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Most of us know what it’s like to be stuck in a 40+ hour job. You do it because you need the money. But is it possible to have both the money AND the lifestyle?
Absolutely! The answer is passive income.
What is passive income and how is it different from active income?
Active income, or hustle income, is normally directly tied to time and results produced. This means exchanging time for money, or hustling to sell, create, or distribute something.
Passive income, on the other hand, is regular income that you receive with little or no ongoing work because you have already done the work up front. This income comes to you on a daily, weekly, or monthly basis from the automatic sale or billing from a previously sold product or service.
People often mistake passive income to mean income that magically appears without hard work.
That is not true. The hard work is part of the process, but it is done upfront so that you can reap the benefits later.
Passive income typically needs an input of either;
- Cash that you invest or
- Hustle of time and energy.
Either way, if you do it correctly, you can have BOTH money and lifestyle.
Here are 16 ways that you can earn passive income.
- Stock dividends
By choosing a long term strategy and investing in a decent number of stocks that pay great dividends, you can truly sit back and reap the cash flow from it.
You need a sizeable amount of cash to invest to make this strategy work. You may have to occasionally keep watch on how your stocks are doing to make sure that their value doesn’t take a permanent dive.
TradeStation, SpeedTrader, Scottrade, Fidelity and Ameritrade are some of the brokerage providers that can provide you with trading accounts.
- Real Estate Investment Trust (REIT)
If you like the idea of passive income dividends but prefer having your money invested in real estate instead of stock, REITs are a good consideration. It’s also a good way to earn passive income from a range of real estate without actually having to physically own any.
REITs are companies that own or invest in real estate that produce income. You receive profits in the form of dividends. Just like common stock, the value of your investment can go up or down. You can find REITs on the stock exchange, but there are also non-listed REITs and private REITs.
- Peer-to-Peer Lending (P2P)
In P2P, you lend your money to other investors and essentially, you charge interest like a bank. The kinds of people who would borrow money from you are normally investors who are unable to get approved for an ordinary bank loan. Because of the higher risks, you can also charge higher interest.
To avoid costly mistakes, you need to be confident that you will be able to get your money back, so it is advisable that you do some research into the borrower’s background and also his or her business goals to assess its possibility of success.
According to CNBC and LendingClub, peer-to-peer lenders are seeing 5% – 9% returns. This is great compared to the negative inflation-adjusted interest rates you'll get in a savings account or CD.
Some of the best peer-to-peer lending sites include LendingClub and Prosper.
- Rental income
One of my favorite ways to generate passive income is to purchase rental properties that generate monthly income.
In order to succeed, you need to invest a deposit into buying a property that brings you cash flow. If it’s a rehab, you will also have to add cost, energy and time into doing it up.
However, once you have found a reliable tenant and property manager for the property, it can be pretty passive except for the occasional email or two to your property manager every month.
You can get an idea of potential opportunities, property prices and expected rental prices on Trulia, Zillow and Redfin.
Many investors are looking to use “Turn Key Real Estate Investing Companies” that find good real estate deals, fix them up for you, and manage the tenants.
- Self storage units
Unlike a typical landlord, self-storage owners don’t have to worry about unplugging toilets, burst water heaters or illegal pets.
In most markets, storage units rent for about the same price per square foot as a single family house. In central Texas, we typically see rental units go for about $1 per square foot.
Storage units are usually bare and require little to no maintenance within the storage unit itself. Renters pay to use the unit to store their stuff and if they default on payments, you can auction the items left behind and get a new renter in.
There may be some general maintenance needed for the business such as purchasing security cameras and updating fencing but you can hire a manager to look after that for you.
To get more ideas, see the Self Storage Association’s website.
- Mobile home parks
John Fedro gave us a glimpse into what it's like to own a mobile home park in Episode 003 of Pathways To Wealth.
The benefit to owning a mobile home park is that you get to scale management. You own
anywhere from 20 – 250 homes on the same plot of land, which makes it much easier to manage than owning the same number of houses in different neighborhoods.
Unlike single family homes, in some states, the purchase of a mobile home is treated like the purchase of a boat or trailer. If so, there are no closing costs, no real estate taxes and other costs associated with home ownership.
Some investors are able to retire from the cash flow of owning mobile home parks alone. The key to making the investment as passive as possible is to hire a manager to look after the tenants and the general maintenance of the park.
