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Making money while sleeping is the ultimate dream of hands-off investors. Finding the best sources of passive income can allow you to do just that.
What is Passive Income?
Passive income is money that you can earn without much ongoing effort. After you identify and establish a passive income stream, you won’t need to deal with it every day, but that doesn’t mean you won’t have to put in the work every once in a while.
Most passive income ideas require an initial investment of time, money, or other resources. They also require some degree of regular monitoring or maintenance to keep things on track, but they won’t require you to put in dozens of hours a week or chat away at the water cooler.
How to get passive income
People generally generate passive income in one of three main ways:
- Invest. When you invest, you use the money you already have to make more money.
- Building up assets. It means acquiring an asset that earns money passively over time.
- Asset Sharing. In this sense, sharing means selling or renting assets that you already own.
Let’s take a look at different passive investing ideas that leverage investing, asset building, and asset sharing.
Passive Income Ideas: Investing
Investing offers the greatest opportunities to generate passive income, but it can require large sums of money to generate significant returns.
Dividend stocks reward investors with regular payouts of company profits. Because you must own the stocks to receive dividends, you will likely need to tie up thousands, if not tens or hundreds of thousands of dollars to earn significant income from dividend stocks. (The S&P 500 offers an average dividend yield of just over 1%, for example.)
Dividend investing is not without risk. Companies may experience difficult times and be unable to pay dividends or have to reduce them. Look for preferred stocks or dividend aristocrats for higher dividend yields.
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Owning real estate is one of the oldest ways to generate passive income. But it’s not as simple as buying a house or land. When you own a rental property, repairs and maintenance can become a major waste of time and money unless you hire a property manager, which will only further reduce your income. In addition, the purchase of real estate can require an initial investment of hundreds of thousands of dollars.
If you’d rather avoid the costs and headaches, consider other sources of real estate investing, like real estate investment trusts (REITs) or real estate crowdfunding platforms like Fundrise or RealtyMogul. You’ll just need to make sure that a crowdfunding doesn’t require you to be an accredited investor to invest with them.
Peer-to-peer lending works exactly as it should: you act as a lender to a third party, often through an out-of-the-box platform like Prosper. You will then earn interest as the original amount you lent is repaid.
Peer-to-peer lending carries a significant risk that the person(s) you are lending to will not repay their loans. You can choose to spread your funds over many different loans to minimize this risk. You meet the income or net worth requirements for the peer-to-peer platform of your choice. Some require you to be an accredited investor, and even Prosper has lower state-specific financial requirements.
Investment in a domain name
Investing in a domain, also known as a domain, is a bit like trading stocks. You buy cheap domain names and hope to resell them for a profit. You’ll generally want to target common terms or specific proper names, and keep in mind that .com domains run at a higher price than almost any other in the US.
Although it’s cheap to get started – you can get domains for $10 or less – it comes with the risk that you won’t be able to sell the domains you buy and therefore lose your initial investment. You will also be responsible for the annual fee each year through your registration service.
Owning and operating vending machines can provide a (mostly) passive income stream. You’ll need to find a location and shell out at least a few thousand dollars to get started. From there, maintenance simply requires you to spend some time each week restocking and maintaining your machines, although you can outsource these tasks if you’re willing to sacrifice some profit.
However, whenever you buy physical property as an investment, remember that you will need to allocate space for storage and bear the risk of moving perishable goods.
Passive Income Ideas: Creating Assets
As the name suggests, asset creation requires upfront time and effort to create an income-generating asset. Although it does not bear the high financial costs of investing, it does come with the risk that the assets you invest your time in creating will not sell.
Digital products can be anything from e-books and lesson plans to mobile apps, even NFTs. What is essential here is that you spend time building them once and then are able to sell the same asset again and again online. You can take a completely passive approach to the digital products you create, or spend time and money marketing them.
Music and Photo Licenses
If you have a creative side, you can turn your photography or music into a passive income stream by licensing image and music sites. Other content creators then pay for the rights to use your creations. Musicians can sell their songs on sites like AudioJungle.net and Pond5, while photographers can sell their images on sites like Alamy and Adobe Stock.
Custom designed products
By uploading original designs to print-on-demand websites like Teespring, Redbubble, CafePress, and Zazzle, you can earn passive income every time someone orders a t-shirt, coffee mug, or anything else. physical product emblazoned with your design. Best of all, you don’t have to deal with printing, storage, or shipping, which takes a lot of the frustration out of selling physical goods.
Affiliate sales are passive income generated when someone makes a purchase after clicking on a link or using a referral code that you post on a website, video, or podcast. You will usually earn a flat commission or a percentage of their purchase.
You can find affiliate links for just about any type of product or service, which means you can earn passive income from anything from mattress reviews to software ratings. Keep in mind, however, that this space is highly competitive, and the most successful affiliate marketing requires continuous high-quality content production.
Passive Income Ideas: Asset Sharing
If you’re not in a position to dedicate the time or money to generating passive income, look around. You may be able to make money from assets you already own by renting them out or renting them out to others. Think of it as Airbnb for [insert asset here].
If you have extra room in your yard, garage, or carport, you may be able to make a profit by renting out space that you don’t even use. Sites like HomeCamper let you rent land to travelers who want to pitch a tent (or park an RV) in your area, and JustPark helps you rent parking spaces on your property.
Operating your home for passive income can include anything from renting out a spare bedroom to listing your home on Airbnb or Vrbo when you’re out of town to renting out to movie productions. Kathy Kristof, CEO of SideHusl.com, notes that she rented her own house by the hour to film and ad producers using Giggster, bringing in $1,400 in a single day.
You don’t need to drive Uber to profit from your car. You can rent it to others who need a set of wheels using sites like Turo or Getaround or if your bike is gathering dust you can rent it on platforms like Spinlister. Many transport hire companies offer their own insurance policies to protect you and your hirers, but you should ensure that you are aware of any insurance liability you may incur. Also consider the wear and tear that your bike or car may experience when deciding to rent it out to others.
Advertise on your car
Earn passive income by turning your car into a rolling billboard. Sites like Free Car Media, Wrapify, Carvertise and StickerRide connect car owners with advertisers. In return for putting a vinyl sticker on your car for an agreed duration, you’ll earn a tidy passive income stream, all without disrupting your normal driving routine. Just make sure the platform and campaigns you choose match your driving habits. Some require a certain mileage per day or whether you are a delivery driver.