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Either way, a passive income gives you extra security. Passive income includes regular earnings from a source other than an employer or contractor. The Internal Revenue Service IRS says passive income can come from two sources : rental property or a business in which one does not actively participate, such as being paid book royalties or stock dividends.
You just give the work upfront. In practice, you may do some or all of the work upfront, but passive income often involves some additional labor along the way, too. You may have to keep your product updated or your rental property well-maintained, in order to keep the passive dollars flowing. One popular strategy for passive income is creating an audio or video course, then kicking back while cash rolls in from the sale of your product.
Courses can be distributed and sold through sites such as Udemy , SkillShare and Coursera. For example, language teachers and stock-picking advice may use this model. The free content acts as a demonstration of your expertise, and may attract those looking to go to the next level. Opportunity: A course can deliver an excellent income stream, because you make money easily after the initial outlay of time. Tresidder says you must build a strong platform, market your products and plan for more products if you want to be successful.
Writing an e-book can be a good opportunity to take advantage of the low cost of publishing and even leverage the worldwide distribution of Amazon to get your book seen by potentially millions of would-be buyers. E-books can be relatively short, perhaps pages, and can be relatively cheap to create, since they rely on your own expertise.
You can quickly design the book on an online platform and then even test-market different titles and price points. But just like with designing a course, a lot of the value comes when you add more e-books to the mix, drawing in more customers to your content. Opportunity: An e-book can function not only to deliver good information and value to readers, but also as a way to drive traffic to your other offerings, including audio or video courses, other e-books, a website or potentially higher-value seminars.
Risk: Your e-book has to be very strong to build up a following and then it helps if you have some way to market it, too, such as an existing website, a promotion on other relevant websites, appearances in the media or podcasts or something else. So you could put in a lot of work upfront and get very little back for your efforts, especially at first.
And while an e-book is nice, it will help if you write more and then even build a business around the book or make the book just one part of your business that strengthens the other parts. So your biggest risk is probably that you waste your time with little reward. Investing in rental properties is an effective way to earn passive income. But it often requires more work than people expect.
Opportunity: To earn passive income from rental properties , Graves says you must determine three things:. Risk: There are a few questions to consider: Is there a market for your property? What if you get a tenant who pays late or damages the property? Any of these factors could put a big dent in your passive income.
And economic downturns can pose challenges, too. You may suddenly have tenants who can no longer pay their rent, while you may still have a mortgage of your own to pay. Or you may not be able to rent the home out for as much as you could before, as incomes decline. And home prices have been rising quickly due in part to relatively low mortgage rates, so your rents may not be able to cover your expenses. Amazon might be the best-known affiliate partner, but eBay, Awin and ShareASale are among the larger names, too.
And Instagram and TikTok have become huge platforms for those looking to grow a following and promote products. You could also consider growing an email list to draw attention to your blog or otherwise direct people to products and services that they might want. Opportunity: When a visitor clicks on the link and makes a purchase from the third-party affiliate, the site owner earns a commission.
The commission might range from 3 to 7 percent, so it will likely take significant traffic to your site to generate serious income. But if you can grow your following or have a more lucrative niche such as software, financial services or fitness , you may be able to make some serious coin. Affiliate marketing is considered passive because, in theory, you can earn money just by adding a link to your site or social media account.
Take advantage of online sales platforms such as eBay or Amazon, and sell products that you find at cut-rate prices elsewhere. This could work especially well if you have a contact who can help you access discounted merchandise that few other people can find. Or you may be able to find valuable merchandise that others have simply overlooked.
Otherwise you may end up with products that no one wants or whose price you have to drastically cut in order to sell. Selling photography online might not be the most obvious place to set up a passive business, but it could allow you to scale your efforts, especially if you can sell the same photos over and over again. To do that, you might work with an organization such as Getty Images, Shutterstock or Alamy. The platform then pays you every time someone uses your photo.
Photos could be shots with models, landscapes, creative scenarios and more, or they could capture real events that might make the news. Opportunity: Part of the value of selling or licensing your photos through a platform is that you have the potential to scale your efforts, especially if you can provide pictures that will be in demand. So you could potentially sell the same image hundreds or thousands of times or more.
