Discover how to make money while spending minimal time working when you follow one of these strategies for generating passive income.
Earning money consistently without needing to work adds freedom to your life. It isn’t easy to start earning passive income, as it typically requires a significant upfront commitment of your time, your money, or both. And even though it’s called passive income, you may need to put in work from time to time to maintain that income source once it gets rolling.
Be sure to be aware of the rules associated with making a passive income in a small business. When you’re ready to start building one or more sources of passive income, there are several popular strategies you can try.
1. Earn Passive Income from Ads and Affiliate Links
If you think you can develop a popular site, you can earn money through ad revenue or affiliate marketing. Advertisers usually pay per click, so you earn a small amount every time someone clicks on one of your site’s ads. With affiliate marketing, you earn money every time someone clicks through one of your affiliate links and makes a sale on the company’s site. You can choose just one of these tactics or combine them.
Earning passive income through these methods requires a large number of readers. With ads, you make a small amount per click, and most readers don’t click on ads. You can make more through affiliate marketing, but you run into a similar problem – most readers don’t click on affiliate links, and those that do may not make a purchase.
To build a large reader base, your site must provide valuable information and have a responsive design. People aren’t going to stay on your site long or come back if it has a clunky interface full of ads and affiliate links. It’s best to build a site for a subject you’re passionate about, then choose ads and products that fit that subject.
2. Product Sales Passive Income
Managing a successful e-commerce site is no easy task. You need to figure out what you’re going to sell, how to market your products, and what’s going to make you different from the thousands of other online shops out there. If you find the right niche and have consistent sales, you can make money every month just by running your site and fulfilling orders. You can also automate the order fulfillment process to reduce your workload.
The key to being successful with e-commerce is finding something that sets your site apart. People need a reason to buy products at your site instead of the competition. Maybe you offer a product that’s hard to find anywhere else on line, or perhaps you find a new way to sell a popular item. Informational products, such as courses and e-books, have become particularly popular.
If you’re an expert in a specific field, you may be able to turn your knowledge into passive income by creating an online course or writing a book. If you’re going to sell informational products, your site should also provide plenty of free information to convince people that they can benefit from buying your product.
3. Rent Out Real Estate for Passive Income
The classic method of buying a house or apartment and then renting it out still works well for creating passive income. The two biggest challenges of renting out real estate are finding suitable tenants and providing repairs for any serious issues, whether something breaks down or a tenant causes significant damage when they leave.
It’s ideal to have multiple properties that you rent to bring in multiple income streams. This results in more profit every month, so you’re better prepared to handle anything that goes wrong. As you build up your number of properties, you can increase your passive income without much of an increase to your workload.
Instead of renting directly, you can earn passive income from Real Estate Investment Trusts (REITs), some of which offer yields comparable to direct rentals.
Rental websites like AirBnb allow you to rent out a room in your home, or even your entire home, to people looking to stay in your city or town. This can be a profitable venture, and there’s little risk involved – you rent from a pool of vetted applicants, with clearly expressed ratings. In the unfortunate event that something does go wrong, the company provides a million dollar insurance policy to cover any damages to your home or property.
4. Invest in Equities or Debt for Passive Returns
If you want to make big returns investing in the stock market, it’s going to take quite a bit of research and sound decision-making. If you’re satisfied with a smaller return, you could put your money into an index fund, which is a low-risk option that could earn you about 5% per year or more. You could also choose higher-risk investments for a potentially greater payoff.
Another type of investment that’s gaining popularity is peer-to-peer lending, where groups of investors fund loan requests. While this has been around in the United States since 2005, Lending Loop brought it to Canada in 2015.
Like any other investment, you can choose how much risk you want to take on. Borrowers with lower credit scores pay higher interest rates, and that interest goes to you. Just like the stock market, there is risk here — if a borrower defaults, you lose any money you loaned to them.
5. Create Classes and On-going Subscriptions for Income
You’re probably pretty good at a few things, maybe even really good. Have you ever considered sharing your knowledge? Thanks to platforms such as Udemy and Teachable you can create an online class based on your specific skill set – you can literally teach anything!
After you create the course, you place it on the platform of your choice and receive compensation every time someone “attends” your class. You could even set up your own subscription platform.
Choosing the right strategy for earning passive income depends on your expertise and the resources you currently have available. If you have the capital to start with, you can create one or more passive income streams quickly through real estate or investing.
It takes more time to develop a product or build a site that’s profitable from ads or affiliate links, but the cost to get started is lower. Using an accounting system, such as QuickBooks Online, you can generate a Profit and Loss statement automatically. Learn how today.