower likely cannot get a loan from the bank.
4. Digital Assets Calgarians should Own
In today's digital age, there's a growing opportunity to generate passive income online. From creating and selling digital products to affiliate marketing and passive advertising revenue through blogs or YouTube channels, the internet offers a plethora of avenues to earn money passively.
Digital assets are the future of passive income. Some creative ways you can get into making money passively online are starting your own podcast, drop shipping, affiliate marketing, blogging, vlogging, E-Commerce, stock photography, Selling online courses, and print on demand.
There is a concern that this online market is becoming oversaturated, but if you find a niche market, there is still room to grow. The key is having a unique perspective.
5. Passive Business Ownership and Rental Income Opportunities in Calgary
While starting and running a business requires active involvement initially, it can evolve into a source of passive income with the right systems and delegation in place. Consider investing in or acquiring existing businesses with proven revenue streams and growth potential.
Some examples of successful passive income businesses that seem to work in Calgary are
RV & Boat Lot Rental
There are a lot of RV and boat enthusiasts in Calgary. A lot of places in Calgary do not allow owners to park their RV’s on the street, and many do not have parking available. If you’ve got some land close to a highway outside of Calgary, there could be a lot of potential to rent out RV and boat spaces.
Storage Unit Rental
Operating a self-storage facility where customers rent storage units to store personal belongings, furniture, or business inventory. Storage unit owners charge monthly rental fees based on the size and type of storage unit. Again, outside of the city seems to have the best potential as land is less expensive.
Equipment Rental
Renting out equipment and machinery such as construction equipment, tools, vehicles, generators, or audio-visual equipment to businesses or individuals. Equipment rental companies charge rental fees based on the duration of use.
If you’ve got construction equipment or several trailers, you can rent those out and make your money back and then some. Many people in Calgary need to use a trailer for a day or two here and there, but less than it would make sense to buy one. Specialty construction equipment is also something that contractors might need for one job, and it doesn’t make sense to buy it.
Party and Event Rentals
Providing rental services for party supplies, event equipment, furniture, tents, and decorations for weddings, corporate events, or private parties. Customers rent items for temporary use during events and celebrations.
Vacation Rental
Renting out vacation properties, such as beach houses, cabins, or villas, to travelers on a short-term basis. Vacation rental owners earn rental income from guests who book stays through platforms like Airbnb, VRBO, or Booking.com.
This one is dicey with the crack down on Vacation Rentals recently. The CRA Canada Revenue Agency has also said that landlords who continue to rent short-term in areas that are restricted or forbidden will not be able to deduct expenses against their rental income. It is best to buy rental real estate based on long-term rental prices, and not based on what you might make from Airbnb.
Vending Machines
There’s more than just snack vending machines. If you’d like to take a deep dive in the vending machine business in Calgary, you could get into health food vending machines, fresh food vending machines (salad kits, fruit packs), specialty coffee vending machines, Ice cream vending machines, hygiene product vending machines (toothpaste, tooth brushes etc., works great at camp grounds), toy vending machines, and specialized vending machines for special locations (suntan lotion at the beach, pet supplies near the park, the sky is the limit).
Key Considerations and Tips
Diversification
Spread your investments across multiple asset classes to reduce risk and maximize returns. This works great for some people, but some investors prefer to keep all their eggs in one basket if they know that basket in and out.
Risk Management
Conduct thorough due diligence and seek professional advice when venturing into new investment opportunities. Do your homework. Abraham Lincoln said “Give me six hours to chop down a tree and I will spend the first four sharpening my axe.”
Long-Term Perspective
Building passive income takes time and patience. Focus on sustainable growth and resist the temptation of quick fixes or get-rich-quick schemes.
Continuous Learning
Stay informed about market trends, regulatory changes, and emerging opportunities to adapt your strategies and stay ahead of the curve. Spend a lot of time researching the risks and put in effort to learn. Not every investment is a winner, so learn before you sink your money into it.
Conclusion
In conclusion, building passive income streams in Calgary requires careful planning, diligence, and a willingness to adapt to changing circumstances. By leveraging the city's economic strengths and exploring diverse investment avenues, you can create a robust financial foundation that empowers you to achieve your long-term goals and aspirations. Remember, the journey towards financial independence begins with a single step – start today and reap the rewards tomorrow.
One thing that every investor needs is a great accountant. We offer bookkeeping and tax preparation services in Calgary and southern Alberta. If you have a business that needs bookkeeping and tax preparation, please contact us today for more information.
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