Passive income is money that you earn without having to actively work for it. It can be generated through investments, ownership of assets, or other means. Passive income can be a great way to build wealth over time, as it can provide you with a steady stream of income even when you’re not actively working.
There are many different ways to generate passive income. Passive income can be a great way to supplement your income or to build wealth over time. If you’re interested in generating passive income, there are many different methods that you can explore.
8 Best Passive Income Investments
Here are different ways to create passive income that you can explore:
1. Real Estate Investing Opportunities
If you’re ready to settle down in one area, buying a home may be a good option to consider. By purchasing a home, you can make monthly payments towards an investment that has the potential to earn you money if you sell it in the future. On average, home values have increased by 4.3% since 1991, according to the Federal Housing Finance Agency.
Another way to earn regular rental income is by purchasing, preparing, and managing a property. Whether you rent it out for short or long-term purposes, once established, it can provide you with a predictable source of income.
If you’re interested in real estate investing but don’t want to manage a property yourself, you may want to consider a platform like Realty Mogul. Realty Mogul is a real estate investment platform that allows individuals to invest in commercial real estate properties with as little as $5,000.
Through the platform, investors can access a range of real estate investments, including rental properties, commercial buildings, and development projects. By investing in a diversified portfolio of properties through a platform like Realty Mogul, you can potentially earn rental income without the hassle of managing a property yourself.
One potential advantage of investing in housing is that your investment may grow in value over time as you accumulate home equity.
However, one potential disadvantage is that you may have to deal with more upkeep and repairs compared to renting your living space. Additionally, your home may not always increase in value.
2. Consider Peer-To-Peer Lending
If buying a home isn’t an option for you, you may want to consider peer-to-peer lending. This is when you offer a loan to another person, usually through a lending platform.
As an investor, you can also choose to work directly with businesses or individuals who need financing, and they may pay you a monthly payment plus interest without having to go through a financial institution.
In peer-to-peer lending, you lend money to borrowers and earn income in the form of interest paid back. To reduce the risk of borrower default, you can spread out the money you invest or lend to others.
One potential advantage of peer-to-peer lending is the potential for investment returns. However, there are also investment risks involved, so it’s important to have a written contract if you’re not using a lending platform.
3. Write and Sell an E-Book
If you have a story to share or a skill you’d like to teach, writing an eBook can be a great way to earn passive income. For example, you could create a fitness eBook that includes all of your favorite exercises.
However, keep in mind that you may need to continue promoting your products to reach new audiences.
One advantage of writing an eBook is that you have complete control over your story, message, and pricing. However, if you don’t have a strong and loyal following, sales may be slower to come.
4. Design and Sell T-Shirts
If you enjoy photography or creating unique designs, you may want to consider putting them on a T-shirt and selling them. There are many platforms available that allow artists to post and sell their work.
You could also consider purchasing the supplies to make your own T-shirts, adding your creative touch, and selling them online to potentially make a profit from your hobby.
One advantage of this approach is that it can be a fun and creative way to potentially increase your passive income over time. However, there may be upfront costs associated with purchasing materials, outsourcing operations, and maintaining your business.
5. Real Estate Investment Trusts
Real estate investment trusts (REITs) offer a less stressful if less lucrative, way to earn a return on real estate investments. With a REIT, you invest in a fund that invests in real estate and pays you a dividend.
REITs allow you to invest in real estate without having to purchase and manage your own property.
Instead, you buy shares in companies that own commercial real estate such as apartment complexes, hotels, and office spaces, and receive regular dividends in return. However, like dividend stocks, you may need to make a considerable initial investment to earn enough return to live off of.
6. Sell Designs & Art Online
If you’re a photographer or enjoy drawing, you may want to consider selling your artwork or photos online. You can set up a website or use online marketplaces like Etsy to sell digital downloads of your work.
Platforms like Squarespace make it easy to create a professional-looking website without needing extensive technical skills, and once your site is set up, you can market your work to help increase sales.
