There are numerous benefits to building wealth through passive income. In addition to providing extra financial security for the future, you can also reach your financial goals in a shorter time frame and save money in the present as well.
It's important to remember that most times, it requires quite a bit of effort, patience, and time to establish a passive stream of income. There are many passive income ideas, but few of them will start paying dividends immediately without any work on your end.
There are fundamental differences and benefits between passive vs. non-passive income that we'll explain in this article; we'll also provide popular avenues on how to generate passive income.
We've compiled a list of great passive income start-ups, ranging in difficulty and how fast you'll start to see a profit. Continue reading for more information on how to make passive income.
Passive vs. Non- Passive Income
The easiest way to explain the difference between passive income and non-passive income is continual effort.
Passive income is money that you earn on an investment; this can be based on work that you did in the past or work that you do on a very minimal basis. Usually, this effort is for maintenance, and it allows for virtually no active involvement while still generating profit.
Non-passive income is the money that you earn in exchange for a product or service. You are constantly working to receive wages — that’s the nature of non-passive or active income.
What are the Four Types of Passive Income?
How to make passive income will be predicated on the money that you make from the assets that you have control over. There are four main types of passive income that will increase your savings.
1. Building Assets
This type of passive income involves creating or building something that can be provided to others for use. Assets such as these require a lot of skill and time to construct correctly.
Examples of this type of passive income are: writing a book, building a website, creating software, etc.
2. Cash-Flowing Assets
The old adage defines Cash-Flowing assets, “You have to spend money in order to make money.”
These particular investments will require some level of wealth or a significant nest egg that you've saved up, but they also create a pretty stable avenue of cash flow down the line.
Examples of this type of passive income are investing in real estate, dividend funds, and buying existing websites and businesses.
3. Sharing or Selling Assets
Want to create an expendable income that will help to decrease monthly expenses? Sharing or selling assets is a good form of passive income that can save you extra money to help maintain costs.
Unbeknownst to you, you might be inadvertently spending a little or a lot more than you have to on mortgage payments, bills, and more. A simple gesture such as refinancing student loans or house payments can free up the income you currently have and allow you to use it to reinvest into other opportunities that'll offer a moderate to the high return.
4. Reverse Passive Income
Many passive income ideas revolve around this method because you can quickly sell, rent out, or use the items you have lying around the house.
You can also execute this same concept with non-physical resources such as your skills and time to generate a profit.
Examples of reverse passive income include renting out your home or car for use when you don't need it, renting out or selling old baby gear, or even volunteering to walk your neighbor's dog because you're already heading out. So you have the passive vs. non-passive income debate, but some options are also semi-passive, allowing you a slightly more relaxed method of making money.
If you find yourself having assets that you can easily use to increase your income quickly, go for it!
Helpful Passive Income Ideas
Here are the best ways that you can dive into passive income streams to boost your wealth. Be realistic with your resources and investment power; your upfront effort will determine your long-term success.
1. Rental Properties
We'll start off with the most well-known way to generate passive income, investing in rental properties. There are different ways to go about using rentals to make extra money, but be mindful that it is very time-consuming in the beginning.
Fundrise is a site that helps to make this opportunity as passive as possible. This platform excels at REITs, also known as real estate investment trusts.
If you don't have the time to manage a rental property, REITs are a great alternative option. The REIT will be the owner and manager of properties that produce income, and they distribute profits to the investors.
Using Fundrise, your minimum investment would be $500.
2. Become a Notary
It's relatively simple to become a notary, as the fees to become certified are low. It can yield a nice revenue stream if you're willing to put in minimal effort. Depending on which state you live in, the fees for becoming a notary signing agent can range from less than $100 to $140.
As a notary, your duties will be to serve as the overseer of distinct legal processes, namely, being the witness during document signings. This will include various contracts, mortgage signings, transfer of property, etc.
Such a low start-up cost, but you can make a couple thousand dollars a month as a notary doing signings here and there.
3. Invest in Vending Machines
One of the more random but fun streams of passive income is investing in a vending machine.
There are two main components to owning a vending machine: optimal location and making sure it's always stocked. The variety has really skyrocketed compared to what was available in the past from vending machines–candy and drinks.
Today, you can get multiple services from the vending machine, such as movies, food, electronics, fashion products, school supplies, and more. If you don't want to be involved with the restocking and maintenance, you can outsource the responsibilities to other workers. This makes it an even better candidate to fit the mold of a truly passive income.
It requires a high capital initially, but you can expect at least $100 a week and more if your vending machine is in a prime location.
