Passive income is kind of a buzzword these days. People throw it around and say things like, “I’d like to get some passive income”…as if it was hanging out somewhere online and you just had to find it.
Passive income is a strange concept. It’s income you don’t have to work for, but at the same time, you have to work really hard to create systems which can deliver it. There are a few different ways to achieve it. The age-old saying rings true for most, but not all of these methods of creating passive income; many times you need money to make money.
Passive Income Through Stock Dividends
When you buy a share of a company, some companies pay dividends. If you buy a brand new company like Snapchat, they likely don’t have extra money to spare, so you will not earn a dividend. You are buying this stock with the belief that it will hold more value in the future. You buy it today for $10, and hope it will be worth $100 in the future.
With older companies like Ford, Apple, or AT&T, they have less growth potential. There’s only so many people in the world that will buy a truck and iPhone. Ford and Apple have already penetrated most markets in the world to some degree. While the stock may still grow, it will not grow as fast as newer companies like Chipotle or Twitter. So to incentivize investors to invest their money, they offer a dividend.
The actual number ranges from less than 1% to more than 10%, though most companies you’ve heard of will fall between 1% and 6%.
I’m not a huge math guy, so I wont’ attempt to calculate out exact returns, but I do know that you need a lot of money to create legitimate income through this method. Earning modest returns, you will need close to a million dollars in the bank to earn $30,000 USD per year. According to one answer I found online, to get to $500 per month in income you would need $240,000 with a 2.5% dividend rate.
Hey, that’s free money! But not a lot of folks will have a million dollars saved up and let it sit there in the bank while you live just above the poverty line.
Dividend income is legit.
This is another great way to earn passive income. One of my friend is currently earning about $1,100 per month in passive income through real estate. Buy and hold baby! He bought some properties back in 2012-2015, and he’s renting them out. He’s giving up some potential income by hiring the manager, but it means he don’t have to fix toilets at 3AM or take phone calls while he’s on vacation.
The difference between the mortgage payment and the rent is passive income. If his mortgage, including taxes and insurance is $900, but the rent is $1500, then he’s earning $600 per month in income.
That’s not the full story, because he still have to pay for repairs, and lawn service, but that’s the general idea of how passive income through real estate works. Buy the house, get someone else to pay rent that equals more than your house payment.
Of course, this is another methods that takes money to make money. I had to put a down payment on the house, right? If you don’t have $60,000 to pay for the down payment, then you can’t really reap the rewards of “passive” real estate income.
There are different tricks to get around this hurdle in real estate, but I’m not qualified to talk about them. BiggerPockets is a great resource to start with. There are ways to get money for a down payment, but you need to spend time learning about the real estate industry. Don’t expect to jump in and score big. It takes time to learn the ins and outs of this industry!
Peer to Peer Lending
Sorry to disappoint, but another method of passive income is going to take money to earn money. Peer to Peer lending is a very new, and very interesting way to make your money work for you. Websites like Lending Club, Prosper, and BitBond allow users to upload their needs for loans, and you, as an investor, can choose which ones to invest in. You can get much higher rates than in the stock market most of the time, and you can diversify your lending based on projects, people, or loan risk.
I was browsing BitBond last week and lending opportunities ranged from someone needing to relocate to a new city for a job, to someone trying to start a family restaurant in the Philippines.
Again though, you need some cash to be able to lend out in order to reap the rewards of peer to peer lending. This is the method of passive income I’m least familiar with, but it still seems pretty interesting.
Creating Business Systems
Perhaps the most intimidating, but also the cheapest way to create passive income for yourself is to create a business system that lets you make money without any work (or little work). By “business system”, I mean creating a business that has employees or contractors doing the work, and you reap the income the business creates.
An example of this could be an Esty shop selling knives. If you find a supplier in China selling wooden hunting kinves, you can drop ship the knives to a person in Tanzania who will take custom orders from Etsy for engraving, then have them ship out. You buy the knives, you organize the shipping and the store, but everyone else in the chain is doing the work. This would be an example of drop shipping.
That was just an example off the top of my head, and one that would require some money to buy inventory. But online, there are many options for creating an online business that requires very little money.
The tradeoff is that you have to put in a lot of time to set up the system, especially if you are a newbie without business or web experience.
What if I show you the business systems that can be accessible to even beginners… Would you be interested?
In the following posts I’m going to talk specifically about one business system that can create truly passive income (eventually). You have to put in a lot of ground work in the beginning, but as you grow your business you can spend less time doing the work as you pay people to replace you.
I have created a decently passive stream of income through affiliate and network marketing combined together.
Not everyone is familiar with affiliate and or network marketing, but I think it’s a really cool way to earn money online because it’s accessible to even beginners. With affiliate marketing, it’s completely possible to start out as a starry-eyed newbie without a clue in the world and build your business to generate six figures at your own pace, and according to your own interests.
The world of online affiliate income is vast, so we’re going to spend this post talking about how to create passive income online through an affiliate marketing blog.
Want to learn how to do all this in more detail? Want my personal help?
Please let me bellow.