{"id":9963,"date":"2022-06-30T18:11:05","date_gmt":"2022-06-30T23:11:05","guid":{"rendered":"http:\/\/blog.jlbn.net\/?p=9963"},"modified":"2022-10-25T19:26:41","modified_gmt":"2022-10-26T00:26:41","slug":"35-simple-ways-to-create-passive-income","status":"publish","type":"post","link":"http:\/\/blog.jlbn.net\/?p=9963","title":{"rendered":"35+ Simple Ways to Create Passive Income"},"content":{"rendered":"\n

Making money while you sleep has a beautiful ring to it<\/strong>, and there are ways to create passive income that allows for it.<\/strong><\/em><\/p>\n\n\n\n

As Warren Buffet infamously says, \u201cEither you find a way to make money when you sleep, or you will work until you die.\u201d<\/em><\/p>\n\n\n\n

Earning and finding way<\/strong>s to create passive income<\/strong> provides the opportunity to do just that. Today’s profitable passive income ideas will help you brainstorm your next money-making venture.<\/p>\n\n\n\n

What is Passive Income?<\/strong><\/h2>\n\n\n\n

Passive income is defined as income that requires minimal effort\u2014or perhaps even zero<\/em> effort\u2014to earn. Passive income typically enables your money to work<\/a> for you. It’s a \u201cwork smarter, not harder\u201d situation. We can compare it against active income, where your effort is 100% correlated to your income.<\/p>\n\n\n\n

The best passive income takes the least effort. But today, we will consider many popular passive income ideas that will earn you money, whether you want to pay off a student loan, dig out of credit card debt<\/a>, or put together a retirement plan. As long as it requires little passive activity, it could be a decent passive income<\/a> stream.<\/p>\n\n\n\n

Those who achieve financial independence will tell you that passive income streams are the key to success. The problem is that most supposed passive income ideas that you’ll find are not passive at all. A second job, for example, isn’t passive.<\/p>\n\n\n\n

Since you’re already busy<\/a> with your everyday life, you want to find passive income that truly works while you sleep, or play, or socialize, or whatever you want to be doing with your time. Most income sources require you to put in a LOT<\/strong> of work. But that completely negates the idea of \u201cpassive\u201d income.<\/p>\n\n\n\n

Do you want to make passive income? You will need to invest <\/strong>in an asset that produces passive income for you. Since you’re not committing time to earn this passive income, you’ll need to commit another resource (e.g., money). Unless you are receiving money the old-fashioned way (inheriting it), there’s no such thing as a free lunch.<\/p>\n\n\n\n

The good news is that you don’t need a pile of cash to start your passive income stream. If you already have an asset that you are not fully utilizing, that can serve as your investment. We’ll get to how that works shortly.<\/p>\n\n\n\n

For now, let’s talk about a few passive income strategies. Stop letting your money stagnate in a bank account and lose its spending power. Some of these next passive income ideas will get you ready to invest<\/a> in your future. Passive income means you want to start valuing your time and<\/em> your money.<\/p>\n\n\n\n

Truly Passive Income Ideas<\/strong><\/h2>\n\n\n\n

These first ideas\u2014which we call \u201ctruly\u201d passive\u2014require a one-time investment upfront and zero<\/em> future effort. There’s no upkeep, no fuss, no muss. These are some of the easiest passive income ideas that you could implement.<\/p>\n\n\n\n

1. Alternative Assets<\/strong><\/h3>\n\n\n\n

Alternative assets, or alternative investments, are much talked about these days. The volatility of the markets and extremely low interest rates for the foreseeable future have many people looking for alternate options.<\/p>\n\n\n\n

There are many types of alternative investments. Some of the more popular offerings are hedge funds, private equity, crowdfunded real estate investments, and commodities like wine<\/a> or geeky collectibles<\/a>.<\/p>\n\n\n\n

We recently discovered another unique alternative investment, usually only available to the wealthiest of the wealthy: luxury watches<\/strong>.<\/p>\n\n\n\n

We’re not talking about a $500, $1000, or even a $10,000 watch. Instead, investment-grade watches merit a price range from a minimum of $50,000 up to $1 million.<\/p>\n\n\n\n