Some mobile home park sellers are also happy to provide seller financing. You can start your search by using the Mobile Home Park Store.
- Invest as a silent partner
If you have extra money that you have no immediate use for, consider becoming a silent partner in commercial ventures.
Unlike an active partner that is involved in the day-to-day management of a business, a silent partner only contributes capital.
Depending on your agreement, you may be able to collect income passively from revenue or from profits made. However, because silent partners normally have little say in the running of a business, it is important that you do the research work upfront to ensure that the investment is a solid one.
Silent partners can be found in all sorts of businesses including internet startups, bars, restaurants and real estate.
To become a silent partner, it’s best to network around as many agreements are done privately. Nevertheless, the Angel Investment Network is a good starting point too.
Blogging has gotten quite competitive but you can still succeed through persistence and the choice of a suitable niche.
Bloggers make money through advertising that is placed on the site by companies like Google AdSense. If your blog has a huge following, some companies may contact you directly to advertise on your site.
Articles that you wrote a long time ago can still generate income for you for years to come if it’s a popular and evergreen article.
- Affiliate marketing
Affiliate marketing can be done through many channels including social media like YouTube, Facebook and Twitter and is often combined with blogging.
When you have built a loyal following, you can promote products or services that have affiliate compensation programs. You get paid a commission for people who purchase items through your link.
Popular affiliate companies are Amazon Associates, Commission Junction, ClickBank and Rakuten Affiliate Marketing. To succeed, make sure that you only recommend products and services that you use yourself or that you honestly believe will serve your audience.
- Niche websites
Niche websites have become very popular as a way of creating passive income. If you have a particular passion or expertise that is not being served very well online, this may be your perfect opportunity to create passive income.
You can add a blog, affiliate links as well as an e-commerce shop on your website in order to generate passive income. Just make sure that your content truly creates value for your target audience.
- Drop shipping
Drop shipping is essentially e-commerce but with less hassle. Items that are purchased through your e-commerce website are shipped directly from the manufacturer to your customer and you don’t have to worry about creating the product, packaging or even sending out the product.
It is truly hands-free. The downside of drop shipping is that you don’t have full control over the quality of the product that is sent out and sometimes this can create a problem if manufacturing defects are found in the product by your customer. Popular drop shipping sites include Doba, Wholesale Central, SaleHoo and Worldwide Brands.
** I'm currently working on a drop shipping product that could revolutionalize consumer behavior and disrupt an entire market. Look out for case studies and updates in the coming months! **
- Online courses
Share your expertise and knowledge through the creation of an online e-course on places like Udemy or Teachable. You only have to create the content once but the content can be reused over many years.
There may be some ongoing maintenance with answering questions from students but it’s a very good way to earn decent passive income.
I've made millions in passive income from online courses, so of course I'm a huge fan of creating high-quality content!
Ebooks are another relatively inexpensive way of creating ongoing passive income by putting in energy and time upfront to create something of value to others.
Unlike the old days where it was often challenging to get a publisher to publish your work, you can now take matters into your own hands by self-publishing on places like Amazon Kindle Direct Publishing and iBooks.
- Selling stock photos
If you are a keen photographer, you can earn passive income through licensing your photos through websites like Dreamstime, iStock, and Shutterstock. When someone wants to use your photo, they pay you a fee.
If you love to travel, then you could supplement or replace your income by producing stock photos. During our year-long trip around the world, my wife and I took thousands of pictures from over 60 of the most beautiful cities on the planet. We plan on selling many of our highest-quality photos, and will be doing case studies around that too! Check out some of my travel pics on my Instagram page.
- Rent your summer home or spare bedroom
If you have a spare cabin or summer home that is empty for most of the year, consider renting it out on places like Airbnb, Flipkey or Craigslist.
We love renting our place out in Austin, Texas during big events like SXSW where people are willing to pay over $1,000 per night for a condo or house.
If you only have a spare bedroom, that can still be a good source of passive income. You will have to put in some work with house cleaning unless you hire a cleaner to wash bed sheets and spruce up the house in between guests.
While it's important to hustle to earn income, it's also a great use of your time to focus on building passive income sources, because those can pay you for many years.
Get creative. What talents, assets, resources, connections, or solutions can you use to generate income that comes in on a regular basis without you having to exchange time for money?
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