Are you seeking three straightforward passive income ideas while living in France? What exactly does passive income mean? If you’re looking to effortlessly supplement your monthly earnings, you’ve come to the right place. Before we dive into our top three recommended strategies, let’s first clarify what passive income truly entails.
Table of Contents
Understanding passive income
Passive vs active income
- Active Income: It is basically the income earned through your 9 – 5 job or business activity such as salaries, wages, and business revenue. It is strongly correlated to exchanging your time for money.
- Passive Income: It is the money earned with a minimal effort and time from you side. It normally includes dividends and interests. Passive income is not correlated to your time.
Some people consider passive income royalties, side hustles like drop shipping, affiliate marketing from blogs, rentals, vending machines, etc… but are those really passive? Not so much! as you would need to spend a great amount of time or initial effort to set it up.
For instance, it’s true that renting out an apartment can provide you with a steady monthly income. However, consider the hours you’ve invested in searching for the right property, negotiating mortgage terms with the bank, finding reliable tenants, and handling issues like water leaks and maintenance work. Is this truly passive income?
When does make sense to look for passive income?
Receiving passive income may not be the best choice for everyone. But why is that? Who wouldn’t want to earn money while they sleep? Here are two important points to consider:
1) Initial Capital Investment: Passive income typically requires an initial capital investment. If you are young and actively working, it might be more beneficial to allocate that capital toward long-term investments with higher growth potential. For example, if you had invested €1,000 in Apple stock ten years ago, your investment would have grown by an impressive 755% (not recommending to buy apple now though).
2) Tax Implications: Don’t forget about taxes! Any income you receive from dividends, rental properties, or interest is subject to income tax in France. Notably, income derived from real estate is heavily taxed. For more information, you can check out our article on Taxes in France.
Passive income is most advantageous when you need to supplement your earnings, but as well when looking to achieve financial independence, diversifying your income sources, or just leveraging long-term wealth through compound interests.
Example of Passive Income
Imagine your net salary is €3,000, while your monthly expenses total €3,200, resulting in a deficit of €200. Now, let’s say you have €100,000 saved and readily available in your bank account.
If you invest that capital in an ETF that distributes 3% dividends, you would receive €3,000 annually, which breaks down to €250 per month (before taxes). This amount could effectively cover your budget deficit.
Our 3 passive income ideas:
Idea #1: Dividends from ETF's
While it may seem straightforward to choose a single company to invest in, doing so effectively requires considerable effort. You’ll need to understand how the company generates revenue, assess the associated risks, evaluate its suppliers, analyze financial statements and quarterly results, and stay informed about news that could impact the company. At this point, the investment process is no longer truly “passive.”
For this reason, our preferred method of investing in the stock market for passive income is through an ETF (Exchange-Traded Fund) (this is not a financial advice). An ETF replicates a stock index or market sector—such as the S&P 500, MSCI World, CAC 40, or specific sectors like banking or real estate—and includes a diverse array of companies. This approach offers a solid level of diversification..
A reasonable dividend yield typically falls within the range of 2% to 3% (please note that past performance does not guarantee future results). Yields exceeding this range may be a red flag, as they could indicate that the ETF’s value is not appreciating over time. It’s essential to avoid the “dividend trap,” which involves investing in sectors that are in decline. For more insights about ETFs, be sure to check out our blog.
How to invest in an ETF?
In France, it is advantageous to invest through tax-efficient wrappers such as the PEA (Plan d’Épargne en Actions), PER (Plan d’Épargne Retraite), or Assurance Vie. However, it’s important to note that not all ETFs are available within these wrappers, as they are primarily limited to European options. Additionally, you may need to wait several years before you can withdraw dividends from these accounts. If you’re interested in opening a PEA, we recommend BoursoBank (referral link, which offers benefits for both you and us).
Alternatively, you can invest through a standard broker, which allows for immediate withdrawal of dividends. However, keep in mind that this option comes with a flat tax rate of 30% in France (or as per the country holding the taxes). We personally use and recommend Degiro for its user-friendly interface and low fees (referral link, offering benefits for both you and us). If you’re more experienced and looking for advanced features, you might consider Interactive Brokers , which offers a more complex but powerful trading platform.
myFrenchMoney tip
To select an ETF, we recommend using the website **justetf.com**, which is user-friendly and allows for easy comparison of different ETFs. For our PEA, we prefer the 'SPDR S&P Euro Dividend Aristocrats UCITS ETF' (code IE00B5M1WJ87). For our broker account, we like the 'Vanguard FTSE All-World UCITS ETF' (code IE00B3RBWM25). Please note that this is not financial advice, and we encourage you to conduct your own research before making any investment decisions.