Why inform you about an investment with that kind of price tag? Because the company we’ve discovered\u2014LuxeStreet, Inc<\/a>\u2014has made this investment available with a minimum investment of $10,000. You can buy partial shares of an assortment of watches at that buy-in level. If you’re an accredited investor<\/a> looking for a unique alternative, you should take a closer look at LuxeStreet<\/a>.<\/p>\n\n\n\n

This particular luxury watch investment pays 12% per year at the rate of 1% each month. The best part of it is your investment is backed by luxury watches owned outright by Luxe Street. There are very few investments we’re aware of that pay that kind of an income.<\/p>\n\n\n\n

Here is our full review of LuxeStreet<\/a>, where you’ll find the offering’s details and get our thoughts on the pros and cons of the investment.<\/em><\/p>\n\n\n\n

Pro: <\/strong>Alternative investments give you exposure to unique asset classes, different from everyday stocks, bonds, real estate<\/a>, etc.<\/p>\n\n\n\n

Con<\/strong>: Alternative investing is a fledgling industry with developing regulations. There\u2019s likely to be more risk than with typical investment choices.<\/p>\n\n\n\n

2. Passive Real Estate Investing<\/strong><\/h3>\n\n\n\n

Talk to any landlord, and they’ll tell you that \u201cpassive\u201d is the last word they’d ever use to describe having to replace a washing machine after an already full day. That’s plain old work.<\/p>\n\n\n\n

However, many companies give you the ability to invest in commercial and residential real estate<\/a> projects without actually doing the heavy lifting yourself. It’s often better having your very own real estate agent<\/a> or other real estate professional picking the properties.<\/p>\n\n\n\n

One example is DiversyFund<\/a>. It’s a private REIT (real estate investment trust) that allows you to invest in professional real estate passively for as little as $500<\/a>. I love companies like DiversyFund because they don’t earn money unless the investors earn money since they invest and manage the projects themselves. Having aligned incentives is important in investing.<\/p>\n\n\n\n

Another detail that differentiates DiversyFund is how they invest. Rather than spread its expertise too thin, DiversyFund focuses its investments on lower-risk multifamily housing. They use technology to scour the country for properties that fit their specific criteria.<\/p>\n\n\n\n

What criteria? Specifically, DiversyFund looks for high occupancy and positive cash flow<\/a> properties, but that needs some work. These aren’t complete renovations. Instead, a typical DiversyFund property could just need an updated bathroom or kitchen, or maybe just a fresh coat of paint.<\/p>\n\n\n\n

The fact that DiversyFund does all of the work themselves means they have lower costs than their competitors. After the aforementioned minor renovations, the upgraded properties merit increased rents. And that increases your<\/em> cash flows<\/a> and the value of the properties.<\/p>\n\n\n\n

Holding periods for DiversyFund properties tend to be in the five-year range. Preferred returns for their properties are in the 7% range.<\/p>\n\n\n\n

Both DiversyFund and their passive investors\u2014e.g., you\u2014benefit from this business model. When incentives are aligned, you give yourself the best chance to win.<\/p>\n\n\n\n

Con<\/strong>: There\u2019s always a give-and-take to using a third party\u2014namely, their fees.<\/p>\n\n\n\n

3. Earn Passive Income with Lending Club<\/strong><\/h3>\n\n\n\n

If you’re looking for another way to earn passive income, you may want to consider Lending Club’s peer-to-peer lending platform.<\/p>\n\n\n\n

Lending Club allows passive investors to diversify their assets by investing in different types of loans. Wait\u2026in loans? That’s right. Lending Club allows you to loan your money out to people and groups looking for funding. The type of loans you choose will determine your investment return and risk exposure (remember, risk<\/a> and return are related).<\/p>\n\n\n\n

All you need to do is invest as little as $25 in a single loan. Your investment is combined with other investors to make up the entire loan amount. While others may invest more, many investors choose to stick with $25 minimums across multiple different loans. This diversification tends to decrease risk.<\/p>\n\n\n\n

So how do you generate income with Lending Club?<\/p>\n\n\n\n

After you make your initial investment, you will start earning passive income from the borrowers\u2019 repayments. As a borrower pays down their loan, you will receive monthly interest payments.<\/p>\n\n\n\n