4. Rent Your Living Space
This particular form of passive income allows you the autonomy to make the schedule you want and only rent your living space when you want to.
Do you have an extra room in your house that you don't mind lending to tenants when it's not in use? If so, it can help cover some home expenses like mortgage, bills, and household maintenance fees.
There are multiple sites like Airbnb that are very popular and trustworthy when it comes to both landlords and consumers. Their site offers insurance protection if a tenant defaults on the payment and gives you the freedom to do long-term or short-term rental periods.
5. Invest in Small Businesses
Some people don't like the volatility of the stock market, and they'd instead opt to invest in tangible assets. Small businesses are the perfect opportunity to better understand where your money is going, and you also get to watch it mature with time.
There's always an opportunity to help an entrepreneur who has a really innovative idea but needs a little help getting their business up and running. You can also do a little research and find a few companies that specialize in connecting businesses with investors who are willing to give them money with the promise of receiving a return.
6. Affiliate Marketing Programs
Sites such as Amazon have made affiliate marketing one of the best forms of passive income because they allow you to make money by merely owning a website.
Affiliate marketing means that someone with a website offering any service or product includes a link to third-party products on their social media page or website. Other sites like eBay, ShareASale, and Awin also offer affiliate programs.
So how does it all work?
As stated, you need to have a web page where visitors would be inclined to visit. Once there, they may click the link and purchase from the affiliate site. The site owner hosting the link would receive a commission, ranging from 3 to 7 percent.
The only risk with this option is that newcomers have to take the time to establish their website as credible amongst the public. You've got to build that coveted traffic and potential income stream.
7. Advertise on Your Vehicle
If you're interested in making money just by driving around, this opportunity offers you the ability to do so. A specialized advertising agency will consider your driving habits, how many miles you drive, and where you frequent.
If you pass the test, then the agency will contact you and come out to wrap your car with their company's ads at no cost whatsoever to you. These deals usually get landed by people who have newer cars and clean driving records.
You must drive around a lot; however, it shouldn't be a problem if you go from place to place anyway. Drivers get paid per mile, and you can earn a few hundred dollars a month with this gig.
8. Create an Online Course
Online courses offer those with busy lifestyles a more flexible option for learning. This business is currently exploding as a passive income opportunity because you can pretty much create a course about anything.
If you have an interest or a passion, and you're willing to put in the time it takes to build an online course that you'll be able to market for years to come, this is an excellent source of additional income.
What should you add to an online course?
Good options include:
● Audio files
● Video lessons
● Checklists to accompany the video lessons
● Interviews with experts in your field
Another tip to generate more revenue is to create various options that include multiple packages for different prices. Offer the bare minimum, the maximum, and two options in between. This gives you the chance to entice more people to make a purchase because they'll feel like they can pick a course that's tailor-made to their needs and budget.
9. Buy a Website or Blog
Many blog sites start off hot and then get abandoned after a while. This may be due to the site owner becoming busier, the site isn't generating enough income, or maybe they just simply lost interest in writing. Either way, you can choose to buy a blog that has decent web traffic and proven cash flow as a passive income source.
It's also an intriguing opportunity because many of these sites already have a program such as Google AdSense or Amazon Affiliate links on their site.
Keep in mind that a blog will typically sell for about 24 times whatever it produces in profits every month. If a site generates $250 every month, you'll probably get it for $6000 more or less. So, a $6000 investment will earn you around $3000 a year.
Bonus tip: You may want to consider giving the site a makeover and revamping it with new and exciting content. This could increase the revenue every month and also allow you to sell it for much more at a later date.
10. Flipping Raw Land
Flipping land is almost as lucrative as flipping houses — if not more so. It means that you purchase a piece of land for a low price, and then you'll sell it for more later. As the population grows, land is in high demand!
You honestly have complete control over this asset; decide the location, if you want to improve the land, if you're going to live on it or rent it, they're all viable choices. The possibilities are abundant!
Land can be a few thousand dollars, or thousands of hundreds of dollars, up to millions. You pick what works for your starting point and watch your revenue grow once you select what you want to do with your land, even if that's just letting it appreciate with time. It's a fantastic strategy!
Passive vs. non-passive income — which is best?
Remember, there's nothing wrong with using passive income in conjunction with pursuing your active income; saving while you're receiving consistent profit is an excellent path to early retirement! Even if you're not interested in retiring early, at the very least, it'll allow you to enjoy a few extras in life. Everyone wants to enjoy the fruit of their labor, right?
This article will help you take the first step if you're serious about investing and want to know how to generate passive income.