10 Smart Ways to Generate Passive Income
The idea of making money while you sleep definitely has a nice ring to it. However, when someone needs extra income, the stereotypical suggestion most people offer is to “get a temporary or part-time job”. However, not everyone has the energy or time to put in all those extra hours.
For many people, toiling for a living is not fun and there are several reasons behind it. There could be lengthy commutes, annoying coworkers, dress codes, unreasonable supervisors, insufficient vacation time, taxing physical labor, heavy workloads, and a lack of recognition and appreciation, among so many other things. As a result, it is easy for many people to dream of money just coming in, without actually having to clock in to earn it.
The good news is that passive income streams do not have to be merely a dream.
What is Passive Income?
As you can imagine there is plenty of chatter in the finance world when it comes to passive income, how great it is and why you need it.
However, what is passive income and why has it become such an important topic of conversation? Passive income is money you make without actually doing much to earn it. It is highly sought after and usually understood. Many passive income ideas often take some extent of upfront work or investment to earn, such as writing an e-book. On the other hand, some ideas do not take much effort on your part, like investing with a robo advisor.
The addition of passive income streams to your income portfolio could help you enhance your earning potential as well as accelerate your various financial goals in tremendous ways.
Here are ten smart ways you can generate passive income and achieve your financial goals.
1. Start or Buy a Blog
One of the most effective ways to generate passive income is through blogging. Yes, we know that in the beginning there won’t be any income. However, over time, you will start generating considerable income from your blog. It will snowball eventually. Potentially, income from you blog can earn you six or even seven figures each year; some people earn even more.
Keep in mind that there are a few basic steps you will have to take before starting a blog. Do not make the mistake of just rushing headfirst into it without adequate planning first.
According to research, blogs in the following categories tend to make the most money:
- Relationship and dating related blogs
- Money and finance related blogs
- Diet, fitness and health related blogs
It is advisable to choose a niche and blog about it. For instance, if you are launching a blog about, perhaps it can be regarding how to make money online or how to make money in real estate. Choose your niche and make sure you stick to it. On the other hand, if it is a blog related to diet and fitness, maybe your niche can be ketogenic or vegan diet.
If starting a blog sounds too much work, you can buy a blog too. You will be surprised to know that thousands of blogs are created each year, and many are completely abandoned after some time by their owners. If you manage to buy a blog with a decent amount of online traffic and a demonstrated cash flow, it can be a great source of passive income.
A majority of blogs tend to employ Google AdSense, which offers a great monthly revenue stream depending on adverts that Google places on the website. In addition, there might be affiliate programs that generate additional revenue and both income sources can be yours as soon as you buy the blog.
From a strictly financial perspective, blogs generally go for 24 times their monthly income. Therefore, if the website generates $250 per month in income, you could likely purchase it for about $3,000. This means that an investment of $3,000 will purchase you about $1,500 a year in cash flow, which is not too shabby.
2. Crowdfunded Real Estate
If you do not want the hassle of holding properties directly but are looking to add some real estate exposure to your portfolio, you can invest in crowdfunded real estate projects to make passive income.
In this case, you will have to loan the money to a landlord, corporation or rehabber who will purchase the property and pay you the interest for using your funds. Keep in mind that you will invest alongside others.
Out of the several options, the three that we really prefer are:
This is a great platform for accredited investors. If you have a couple of thousand dollars you would like to invest in individual properties, such as homes, condos, commercial real estate, and mixed use buildings, you will find this RealtyShares very attractive.
This is an awesome eREIT with no accredited investor requirement and $1,000 minimum investment. All you have to do is invest in a fund and their real estate experts will choose the investments.
It is like the LendingClub for accredited investors and private real estate loans. The minimum investment is $1,000.
The great thing is that you can sign up for free on all three platforms; therefore, you may join, poke around a little and see which ones you like the best.
The massive appeal of the above passive income sources is that you could easily diversify across various small investments and lower your risk, rather than invest in just a handful of big ones. On the other hand, when you invest in real estate directly, you will have to invest plenty of capital and time to individual projects.
In addition, you might have trouble finding good tenants who pay rent on a timely basis. That is not all as some tenants may even damage your property, while others might be difficult to get rid of.