Like all loans, Lending Club charges interest to the borrowers. These interest rates may vary and will be determined by various factors, including the borrower’s creditworthiness and loan amount. Even if you don’t reinvest your passive income back into the platform, you will still earn a return on your investment from this interest.<\/p>\n\n\n\n

Since this is a peer-to-peer lending<\/a> platform, you’re essentially the lender. That means that you collect the principal and the interest. After you’re repaid, you can choose whether to cash out or reinvest your funds in other Lending Club loans.<\/p>\n\n\n\n

Pro<\/strong>: Lending Club allows you to help many different loan seekers while earning passive income yourself.<\/p>\n\n\n\n

Con<\/strong>: If a few of your loaners cannot repay your loan, it can be easy to miss out on profits or potentially even lose money.<\/p>\n\n\n\n

4. Invest in Dividend Stocks<\/strong><\/h3>\n\n\n\n

Dividends are profits paid out to owners of stocks<\/a>. Some companies pay dividends<\/a> regularly, which means that dividends can become a dependable source of income.<\/p>\n\n\n\n

Investors who love dividend-paying stocks will talk about their investment<\/a>is generating dividend income and appreciating. In other words, they’re getting a regular supply of money (from the dividends), and<\/em> the underlying stock is increasing in value (as the company grows).<\/p>\n\n\n\n

Keep in mind that stocks with high dividends<\/a> still carry risk. Dividend stocks can drop in value like any other stock. Historically, dividend-earning stocks drop in price less <\/strong>than the overall stock market. They tend to be steadier in priceless upside, less downside. But you should never invest in any stock, a high-paying dividend stock or otherwise, without understanding that you’re taking a risk.<\/p>\n\n\n\n

They are similar to other equities in that they’re usually best to buy and hold for a long time. And with that long-term mindset, it’s reasonable to purchase stocks even at all-time highs<\/a>.<\/p>\n\n\n\n

Some people even rely on dividend checks for their regular expenses. They receive thousands of dollars each quarter from their dividend investments. And that might require you to own a significant <\/strong>number of shares!<\/p>\n\n\n\n

But if you have some extra cash to invest and understand the risk involved, dividend stocks are something to consider. Perhaps an index fund full of them would be right for you. Just make sure you learn about the risk (or lack thereof) from the index fund bubble<\/a>.<\/p>\n\n\n\n

Pro<\/strong>: A proven income stream with over 100 years of heritage, backed up by some of the world’s most blue-chip companies.<\/p>\n\n\n\n

Con<\/strong>: \u201cPrior results do not guarantee future outcomes.\u201d Your initial investment could lose 50% overnight if the stock market crashes.<\/p>\n\n\n\n

5. Open a High-Interest Savings Account<\/strong><\/h3>\n\n\n\n

If you are afraid of investing, there’s a chance you have a decent chunk of change saved in a checking or savings account. Saving money is always a good thing<\/a>.<\/p>\n\n\n\n

Sadly, brick-and-mortar banks barely pay any money in interest. Institutions like Wells Fargo<\/a>, Chase, Bank of America, and others pay around 0.08% interest. You could have $100,000 in that bank, and you’d earn less than $100 per year in interest. That’s nothing!<\/p>\n\n\n\n

That’s why keeping your savings in a high-yield savings account<\/strong> is clutch.<\/p>\n\n\n\n

The best high-interest banks are online-only, so you won’t need to mess with going into the bank to get started. The best part is that as of this writing (October 2020), they pay as much as 0.80% interest per year. So with $100,000 in the bank, you’d earn $800 per year. That’s much better!<\/p>\n\n\n\n

Even if you don’t have a ton of money saved up, you will still make way more money than you would with a regular checking or savings<\/a> account. One of my favorites is VARO Money.<\/a> They consistently pay higher rates than almost any local or national brick-and-mortar banks.<\/p>\n\n\n\n

You could also look into money market accounts, treasury bonds, or certificates of deposit for low-risk, stable return investments.<\/p>\n\n\n\n

Pro<\/strong>: As safe as safe can be.<\/p>\n\n\n\n

Con<\/strong>: Meager returns. In fact, inflation might cause you to lose<\/em> buying power.<\/p>\n\n\n\n

P.S. For passive investing or financial planning ideas, make sure you understand the tax ramifications with the Internal Revenue Service (IRS).<\/p>\n\n\n\n