Idea #2: Dividends from SCPI
Since we enjoy investing in real estate but prefer to avoid the associated hassles, investing in a SCPI (Société Civile de Placement Immobilier) is a great option for us. Choosing the right SCPI typically requires only a few hours of research and could provide long term steady dividends. For more detailed insights, feel free to check out our SCPI blog.
We anticipate a dividend yield from SCPIs in the range of 4% to 6% (before taxes). In 2023 and 2024, the market value of some SCPIs shares has decreased due to rising interest rates. However, this could present a good entry point as prices become more attractive (please note that this is not financial advice, and past performance does not guarantee future results).may
myFrenchMoney tip
We are invested in Corum SCPI. We really like the company's opportunist approach buying properties at discount and with good quality long term tenants. Our preferred offer is Corum Origin and Corum Eurion. If you decide to select this company to invest in, you may want to use our referral code OWQV68 when subscribing (check our good deals page for more info).
Idea #3: Interests from lending money
Our final passive income idea involves lending money to companies (through crowdlending or private debt) or individuals (via peer-to-peer lending), with potential interest rates ranging from 7% to 12%. Individuals can lend to various borrowers, including construction companies, businesses seeking capital, green energy projects, or even other individuals.
How to choose a lending platform?
The first step is to dedicate a few hours to selecting the right lending platform. It’s crucial to verify that the platform is certified by ORIAS. Additionally, consider the volume of projects available, the user-friendliness of the platform, and the ability to track repayments.
Finally, you’ll need to decide to whom you want to lend your money—selecting specific projects or borrowers. This process does require some effort, which is why we’ve ranked this idea as number 3.
Our experience
We lend money to building constructors through Raizers and Wiseed (referral link). For Raizers, you can subscribe using our referral code: ‘econtessigarcia-30087′. We have selected those companies based on our own criteria that may be different from yours. Learn more by reading our blog about Crowdfunding in France.
If you want to lend money to large companies (private debt), unfortunately it is not that easy to enter this market. We use Corum as well for this. They have 5 interesting funds. Have a look on the web site and if you decide to invest with them, you may subscribe using our referral code ‘OWQV68′.
We do not lend money to individuals or peer2peer, but we know several people are happy with this kind of investment. A well known platform is ‘mintos‘.
Similar to peer2peer, we are not invested in green energy projects. But it seems the Lendosphere platform is a good one.
Other passive income alternatives
There are additional passive income ideas to consider that require a moderate level of effort, such as vending machines, renting out parking spaces or storage boxes, and managing a social media account as an influencer. Ultimately, it comes down to what you want to pursue and what you feel comfortable with.
On the other hand, we categorize certain passive income ideas as high-effort, such as renting apartments (especially through platforms like Airbnb), earning royalties, drop-shipping, and running blogs. If you have the time and passion for these types of investments, then go for it! Just be mindful of the time and effort they will require.
Key takeaways about passive income
We hope these three passive income ideas have inspired you to make your money work for you. There’s a satisfying feeling that comes from earning money while you sleep.
Here are the key takeaways from this blog:
- Passive income investments are a great option when seeking additional revenue.
- For long-term growth, it may be wiser to invest in high-growth assets.
- Be cautious of the high-yield dividend trap.
- Utilizing French wrappers (such as PEA, Assurance Vie, and PER) is essential for optimizing taxes.
Discover the ultimate guide to managing your money in France with our “Expat’s guidebook for personal finance in France” and unlock the secrets to thriving financially while living in France.
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Bon chance!
Disclaimer
Please remember that we are not financial advisors. We are just sharing our best understanding based on our own experience. This blog is for educational purposes only. Do not make investment decisions solely based on what you read in this blog. What works for us, may not for you. Do your own research and look for professional service if required. Read our full disclaimer in the ‘about’ page.