However, when you invest in most crowdfunded real estate investments, you will be able to spread your funds and, thereby, risk across numerous uncorrelated real estate ventures; as a result, individual investments will not cause major issues and you will have the peace of mind you need.
3. Make YouTube Videos
What’s better than broadcasting yourself! As you can imagine, this is one of those ventures that is growing very rapidly. You may create fun and entertaining videos in almost any area or niche that you like.
Some of the popular categories that can help you rake in thousands of dollars include music, opinions, tutorials, comedy, game walkthroughs and movie reviews. Make great videos and then upload them on YouTube. Then, you can attach Google AdSense to your videos; it will overlay the videos with automatic ads.
If viewers click on these adverts, you would earn money from AdSense, which is great. However, the key is to create compelling and exciting videos, promote these videos on various social media websites, such as Facebook. You need to create enough videos so that your monthly income will come from more than one source.
In addition, in many cases, Google tends to favor You Tube in its search results, usually putting videos at or near the top of your page for the search term – without actually knowing the video quality, apart from its description, title, and tags.
However, it is evident that there is fair bit of work, which goes into developing captivating videos; that said, once your video is complete; it will become a fully passive source of cash flow for a very long time. Are you a little skeptical that you will not find success with YouTube?
Here is something that you lift your spirits. Emily Eddington used her passion and love for makeup and leveraged YouTube in order to quit her permanent job. The former morning news anchor has managed to receive more than 67 million views on YouTube. She took her passion — makeup and YouTube — and turned it into a great success story.
4. Become a Reliable Referral Source
Keep in mind that all small businesses need referral sources to maintain or increase sales. So, make a comprehensive list of small or medium-sized business providers that you use on a frequent basis and feel that you could recommend to others, such as friends and colleagues, without reservation.
Then get in touch with the business owners to see if they run any type of cash referral offers. The great thing about this is that you could do this with landscapers, accountants, electricians, carpet cleaning services and plumbers — the list is really endless.
Maintain a list of all these businesses, and be prepared to refer their services to your family, friends, and coworkers. You will be able to earn a fee on every referral just by talking to people. It can’t get any simpler. Also, don’t ignore referral programs at your workplace either.
Therefore, for example, if your company gives a referral bonus for either new customers or new employees, then you need to take full advantage of that referral plan. It is easy money with almost no work, something we all dream of.
Are you into photography? If you are, you might be able to convert your love for photography into a passive income source. If you have a great eye when it comes to capturing excellent images, then photography websites like iStockphoto and Shutterstock can offer you excellent platforms to sell your photographs.
These platforms might offer either a flat fee or percentage of each photograph that is sold to a site client. A single photo, in this way, can represent a great cash flow source as you can sell it repeatedly. All you have to do is create your photo portfolio and put it on multiple photo platforms. Once you do that, the activity becomes passive.
The good thing is that all the technical aspects of photo sales are handled via the web platform.
Here are some photo shoots that you can do for your clients:
- Family portraits
- Newborn photo shoots
- Boudoir photo shoots
- Pet photo shoots
You can also join photo contests, which can be lucrative. In addition, if you do not believe that you have sufficient experience or your skills are not good enough to win you a photography contest, then you have to think again! After all, it is not only the experts and professionals who join these photo contests.
It is likely that the contestants you compete with will often be a diverse mix of photographers who have different levels of expertise and experience; therefore, do not be scared to venture out a little bit and try your luck.
In addition, perhaps, more importantly, you have nothing to lose. If you fail to win any cash award or prizes, these photo contests could help gain you some exposure and boost your confidence.
6. Do Affiliate Marketing
Another incredible way of generating passive income is via affiliate marketing. However, keep in mind that this depends, to a great extent, on the size of your list. When it comes to your list, size really matters. This is especially true if you are looking to earn some serious money while doing it on autopilot. Moreover, note that list building can take some time; it is not something that happens overnight.
In addition, you have to add considerable value to the list or you will become obsolete very soon. As a result, it is a passive income method, which is more suited to individuals who have active websites and blogs. You could sign up and promote specific products or services on your website, and in exchange, you would be paid either a percentage of the sales amount or a flat fee.