Risk: You could add hundreds of photos to a platform such as Getty Images and not have any of them really generate meaningful sales. Only a few photos may drive all of your revenue, so you have to keep adding photos as you search for that needle in the haystack. It may require substantial effort to go out and shoot photos, then process them and keep up with the events that may ultimately drive your revenue.
A peer-to-peer P2P loan is a personal loan made between you and a borrower, facilitated through a third-party intermediary such as Prosper or LendingClub. Other players include Funding Circle, which targets businesses and has higher borrowing limits, and Payoff, which targets better credit risks. Opportunity: As a lender, you earn income via interest payments made on the loans. But because the loan is unsecured, you could end up with nothing in the event of a default.
Whatever you make in interest should be reinvested if you want to build income. Economic recessions can also make high-yielding personal loans a more likely candidate for default, too, so these loans may go bad at higher than historical rates when the economy worsens. Shareholders in companies with dividend-yielding stocks receive a payment at regular intervals from the company. Companies pay cash dividends on a quarterly basis out of their profits, and all you need to do is own the stock.
Dividends are paid per share of stock, so the more shares you own, the higher your payout. The money will simply be deposited in your brokerage account. For example, companies issuing a very high dividend may not be able to sustain it. Graves warns that too many novices jump into the market without thoroughly investigating the company issuing the stock.
That said, there are ways to invest in dividend-yielding stocks without spending a huge amount of time evaluating companies. Graves advises going with exchange-traded funds, or ETFs. ETFs are investment funds that hold assets such as stocks, commodities and bonds, but they trade like stocks. Here are some of the best ETFs to choose from.
Another key risk is that stocks or ETFs can move down significantly in short periods of time, especially during times of uncertainty, as in when the coronavirus crisis shocked financial markets. Economic stress can also cause some companies to cut their dividends entirely, while diversified funds may feel less of a pinch.
Creating an app could be a way to make that upfront investment of time and then reap the reward over the long haul. Your app might be a game or one that helps mobile users perform some hard-to-do function. Once your app is public, users download it and you can generate income. Opportunity: An app has huge upside, if you can design something that catches the fancy of your audience. For example, you might run in-app ads or otherwise have users pay a nominal fee for downloading the app.
Risk: The biggest risk here is probably that you use your time unprofitably. If you commit little or no money to the project or money that you would have spent anyway, for example, on hardware , you have little financial downside here.
The popularity of apps can be short-lived, too, meaning your cash flow could dry up a lot faster than you expect. A REIT is a real estate investment trust , which is a fancy name for a company that owns and manages real estate. REITs have a special legal structure so that they pay little or no corporate income tax if they pass along most of their income to shareholders.
Opportunity: You can purchase REITs on the stock market just like any other company or dividend stock. Like any stock, the price can fluctuate a lot in the short term. REIT dividends are not protected from tough economic times, either. So your passive income may get hit just when you want it most. A bond ladder is a series of bonds that mature at different times over a period of years. The staggered maturities allow you to decrease reinvestment risk, which is the risk of reinvesting your money when bonds offer too-low interest payments.
Opportunity: A bond ladder is a classic passive investment that has appealed to retirees and near-retirees for decades. For example, you might start with bonds of one year, three years, five years and seven years. In a year, when the first bond matures, you have bonds remaining of two years, four years and six years. You can use the proceeds from the recently matured bond to buy another one year or roll out to a longer duration, for example, an eight-year bond. Risk: A bond ladder eliminates one of the major risks of buying bonds — the risk that when your bond matures you have to buy a new bond when interest rates might not be favorable.
Bonds come with other risks, too. While Treasury bonds are backed by the federal government, corporate bonds are not, so you could lose your principal if the company defaults. If overall interest rates rise, it could push down the value of your bonds. Because of these concerns, many investors turn to bond ETFs, which provide a diversified fund of bonds that you can set up into a ladder, eliminating the risk of a single bond hurting your returns. Etsy is a massive resource for people wanting to sell all types of handcrafted goods.
But, did you also know that you can sell digital products on Etsy? These digital products require little to no maintenance once they're up and running. All you need to do is put the time into creating the digital products and setup quality listings. Clearly, this will require some maintenance on your part and ensuring that the right traffic hits your listings. However, digital products require virtually no overhead and will sell automatically as long as they are high in quality and are appealing to the relevant audience that you're targeting.
