For most people, income is created directly from the amount of work they do. If they work more hours, they make more money. But a growing number of people are trying this trend and putting their money to work while they sleep.
Passive income’s a form of revenue in which a person is not actively involved. This means that you’re no longer trading time for money, giving you the freedom to spend your days doing more of what you love.
Let’s take a look at some of the best forms of passive income to date. While all of these side hustles will take some time, money and effort at first, they can all be automated, so you can sit back and watch your net worth grow.
Before you get started with extra income streams, it’s best to first look at your debt. In many cases, certain debt – such as debt from credit cards – carries an incredibly high interest rate (16.5% on average). And when you simply pay the minimum each month, you can end up spending thousands of dollars in interest before your entire debt is paid.
Instead of immediately pursuing passive income, start by paying off credit cards and other forms of high interest debt. Whatever money you don’t spend on debt now goes back into your pocket. It doesn’t get much more passive than that!
A vacation home is a great place to relax and unwind, but it could also be an opportunity to make some extra cash on the side. With HomeAway, you can turn your second home into a vacation rental. After all, you’re not using it for large chunks of the year, so you might as well make some extra money on the side. This can go towards your mortgage, repairs on the house or it can simply be a new stream of income.
Some vacation rental owners listing on HomeAway gross up to $56,000 a year. You can rent it out as much as you want, whether that’s all year long or just during specific seasons or events.
For some vacation rental owners, managing rental advertisements, bookings and cleaning fees is no big deal. For the rest of us, you can hire a management company to do some of the heavy lifting for you! While this will cut into your profits, it’s the best way to make your income truly passive.
Interested in seeing how much your home could earn a night? Start with this free calculator from HomeAway.
The internet is littered with websites. In fact, there are over 1.6 billion sites in the world right now. While there are several reasons to build a website, one of the most common purposes is to produce income. And websites – assuming that they have consistent traffic – can regularly generate revenue off of ads, online courses, products, affiliates, etc.
Instead of building a blog or website from the ground up, which is very labor intensive, some savvy investors are buying pre-existing sites that are already producing income each and every month. Using online marketplaces like Flippa.com, investors can select from hundreds of websites for sale and then choose the ones that match their needs.
From there, the newly purchased site can either be used as a passive income stream, or you can improve the site with your own content and potentially grow the amount of revenue being produced.
If you’re ready to start the site flipping biz, start with this helpful guide from Passive Income Camp.
Real estate is often looked at as the crème de la crème of passive income. It does seem nice at first glance, collecting rent from tenants every month while gaining equity in an asset, but being a landlord takes serious work.
There’s nothing passive about getting a call in the middle of the night because your tenant needs a lightbulb changed. If you’re going to make passive money on this endeavor, you’ll likely want a management company or a talented virtual assistant to give you a hand now and again.
As far as income potential, a good return on a rental property is 15%. But remember that rental properties take significant upkeep, and some repairs are expensive. Landlording can be very fulfilling, but it can also be a headache if you’re not careful.
While it may not sound as sexy as rental properties, buying and selling raw land can have a larger return with a lower amount of effort. Mark Podolsky, known for his passive income courses on thelandgeek.com, is also the author of Dirt Rich: a book that focuses on building passive income through raw land. Podolsky claims that he and his students can earn 300% return on investment (ROI) from these land deals, which is far superior to most forms of investments – passive or otherwise.
To flip land, investors must purchase raw land then resell it to turn a profit. They can either sell it for cash or they can owner finance the property, meaning they’ll collect passive income in monthly increments.
Starting your own raw land business may take some research, as you’ll need to learn how to find good deals on land that can then be flipped for higher profit. To do this without sacrificing your time, you can hire virtual assistants to help find the properties, make contact with potential buyers and complete any due diligence. While investing in raw land may take some effort and time upfront, it can potentially be one of the best passive income streams out there.
In recent years, investors have started putting their money into peer-to-peer lending companies. By lending out your own money to peers in the form of personal loans, you are able to earn interest – similar to the way that banks and other lenders produce income. On sites such as Lending Club and Prosper, you can open an account and begin investing in this passive income venture.
Like all investments, the ROI varies, but Lending Club and Prosper boast an average investment return of about 5 – 10%. Both of these platforms also give opportunities for users to make their investment semiautomatic, meaning you wouldn’t need to constantly monitor your investments or reinvest returns. But there would still be some work involved. If you want this to be a completely passive income stream, Lending Club offers a PRIME account, in which you’ll have a fully managed account. You’ll need to have a minimum investment of $5,000, though, and it will be subject to a one-time .8% fee.
When investing into peer-to-peer lending companies, there’s also a chance of default, meaning the person who took out the loan stopped making payments. Defaults can be one of the biggest stressors for investors. But both Prosper and Lending Club have strict underwriting standards, which decreases the likelihood of defaults. Like any type of investment, there is always some risk involved.
Passive income isn’t a get-rich-quick scheme. With each of these investments types, you will need to devote significant money and time at the beginning of the process, laying a foundation for an automated business. If you’re able to take the initial leap, you’ll be on your way to creating passive income while you sleep.
What are your favorite passive income streams? Let us know in the comments below!
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