Make Passive Income Renting Out Bodies of Water

You may have heard about water rights, but if not, here's the deal: you invest in a Water Right to use a particular source of water (like a lake, river or underground aquifer). You can then charge companies and governments (think farms and towns and cities) to access the water you own in your investment contract. Water rights are limited by their geography, weather patterns and even property ownership rights. But as water increasingly becomes a limited commodity, the possibilities for creating multiple passive income streams are endless.

What are Water Rights?

Water rights gives investors access to bodies of water, like lakes, groundwater and rivers. Once you own the rights, you can make a lot of money by charging various entities to access it. For example, if you own rights to the water flowing by your riverside cottage, you can charge a fishery $5,000/month to use that water. If a fish farm wanted to build on it, they'd have to pay you $8,000/month because you have first right to the water that they will be using. That's inflation worth its weight in gold, because you're a seller of scarce water, not a passive owner of it. You can also charge a local lakeside resort $20,000 to use the lake for fishing or boating.

Water also has numerous other uses. It can be used to cool our factories and keep our cars at a consistent temperature. It can be used to power our homes. It can be used to generate electricity. All these properties can be bought from a water rights investor.

In most places, buying and selling water rights is not any different than buying and selling any other asset. Water investors, especially hedge funds, are increasingly bundling these water rights as water becomes more scarce around the world. In Australia, hedge funds go to the ranchers and buy their water rights, only to rent it right back to them. In addition, investors and hedge funds are sitting on an appreciating asset as droughts continue to get worse.

How to Invest in Water Rights

Buying water rights is more complex than simply buying stock. In fact, it can be even more complex than buying a house. There are a few platforms that can walk you through this complicated process, including Water Right Exchange or waterbank.com.

However, first do your due diligence. Every state has different rules regarding which water rights claims have priority over others. For instance, California is implementing a new policy that helps protect water rights, which for decades have been up for grabs amongst legislators and the special interests. This new policy states that a maxim of equal availability is the new goal for all statewide water rights. For example, if I own the first water right to a new aquifer that is discovered in 2015, then I have the right to use that water for the next fifty years. We're basically buying water rights to water sources that are produced in the future.

With proper knowledge of your state laws, you make sure you acquire the water you need. Check out this two step strategy to make money selling water rights:

1) Buy a large tract of land with underground water. Acquiring water rights to surface water like lakes is a lot more complex, and sometimes not as profitable since you only own the water within your parcel of land. However, the amount of underground water could be far more extensive. In most states, you could drill for the water under your land, regardless of whether the water is coming from parcels far beyond yours. "I drink your milkshake!"

2) Let the water appreciate in value. One thing is for sure. With water becoming increasingly scarce, the demand for water will increase. You better drill for water before your neighbors do. Thereafter, you can negotiate a sale of your water rights to another investor, or more likely- local municipalities and districts.

For more detailed instructions on how to invest in water rights, I found this Wikihow article especially useful. I highly recommend it if you're serious.

Water Rights and Catchments

Moving forward, you'll be able to buy water rights for rainwater harvesting from lakes, catchments and groundwater aquifers. There are 30 million acres of land (across 10 states in the West) that are projected to be converted into urban environments very soon. Each new city will require a catchment area to collect rainwater that will then be used for drinking water, agriculture, and other uses. The need for catchment is vital, but these catchment areas are competing for space with old growth forests. As a result, some environmentalists are rallying against these water rights. Regardless, this new policy gives forest land owners the right to buy rainwater rights from water flow owners. If only they had bought those rights sooner.

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