6. Long-Term Index Fund Investing<\/strong><\/h3>\n\n\n\n

Do you believe that the global economy will continue to grow and progress? And do you have 10+ years to invest money and build eventual<\/em>passive income streams? If so, index investing might be for you.<\/p>\n\n\n\n

An index fund is a mutual fund that owns a wide assortment of assets. Some index funds are fairly focused (e.g., an automotive index fund might own all automotive stocks). Other index funds are broad (e.g., a total market index fund might own every single stock on the stock market.<\/p>\n\n\n\n

Either way, the idea of index funds is that they lower risk by diversifying their assets<\/a>, and they lower their costs by enacting simple asset ownership rules. Index funds don\u2019t look for the needle in the haystack. They just buy the whole haystack.<\/p>\n\n\n\n

Over the long run, index investing has proven to be a very successful method of portfolio growth. And if your portfolio is growing<\/a>, you can skim off some of the profits as passive income.<\/p>\n\n\n\n

Pro<\/strong>: Proven method of long-term monetary growth and successful retirement planning.<\/p>\n\n\n\n

Con<\/strong>: Not a short-term passive income solution.<\/p>\n\n\n\n

7. Become an \u201cAngel\u201d<\/strong><\/h3>\n\n\n\n

Angel investing is a high-risk, high-reward proposition. It gets its name because it answers the question, \u201cWho would invest in a startup company with no track record, no customer base, and no surefire path to revenue growth?\u201d Answer: only an angel.<\/p>\n\n\n\n

Of course, angel investing also provides a path to equity ownership in an eventual global company’s infantile stages. Could you imagine buying into companies like Shopify or Uber when they only had a handful of employees? Small angel investment can grow by 1000x! Of course, that same investment can just as easily disappear within 6 months to a year.<\/p>\n\n\n\n

Angel investing is a feast-or-famine proposition.<\/p>\n\n\n\n

Pro<\/strong>: Immense upside. A hands-off way to help entrepreneurs trying to change the world.<\/p>\n\n\n\n

Con<\/strong>: As high risk as anything mentioned in this article.<\/p>\n\n\n\n

Semi-Passive Income Ideas<\/strong><\/h2>\n\n\n\n

We’ve got 100% passive income ideas out of the way. But there are still a lot of great \u201csemi-passive\u201d ideas that you can utilize. These take a bit more effort to execute, but they can still build long-term wealth.<\/p>\n\n\n\n

1. Put Your Real Estate to Work<\/strong><\/h3>\n\n\n\n

Utilizing your real estate is a great way to turn your property into rental income. You don’t have to buy a rental property to have rental property. Use what you already own!<\/p>\n\n\n\n

1A. Use Airbnb or similar services<\/strong><\/h4>\n\n\n\n

Rewind 20 years ago. Could you imagine that strangers would painlessly be staying in one another\u2019s houses without ever meeting, talking, or interacting? Airbnb and similar services have revolutionized where we stay when we travel. And it has opened up serious passive income doors for you and me.<\/p>\n\n\n\n

Unsure how much money you can make?<\/p>\n\n\n\n

Simply log on to Airbnb and check out what your market looks like. There are sure to be other Airbnb hosts in your neighborhood. What are they charging for a room or their whole house? Would you be interested in offering up your room\/house for that same price?<\/p>\n\n\n\n

Granted, you\u2019ve still got to ask yourself: is this money worth the effort? Being an Airbnb host isn\u2019t truly passive. Sure, you already have the house (and that\u2019s most important). But you still have to act as part landlord, part maid, and maybe even cook your guest some meals. That\u2019s work.<\/p>\n\n\n\n

But if you are excited by the idea of meeting new people and<\/em> making some solid side cash, then Airbnb hosting might be perfect for you!<\/p>\n\n\n\n

Pro<\/strong>: Meet new people every week while getting paid to do so.<\/p>\n\n\n\n

Con<\/strong>: You have to become part landlord, part cook, part maid, etc.<\/p>\n\n\n\n

1B. Rent Out an Extra Bedroom<\/strong><\/h4>\n\n\n\n

If you own a home, there’s a decent chance you have an extra room that hardly gets used. Perhaps it’s the guest bedroom or kids’ old playroom. Consider renting it out for extra income.<\/p>\n\n\n\n