If you're musically inclined, one idea for generating some passive income could be to create jingles or audio tracks that you can then license out through popular websites such as Audio Socket , Sound Cloud or Song Freedom , just to name a few. Clearly, this isn't easy. But it is well worth your time if you can come up with something great. Do your research and due diligence to create audio tracks that are appealing to a large audience.
Search for other popular tracks that are being heavily licensed and see what they're doing that you could try to replicate in some format, while not outright duplicating. YouTube is a great resource for earning a large stream of passive income. While it's not easy, and it will effectively take millions upon millions of views to earn some semblance of a real income from this stream, YouTube does offer a very cost-effective avenue to market.
Research what the most popular YouTubers are doing. For example, Blippi , which is a kid's series created by creative entrepreneur, Stevin John , helps to teach children about all types of subjects and has become one of the most popular YouTube series in its niche with over million views in the past couple of years alone.
Seek out successful people and try to replicate their formulas while being unique. Another avenue for passive income is to leverage photo-selling websites such as iStockPhoto and Shutter Stock to earn money while you sleep. Clearly, you need to understand photography and things like Photoshop if you're serious about succeeding in the photo-selling business.
There's a lot of competition when engaged in this line of work. However, if you have a knack for photography, then selling your photos online should come almost naturally to you. Get really good with photo-editing software and find your niche. Whether it's portraits, landscape photography, business photography, or something else, find it and stick to it. Cash back credit cards offer a great resource for earning some passive income, especially if you're already going to be spending the money.
While this revenue stream likely won't make you rich, it will help give you some kickbacks on money that you're already likely spending in your day-to-day life. Do a few searches online for the best cash back credit cards and sift through all the posts that detail what the right card would be to fit the bill.
Be wary of linking through on some of the posts that might try to push you towards the card that will help them earn the greatest income by referring you to it. Dividend stocks are great resource for generating passive income. You also won't need to sell the stock to generate that income. However, you will need to buy a significant amount of shares to see a healthy stream of revenue from whatever dividend stock you end up selecting. Do the proper research and due diligence on finding the right dividend stocks.
You don't need to start out by knowing everything, but you do need a desire to learn and understand. Start small and build up from there while constantly keeping an eye out for high-income producing dividend stocks. Peer-to-peer lending platforms such as the Lending Club and the Funding Circle make it easy and straightforward to invest in people and businesses to generate a passive income stream from interest payments. Many of these sites have accurate algorithms that will predict risk, taking much of the guesswork out of the equation for you.
Clearly, this will require some upfront investment. If you have some money stashed away, this might be a good avenue for investment without having to rely on low-interest-producing CDs at banks or high-risk stocks. Do the research and judge for yourself on whether this passive income idea works for you. Depending on where you live, you could quite possibly make some great passive income by setting up ATMs in a variety of locations such as small corner stores or in malls and so on.
Locate a good company that will allow you to place their ATMs at various businesses and earn a small percentage of the income that these generate. On volume, this can amount to a lot of money. Clearly there is some maintenance involved in this and it's not fully passive, but it is a great resource for earning a respectable amount of monthly cash flow depending on the volume of ATMs you're able to setup.
If you have an understanding of SEO and online marketing, you might want to build niche or guide websites to help generate leads and referral income. Popular industries include insurance, credit cards, the make money niche, diets and weight loss, amongst many others. Find something that you know and ensure that you source the right relationships with the right companies to sell your leads, or make sure that people are referred to the right products or services that will allow you to earn a commission with each subsequent sale.
Kathryn Porritt. Mauricio Umansky. Josh Bowden. Doone Roisin. Entrepreneur Staff. Joseph Zito. Skip to content Profile Avatar. Subscribe to Entrepreneur. Magazine Subscriptions. Adams Updated: May 9, Opinions expressed by Entrepreneur contributors are their own. More About Business Ideas. Business Ideas.
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Cash flow from Investments includes all the transactions involving acquiring and selling long-term investments, property, plants, and equipment. These items are. Guide to Cash Flow from Financing Activities, formula, items included and The economy has turned a circle, and banks can pay steady dividends. Cash Flow from Investing Activities is the section of a company's cash flow statement that displays how much money has been used in (or.