Passive Investment Strategies Yielding 10%+ Returns: DurhamREI Member Survey

As real estate investors mature in their journey, many shift their focus from growth to income. At DurhamREI, I wanted to understand how our experienced members are achieving 10%+ cash-on-cash returns through more passive strategies.

I defined passive as requiring only a couple of hours per week. If a strategy required you to be actively involved in creating income, I didn’t include it for this article. It doesn’t mean it was not valuable, it just didn’t meet my criteria as passive. I also excluded speculative and highly volatile investments for the purpose of income generation, as this would require active trading.

Here’s what I discovered from my recent survey.

Private Lending: The Popular Choice

Many members have turned to private lending as their preferred passive income strategy, with returns consistently exceeding the 10% threshold:

• Member A reports making approximately 10.5-11% through private lending, spending just 1-2 hours per week managing these investments.
• Member B is achieving impressive 11-12% returns through lending funds, with minimal time investment of less than one hour per month.
• Member C has developed a diversified private lending portfolio that includes both secured lending (residential properties) and unsecured lending (businesses), generating exceptional returns ranging from 14-21% annually. This member spends 30-60 minutes monthly on portfolio management, primarily on initial due diligence and occasional check-ins.

Covered Call ETFs: Income from Stock Market

Covered call ETFs have emerged as a popular strategy among our members:

• Member F is invested in a covered call ETF that has delivered steady 14% returns over the past year, even during market fluctuations. They specifically chose this fund because it contains strong dividend-paying stocks as the underlying assets.
• Another covered call ETF mentioned by the same member offers nearly 10% returns through a combination of 25% covered call strategy plus 25% embedded leverage.
• This member notes that information on these ETFs can be difficult to find, with most wealth management advisors having limited knowledge about these specialized investment vehicles.

Mortgage Investment Corporations (MICs)

MICs represent another popular approach for achieving strong returns:

• Member D holds TFSA investments entirely in MICs, with nearly equal holdings in two major MICs, yielding just under 10% each. The goal is to maximize TFSA contribution room and continue building these holdings.

Stock Market Strategies

Some members are using more advanced stock market strategies to achieve high returns:

• Member E focuses on selling naked puts and occasionally shorting stocks. They follow a select few high-volatility stocks that offer option contracts with high premiums, allowing them to generate substantial returns.

Private Investment Funds

Private investment funds are providing returns that approach our 10% threshold:

• Member F reports investment funds yielding 9% annually, with reinvested returns pushing close to 10%.

Diversified Investment Portfolios

Many members maintain diversified investment portfolios:

• Member D maintains a complex portfolio including:
  • Self-directed RRSPs with dividend-paying stocks and previous GIC investments, yielding approximately 7.7% over the past 12 months
  • TFSAs fully invested in MICs, yielding about 9.9% over the past 12 months
  • 10 rental properties (16 units) that have experienced significant appreciation (some doubling in value over 8 years)
  • Additional stocks and index funds in RRSPs

This member estimates spending about 10-15 hours monthly managing real estate investments and 1-2 hours weekly on other investment activities.

Strategic Income Generation

Some members are strategically using high-yield investments to service other investments:

• Member F is specifically using income from covered call ETFs to help pay the mortgage on a new farm property, demonstrating how passive income strategies can support the acquisition of additional real assets.

Time Investment Analysis

A key consideration for passive investment strategies is the time required to manage them:

• Private Lending: Generally requires minimal ongoing time commitment (30-60 minutes monthly for most investors)
• MICs: Extremely passive, requiring virtually no ongoing management
• Advanced Stock Strategies: Time requirements vary based on trading activity and market monitoring
• Covered Call ETFs: Relatively passive after initial research and selection
• Rental Properties: The most time-intensive option, with one member reporting 10-15 hours monthly for property management

Thinking About This A Little More

My survey reveals that DurhamREI members are successfully achieving 10%+ returns through various passive and semi-passive strategies. Private lending and covered call ETFs emerge as particularly popular, offering double-digit returns with minimal time investment. MICs provide another accessible option for achieving returns approaching 10% with virtually no active management required.

This article is based on anonymous responses from DurhamREI members and is intended for informational purposes only. Individual investment results may vary, and proper due diligence should be conducted before implementing any investment strategy.