The term “rentier” comes from the French word “rente” and means a person who lives off rent (interest from invested money). Such a person invests his capital in CDs, shares, securities, real estate and receives a constant income from his assets. This is a passive income, which makes it possible for the investor to not work and labor at a job while providing him with a comfortable lifestyle. At the same time, the assets should not decrease in value due to inflation or additional expenses. Therefore it is necessary to look for ways to grow one’s capital. A smart rentier can invest his capital profitably and in order to do that he transfers custodial management of his assets management to competent financial advisers.

Sources of profit

A rentier can receive passive income from various sources: it can be income from investments in securities and CDs, from renting out apartments, land plots or even from royalties.

Income from renting out real estate

This is the most common way of receiving profit as a rentier as many people consider such investments to be reliable and stable income options. In order to receive income from renting out an apartment or a house, you need to understand the nuances of the real estate market. This income has its pros and cons. And if the pros are obvious (stable, reliable, not hard to understand), such things as difficult tenants, high initial cost, and the necessity to know the market can be considered the cons.

Income from investments in securities

This is a very popular way to generate income all over the world. The advantages of receiving income from investing in securities are a higher yield (than from CDs) and a variety of tools for obtaining such an income. But securities also have their disadvantages like a higher risk and having to study all the intricacies of the stock market.

Royalties and patent payments

Royalties can provide a passive income from owning patents in scientific research or authoring artwork (books, music, etc.) and this type of income can be paid over a person’s entire lifetime.

The difference between an investor and a rentier

The concepts of an investor and a rentier are pretty close, but there is a fundamental difference between them. The difference is that an investor’s income from his invested funds can be unstable and he also has to keep actively investing: he needs to analyze the market and make various decisions in order to optimize his portfolio.  Usually, an investor has a day job for his main income and investing provides some additional income for him.  A rentier, on the other hand, having invested once, has a permanent passive income.

How to become a rentier

In order to become a rentier you need to:

- Know how to manage your capital (keep track of your income and expenses)

 - Learn how to multiply it (use the “money makes money” principle)

 - Determine the main source of income (rental income, investments in securities, etc.)

 - Have a financial strategy (consider all possible risks)

 - Make the initial capital

 - Entrust your capital to money managers (invest in a fund or transfer funds to a management company) 

In general, we can say that to become a rentier you have to do a lot of preliminary work, except in cases of inheritance, winning the lottery, a gift from a rich uncle, or a found treasure.

Rentier is an occupation, the essence of which is managing one's own capital in order to create a high passive income that can provide one with a comfortable standard of living without any additional effort. At the same time, he has free time for any activity he likes, like working for pleasure, which does not contradict his status of a rentier.