Passive Income: What Is It And How To Get It

Blog | November 15th, 2018

Some of the most successful individuals have more than one form of income each month. Most of our money comes from active income, which is simply income that we receive for doing something in exchange. Almost everyone gets this form of income, but since you’re only earning while you work, this kind of income has its limits.

Passive income is an entirely different source of income that can really boost your finances. If you’re interested in developing your passive income, here’s a crash course.

Passive income is money that you earn while not having to do much work. And sometimes, you won’t need to do anything at all. It’s like a load of laundry that you put in, set, and leave until it’s done. While portfolio investments, like stocks and other investments, may immediately come to mind, passive income also refers to alternate ways of generating income without much involvement or effort.

Passive income strategies can generally be categorized into two main types: continuous passive income generated from initial work and passive income that requires very little to no time investment at any point. The key is to create an income stream that works for you.

Passive income can be generated like a plant grows from a seed. You may need to do some digging in the beginning but will reap the benefits of continuous income afterward at stages where you don’t need to put work in.

Real Estate

Real estate has long been a popular mark for those looking to create passive income streams. No matter what, though, you’ll need to put in some initial effort for your investment to be successful. There are a number of options on how to create passive income from real estate.

You can opt to purchase a property that’s ripe for the rental market, in which case you have to consider how you’re going to manage it (Will you be the landlord? Will you have a manager? Who will fix problems). Consider starting small, with something like a one bedroom apartment, and move bigger from there if it’s paying off for you.

Flipping houses will require much more effort on your part, but it’s also quite lucrative. If you purchase a fixer-upper, whether it be to rent out or sell with a profit margin, fixing up a house is a large time investment. It takes a lot of planning, involvement, and possibly sweat equity (depending on your margins). Be prepared to feel like you have two full-time jobs through the period in which you’re going through the renovation process.

Start-ups that allow crowdfunded real estate investment are also popping up more and more. While the idea is good in theory and makes real estate investment more accessible, there’s little track record for these companies, so the potential for return on these investments is an unknown.

There are also REIT’s or real estate investment trusts. These act like mutual funds except they all go towards real estate investments, so they may be a bit more secure than purely crowdfunded investments. Take a look at Fundrise.

Peer Lending

Peer lending represents a relatively accessible investment option that can create great passive income streams. Not only can you grow your money, but you’ll also be supporting people building up start-ups and small businesses. Check out platforms like Lending Club (start with as little as $25), Upstart, and YieldStreet.

E-commerce

If you’re a creative or crafty person, consider building an online shop to sell your original goods or resell random items. Shopify is probably your go-to e-commerce platform to get yourself going. In addition to Shopify, you can also use sites like Teespring and Spreadshirt to create t-shirt designs and not have to worry about production. Just submit the design, advertise it, and start selling.

Digital Advertising

The effort required to develop this passive income stream depends on the individual. If you have an existing website or blog, consider adding advertising to the site to immediately earn money for visits and clicks. Google AdSense is the standard for this.

You can also make passive income if you have a large social media presence, especially on Instagram. Look into programs from Amazon and consider brands you could partner with to earn passive affiliate income.

Rent Stuff

Have a spare room? Times that you’re not using your car? Stuff that other people may want to use? These situations can all be monetized to create a passive income. Post your extra room on Airbnb, or rent your room out if you’re going to be away. Rent out your car on Turo when you don’t need it. Consider renting out underused stuff and equipment on platforms like PeerRenters.

Luckily, there are many different ways you can consider for creating passive income streams. Use the above options as a guide to thinking about what methods and platforms can help you generate income with little effort. Happy earning!

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