If you’re not sure how to facilitate the sale of your artwork, platforms like Flippa can guide you through the process, including brokering the deal and helping with legalities.
Alternatively, if you’re interested in buying an existing business that is already profitable and fairly passive, you can find one through Flippa or similar platforms.
7. Invest With an Automated Advisor
If you’re new to investing, you may want to consider using automated investing tools to help you choose the right asset allocation for your goals.
An automated platform, also known as a robo-advisor, is a digital investing service that provides you with a questionnaire to establish your financial goals, risk preferences, and time horizon.
Based on your responses, a sophisticated algorithm recommends a pre-set, automated portfolio that aligns with your goals.
These portfolios often have lower account minimums than traditional brokers and are typically comprised of low-cost exchange-traded funds (ETFs), making them cost-efficient.
You can use a robo-advisor for various investment goals, including retirement, taxable investment accounts, or even emergency funds. You typically invest using automatic deposits or contributions, and the allocation in each portfolio is pre-determined and cannot be changed by the investor.
Tools like SoFi’s Automated Investing allow you to automatically invest each month and potentially grow your portfolio over time.
8. Investing in Farmland
Investing in farmland may not be the most glamorous option, but it has many advantages when it comes to real estate investing. Farmland is slow and steady, pays consistent rent, and is essential for food production.
Additionally, it is less volatile compared to other types of real estate. Two major companies that allow you to invest in farmland are FarmTogether and AcreTrader.
You can check out reviews of these companies, including a behind-the-scenes review of an AcreTrader investment on YouTube, to learn more about investing in farmland.
Some benefits of leasing farmland include steady rental income, potential land appreciation, and minimal management responsibilities. If you’re looking for a stable and consistent investment option, investing in farmland may be worth considering.
In conclusion there are many different ways to generate passive income. Some popular methods include:
- Investing in real estate: Real estate can be a great way to generate passive income. You can rent out properties to tenants, or you can use real estate to generate other types of income, such as through Airbnb or vacation rentals.
- Investing in stocks or businesses: Stocks and businesses can also generate passive income. When you invest in stocks, you own a small piece of a company. This means that you’ll earn a portion of the company’s profits if it does well. Businesses can also generate passive income through things like licensing or royalties.
- Creating and selling digital products: Digital products are another great way to generate passive income. These products can include ebooks, online courses, or software. Once you create a digital product, you can sell it over and over again without having to do any additional work.
- Earning rental income from property ownership: Rental income is another popular form of passive income. If you own a property that you rent out to tenants, you’ll earn a steady stream of income from the rent payments.
Some additional tips for generating passive income:
- Start small: Don’t try to generate too much passive income too quickly. Start with a small investment and gradually increase your investment over time.
- Do your research: Before you invest in any passive income opportunity, be sure to do your research and understand the risks involved.
- Be patient: Passive income takes time to build. Don’t expect to get rich quick.
What is passive income?
Passive income is a type of regular income that is earned without actively working for an employer or performing a service. Unlike active income, which is earned in exchange for work, passive income is earned through investments or ownership of assets.
To earn passive income, you typically need to make an upfront investment of time, money, and energy. Once this initial investment is made, passive income requires little effort to maintain and can even earn its own money through mechanisms such as compound interest on investments.
In this way, passive income can be thought of as rent earned from owning assets, rather than wages earned from working.
What passive income is not
Passive income is not earned through a job or work that doesn’t produce an asset that generates income. Instead, passive income is earned without active involvement, through investments or ownership of assets that generate consistent returns.
In other words, passive income is not earned through active work or investments that don’t produce consistent returns.
What do rich people do for passive income?
Many wealthy individuals invest in real estate as a way to generate passive income. According to Callahan, they may invest in rental properties, commercial buildings, or real estate investment trusts (REITs) to earn rental income and potentially benefit from appreciation over time. Real estate can be a stable and consistent source of passive income, allowing investors to earn money from their investments without actively managing them.