Moreover, do not worry as it is not as difficult to do as you may think. This is because there are thousands of businesses and companies who are looking to sell their services and products in as many regions as they possibly can. You could find great affiliate offers either by getting in touch with vendors directly, or via dedicated websites, like ClickBank. In addition, it is always better if the service or product is one that you’re either highly interested in or is very relevant to your site.
7. Sell Your Products Online
This is where the possibilities are virtually endless as you may sell almost any service or product that you like. For example, it can be a product that you have developed and can manufacture, if needed, on your own. On the other hand, it can be digital in nature (like DVDs, software, or even instructional videos).
You may set up a dedicated site for your service or product, unless you’ve a blog or website already in place.
Otherwise, you could also sell the products on an affiliate basis. There are two ways of doing it; you can either offer them directly to sites and blogs, which are related to your service or product, or via a platform like ClickBank.
Therefore, if you are making big bucks in your current job and you are not sure you will be able to make a similar amount if you decide to sell products online, then you need to think again.
Recently, a reporter interviewed the famous Steve Chou from MyWifeQuitHerJob.com.
During the interview, Steve Chou explained how his spouse quit her job and become a successful stay-at-home mother.
Now, we know that being a stay-at-home mommy is a full-time job; however, Steve’s wife also commenced an online business, which replaced her past salary and began bringing in a 6-figure income! Now that is awesome! You can also learn to sell products online as well and make considerable money.
8. Stock Dividends
One of the best and simplest ways to enjoy a steady stream of passive income is to purchase stock in growing and healthy companies, which pay dividends. You can do even better if you look for stock dividends that increase on a regular basis at a good clip. Many companies tend to hike their annual payouts. Moreover, they have plenty of room for further growth. This is usually evidenced by dividend payout ratios of about 70% or less.
A company’s payout ratio is the amount of money distributed in annual dividends divided by the last twelve months’ earnings per share. The payout ratio reflects the percentage of earnings paid out in the form of dividends. If the payout ratio is lower, it means that there is more room for expansion and growth.
If you build a portfolio that comprises of high dividend stocks, you could create regular and consistent passive income at a yearly rate that is a lot higher compared to what you may get on traditional bank investments such as saving accounts.
Perhaps more importantly, as high dividend stocks are essentially stocks, you can always benefit from capital appreciation, which is great as it provides you plenty of liquidity. In this way, you will be able to earn passive income from not one but two sources. These include dividends and capital gains. However, keep in mind that you will need to open a brokerage account in order to buy these stocks and do the research needed.
9. Rent Out Extra Space
Airbnb is a hot new concept which has just been around for a couple of years; that said, it has exploded throughout the world and for good reason. Airbnb is a great platform and allows individuals to travel throughout the world and stay in great accommodations which cost a lot less compared to conventional hotels. So, if you are a globetrotter you will find this platform extremely valuable. They achieve this by staying with various Airbnb members who have rented out part of their houses to travelers.
If you participate in Airbnb, you could use your own residence for accommodating guests from different parts of the world. This way, you can earn additional money for renting out extra space in your home.
Paula Pant, for example, took a shot at making some extra dough on the side renting out locations via Airbnb. Her experiment earned her an extra $19,000!
It goes without saying that how much you make would depend, largely, on the location, size as well as condition of your property. For example, if your house is located close to a popular resort or in a high cost city, your income would be considerably higher.
Therefore, renting out through Airbnb is a great way to earn money on unused space in your home.
10. Invest in Index Funds
You may have heard of index funds, especially if you are familiar with finance terms. Index funds are a great investment option as they offer you a way to invest your money in the stock market, which is totally passive.
For instance, if you decide to invest your money in any index fund, which is based on the Standard &Poor 500 Index, you would be invested securely in the general market, and you will not have to concern yourself with rebalancing your portfolio, choosing investments, or knowing when to buy or sell individual companies.
This is because the fund will handle all of that, which will base your fund portfolio depending on the composition of an underlying index. In addition, you are free to pick any fund, based on an index you want, which gives you plenty of choice.
For instance, there are specific index funds which are set up for almost every market sector you can think of. This can include precious metals, energy, banking, emerging markets or retail, you name it.
As an investor, all you need to do is decide that you are willing to participate. Next, invest some money and just sit back and relax. The stock portfolio would then be on autopilot and you will have a steady stream of passive income.
These are ten smart ways to generate passive income. You can use any one or more of them to achieve your financial goals.