Of course, hosting a long-term guest isn’t for everyone. There are some pros and cons to compare. The most obvious trade-off is a few hundred bucks in monthly rent compared to the inconvenience of having a guest in your home.<\/p>\n\n\n\n

But if you don’t mind the company, it may be a no-brainer!<\/p>\n\n\n\n

It’s easy to see how this could lead to a few thousand<\/a> dollars a year. After several years, you’ll have accrued enough extra income to start planning an eventual early retirement.<\/p>\n\n\n\n

Just make sure you both sign a formal rental agreement so that everyone is on the same page.<\/p>\n\n\n\n

Pro<\/strong>: Turn an unused resource in your home into an income source. And hey, maybe you\u2019ll make a new friend!<\/p>\n\n\n\n

Con<\/strong>: Another person is living in your house\u2026your kitchen\u2026your bathroom. Even if they\u2019re a saint, having a housemate can be tough.<\/p>\n\n\n\n

1C. Rent Extra Land<\/strong><\/h4>\n\n\n\n

Perhaps the idea of hosting someone inside<\/em> your house isn’t for you. But how about hosting someone on your property by renting your extra land?<\/p>\n\n\n\n

There is a tiny home bonanza sweeping the country right now. People are choosing to live in tiny homes and embrace a minimalist lifestyle. For a lot of those people, the only downside is where <\/strong>to place their tiny house. If they want to live in a tiny home to save money<\/a>, it likely doesn’t make sense to spend hundreds of thousands of dollars to buy a land lot.<\/p>\n\n\n\n

If you have some land, this creates an opportunity for you to rent out space on your lot. You’ll want to make sure you don’t violate any laws or codes in your city, town, etc.<\/p>\n\n\n\n

But if you’re not using the land, why not get paid a few hundred bucks to let someone place their tiny home there? You’re making the most of a resource you aren’t using and<\/em> giving someone else a place to live. Win-win.<\/p>\n\n\n\n

Real estate income and rental properties are often considered passive, or at least partially passive. It might feel risky if we face another Big Short<\/a> real estate bubble, but doesn’t it feel like rentals will always<\/em> be needed? Either way, they are trendy methods to build long-term wealth.<\/p>\n\n\n\n

Pro<\/strong>: Compared to other ways, you can share your real estate, this is pretty hands-off.<\/p>\n\n\n\n

Con<\/strong>: Adding new buildings to your property can be a significant headache due to local laws and zoning codes. Do your homework!<\/p>\n\n\n\n

2. Renting Your Car<\/strong><\/h3>\n\n\n\n

Companies like Turo<\/a> and GetAround<\/a> are making it easier than ever to rent out your car when you aren’t using it. And let’s face it: if you live in an area with Lyft and Uber service, there’s a chance you might not even need your car daily.<\/p>\n\n\n\n

You’ll want to keep in mind that renting out your car will mean additional wear and tear on your vehicle, so your repair bills might increase. But users have said it’s well worth it for the passive income checks coming in the mail.<\/p>\n\n\n\n

If you have a second car sitting around or have begun to bike to work and no longer need the vehicle daily, this might be the perfect way to start generating some passive income.<\/p>\n\n\n\n

Pro<\/strong>: A car is one of the worst<\/em> investments you can make. But renting your car out makes that investment less bad.<\/p>\n\n\n\n

Con<\/strong>: More miles = more repairs. And what if the car renter spills their burrito all over your nice clean seats?<\/p>\n\n\n\n

3. Refer Friends to Great Products You Already Use<\/strong><\/h3>\n\n\n\n

Companies like Rakuten.com<\/a> (formerly eBates) have existing referral programs that pay out cash for every friend you can refer to. If you have many friends or social media followers, this can be an effortless way to earn money.<\/p>\n\n\n\n

All you have to do is set up an account by clicking the join now tab at the homepage’s top. Once the account is up, go to your account settings and click where it says refer and earn to get a link to send your friends.<\/p>\n\n\n\n

To find other programs like this, it’s super simple. Nearly any company that delivers food or other products have similar programs.<\/p>\n\n\n\n

It takes a little effort upfront and then some consistent effort to keep your friends or followers using the service. Another way people can do this is by recommending things like:<\/p>\n\n\n\n