Passive income streams are a great way to supplement your finances in difficult times. And, if the economic uncertainty resulting from the coronavirus pandemic is anything to go by, it’s always wise to have such investments at hand. You can never really tell when you’ll need them.
In this article, we discuss seven great ways you can earn passive revenue. While most require substantial preliminary investment and/or nurturing, they all have great potential.
#1 Invest in Passive income real estate
Passive income real estate is an investment approach that enables individuals to create earnings with minimal involvement. The term “passive” applies variably since the level of required involvement differs with each investment type.
You will need a comprehensive business strategy to create a successful passive income real estate investment. This includes studying your target market so you are well versed with local real estate values and trends. The insights gained from your analysis will help you choose the most suitable location for a passive income property. They will also enable you to identify property listings likely to provide good cash flow.
Here’s a more in-depth look at how to choose a suitable property
Note: while real estate investing remains a viable source of viable income, the coronavirus pandemic has introduced several new challenges. You may have to deal with tenants who can no longer pay rent due to the economic downturn. You may not be able to rent a home out for as much money as was previously possible. Consequently, you should weigh these risks and have contingency plans to protect yourself
#2 Buy dividend stocks
Dividend stocks award a portion of a company’s profits to investors every quarter. The companies that issue dividends are usually well-established, so they will add stability to your stock portfolio if you have one.
There are about two ways to invest in dividend stocks – mutual funds and individual dividend stocks.
Mutual funds comprise index funds or exchange-traded funds. They grant you access to several dividend stocks within a single investment. This means you can own a portfolio of dividend stocks with a single transaction. The fund will then regularly pay you with dividends that you may reinvest or take as income.
Individual stocks require more research from the investor to determine if the stock is an ideal match for their portfolio. The investor will also need to regularly monitor the performance of each stock.
Since the income you receive isn’t tied to any activity besides the initial financial investment, purchasing dividend stocks can be one of the most passive forms of income. After you purchase the shares, money will simply be deposited into your brokerage account.
#3 Start an Affiliate marketing network
With affiliate marketing, bloggers, social media influencers, website owners, bloggers, or just about anyone with an online following can link products to their websites or online accounts then earn commission from the resulting sales.
Here’s how it works. When visitors click on a link or make purchases from the third-party affiliates, the site owners earn a commission. The commission rates might range from 3 to 7 percent, so it requires significant traffic to your site to generate a reasonable income. However, if you can grow your audience or target a lucrative affiliate marketing niche like financial services, software, or fitness, you’ll make a high income.
Affiliate marketing is a lucrative passive income opportunity because, in theory, all you have to do is add a link to your website or social media account. However, you will not earn anything if you can’t draw a sufficiently large audience. You will need to invest considerable time and resources into creating content and building traffic if you’re just starting out.
#4 Sell information
Selling informational products such as audio, video, or e-books is a great way to earn passive income. Customers can order at any time, whether it’s day or night, from all over the world and receive their purchase there and then. There’s no need for you to be involved. You’ll be making money without much effort, and since there’s no physical printing or shipping involved, there hardly any maintenance costs involved.
Obviously, you will need to resolve customer care issues and monitor sales, but that is less challenging than fulfilling physical orders. There are two main strategies for selling information products: creating an information product, like a video or audio course, then reaping the sales benefits after distributing it on platforms like Skillshare, Udemy, and Coursera.
The other option is to implement a freemium model. With this approach, you build an audience by providing high-quality free content then charging for more technical/detailed information. The free content establishes your credibility by demonstrating expertise, and it attracts people willing to go a step further
#5 Invest in REITs
Real estate investment trusts (REITs) own and manage income-generating commercial real estate. This may comprise physical properties or mortgages on those properties.
You can invest in the companies as an individual through an exchange-traded fund or mutual fund. They provide significant diversification, high total returns, and low overall risk.
The best REITs have a record of increasing their dividend on an annual basis. This means you may have an ever-increasing stream of dividends over time. However, like individual stocks, individual REITs are inherently riskier than ETFs with several REIT stocks. A fund will offer instant diversification and is less dangerous than purchasing individual stocks.
#6 Sell retail items at a profit (Retail Arbitrage)
Retail Arbitrage is relatively simple. You buy a product at a low or slightly discounted price, then sell the same item at a higher price, thereby earning a profit. This may sound a lot like regular retailing, but it isn’t. Unlike traditional retail businesses, a seller who does Retail Arbitrage does not purchase their products from wholesale suppliers but rather from retailers or other sellers.
The benefit of this approach is that you’ll get to take advantage of price disparities between what you find and what the average consumer is willing to pay. This will be particularly helpful if you can reliably find discounted merchandise that others can’t. Or, if you find and market value in merchandise that others have overlooked. Although sales can happen online at any time, which makes this strategy passive, you will have to find reliable product sources. You will have to invest money in purchasing products until they sell, so you need a substantial cash source. You will also have to study your market, so you don’t buy products at prices that are too high.
#7 Invest in Peer-to-peer lending
Peer-to-peer loans are personal loan agreements between you and a borrower. They are moderated through a third-party peer-to-peer lending platform such as Funding Circle, Lending Club, or Prosper. As the financer, you earn income through interest accrued by the money you provide. Although these loans are unsecured, there are several strategies to reduce your level of risk.
It will take a while to master the nuances of the trade, and during this time, it will not be entirely passive. However, once you learn how to properly evaluate your prospective borrowers and reinvest your income, it can be a significant income source.
Starting a passive income business can be challenging at first, but it will get easier as your business grows and you learn the dynamics of your chosen industry.
The ideas covered here may not answer all your questions on how to get started, but they are a critical first step toward your goal. The income will help you cover the shortfalls your main job can’t fill on its own or even quit formal employment entirely if that’s what you prefer.
If you want to learn more about passive income, here’s a video resource for you.