How to Create Passive Income

Passive Income Opportunities – How to Create Passive Income: Passive income is one of those ideas that sound too good to be true. Maybe you’ve heard of the concept watching a late night TV program and it sounds like a scam. Well, if the program is talking about putting little to no effort in and making tons of money – it is a scam. “Passive income” is anything but passive when it first starts out. Passive income takes work to get started and sometimes work to maintain. But the advantage is that you only do this work once and continue to get paid for it again and again! Listed below are some ideas that can help get you started on the creation of a “passive income stream”.

Now you may be saying, that seems great and all – but I have a good job, why do I need this nonsense? Passive income can be many things. It can pay bills if you’re unable to work. It can allow you to quit your job and enjoy your life (i.e: financial independence). You may love your job but what if you didn’t? Would you still be in the same line of work? Or would you even bother working at all? Passive income means you can decide if and when you work. “Needing” to work is no longer a question once your passive income is high enough. Sold yet? Lets begin!

How to Create Passive Income: Tried and true – buy and hold real estate

It’s hard to argue with the power of real estate. People need a place to live and there is only so much room to build homes. Real estate is a great way to build a “passive” income stream. However, there are a ton of upfront costs and lots of work to be done. Between saving up the money for a down payment, buying a property, rehabbing a property, finding tenants and maintaining the house and business – it’s work! However, the reason it’s on this list is that once everything is established (and hopefully running correctly), you’re getting paid. Now you can go and do other things with that time (like look for more passive income opportunities!).

Another twist on the same idea is to consider something like Airbnb. It’s a similar vein to rental real estate but the returns tend to be much higher – if you can book a majority of the month.

How to Create Passive Income: Collect those dividends – Stock/mutual fund investing.

How to Create Passive Income: Dividends are a great way to get passive income

In terms of passive options, once a stock is purchased – there is almost no more work needed to collect a dividend. Most likely it’s a setting on the website you’re using – click off “reinvest dividends” and you’re done!

Not even close! Before you can invest anything – you need to have something to invest! The non-passive part comes in with making a substantial amount money that will actually provide significant dividends.

Personally, I am a fan of Vanguard mutual funds. The reason why is that mutual funds tend to follow the broad market. Basically, they’re average. When the market is good, they’re good. If the market is so-so, they’re so-so. Being average is okay when the average return for the stock market has been 5-9% over the last 50 years. Mainly inspired by the ChooseFI podcast, I really like their take on focusing in on low expense ratio mutual funds (such as Vanguard’s VTSAX – which I personally own). Expense ratios tend to be the killers of profit overtime. VTSAX has an expense ratio of 0.04 which is 96% lower than average according to their site.

A good point brought up my one of our readers was to consider ETFs or exchange traded funds. These typically have no minimum investment amount (unlike VTSAX which requires a minimum of of $10,000). ETFs can be still be found with very low expense ratios, some even rivaling the vaulted VTSAX stock!

Moral of the story: If you don’t want to manually play around with stocks but want the same kind of automatic returns – consider mutual funds.

How to Create Passive Income: Crowd funded investing

How to Create Passive Income: Crowd funded can help you make passive income.

This is definitely something I have tried in the past – with mixed results. With these platforms, you invest in part of a deal and earn a certain percentage in the return. So for example with Lending Club, someone requests a loan for $15,000. If this request is accepted, it is that allowed to be funded. People can fund as little as $25 per loan. Once the loan is fully funded, out it goes into the world – to make some returns.

Now, the returns these loans can make are quite variable. If the person/company requesting the loan has a good credit history, they will typically get a better rate. That means a lower (but more stable) return for you the investor. If you’re more of a risk taker, you can invest with in the higher risk loans (but earn anywhere from 12-18% – potentially).

Another avenue I personally want to explore is a hybrid between crowd funding investing and real estate investing. This would be something like realtyshares. Realtyshares allows you to invest in real estate deals. The only catch is that the minimum to invest is $10,000 so you will need some cash to get started.

How to Create Passive Income: Affiliate marketing

How to Create Passive Income: Affiliate marketing is a very powerful tool that can help you make passive income!

So now you’re here saying “that’s great and all Dave, but I don’t have any money to get started! I guess I should just give up and go back to watching TV!”. Well, maybe. There is another avenue to consider! Have you ever heard of Affiliate marketing? According to dictionary.com – affiliate marketing is a marketing arrangement by which an online retailer pays a commission to an external website for traffic or sales generated from it’s referrals.

If you’re trying to learn how to create passive income using an online option, Affiliate marketing is an interesting strategy because it does not rely on a considerable sum of monetary wealth to get started. It relies on content. Content draws in traffic to your site. Typically, this is done through blogging, social media (Facebook, Instagram, etc). There are literally hundreds of affiliate programs out there, some that pay commissions of 4-80%. That’s right, up to 80%.

Unless you have extensive experience with website creation, word press, etc – blogging can be very daunting. It was for me and I have a fair amount of computer experience. If you’re interested in learning more about affiliate marketing, I recommend checking out: Wealthy Affiliate.

They offer a free to start program that shows you step by step how to start your own website/blog. The training is top-notch. Be warned – after a certain point it is strongly encouraged to join. However, the amount of features and support does justify the monthly cost.

In review

How to Create Passive Income: This article is just a little taste of the options that are out there for those that are looking into the idea of passive income. Although there are many ways to go about getting to that nice passive income, the concept remains the same – do the work up front and continue to get paid for it!

Feel free to comment below and thank you for reading!


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3 thoughts on “How to Create Passive Income

  1. Hi Dave, this is an awesome introduction to passive income and the different ways you can earn it.

    I agree rental properties are a great way to get a passive return but as you mentioned, it does require a large upfront cost.

    Also, when it comes to stock market investing, I would highly recommend looking into Exchange Traded Funds (ETF’s) as they generally work just like a mutual fund but with lower costs and fees. Worth looking into if you’ve got some time.

    I’ve personally never heard of crowd-funded investing, so thank you for that introduction to it. I’ll have to look into it some more.

    And in regards to affiliate marketing, I think this is the best starting point for most people as everyone has an expertise they can give valuable insight to and build a website around.

    But I guess overall, I’d say building a portfolio with multiple streams of passive income is the best way to go, ideally, some combination of all of these can ensure you’ll never need to work in a “job” again.

    Anyways, thanks again for this valuable information!
    Cheers,
    David

    1. That’s a great point about the ETFs as they have usually have no minimum investment amount to get started. I will add it to the list! Thanks again for the solid comment and feedback!

      Dave at Wealthlenial

  2. Good post man. Anyone who wants to take there first step to getting out of the “living paycheck to paycheck” lifestyle can find some useful info here. Keep up the good work!

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