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June 28th, 2018 by Marco Santarelli
What Is Passive Income
Passive income has been loosely defined as money that you earn with the least or zero amount of effort. People often associate passive income with dividends, interest as well as lottery winnings and capital gains from real estate. Passive income or residual income can also be derived from a business where you do not have substantial investment in terms of labor. It’s easy to see why people like the idea of passive income. You are able to do the work once and get that passive income forever.
Active Income vs Passive Income
The difference between active and passive income – Your business associate who does most of the work will consider the income that they earn from the partnership as active income. This is the polar opposite of passive income because the former is money earned from rendering a service. Your salary is considered as an active income, so are tips and commissions. Let us assume that you have a 50% interest in a business venture, you have invested more than 100 working hours to make the enterprise prosper. In this scenario, you consider this as an active income whereas a passive income is earnings derived from any form of business or partnership in which a person is not actively involved. A passive income can also be referred to as residual income.
Why Is It Important To Have Passive Income | Benefits of Passive Income
Considering the nature and benefits of passive income, a lot of people are attracted to it. A passive income can be very rewarding because you become your own boss. This equates to the ability of managing your time. You can still financially gain on a business transaction while you spend time with your loved ones. Even better, you can go on vacation and still earn money. Although you earn paid leaves in a regular job, the vacation time is counted. As you probably know, this carries a lot of risk because you are not actively doing something to ensure the success of the endeavor. But you can lessen such risk by investing on passive income ideas that have been tested and proven to be successful.
Best Passive Income Ideas & Strategies For Beginners To Make Money In 2018
Passive income is money that is usually (but not always) received on a regular basis without any or only little effort. You either have to do much in the beginning to set up your passive income stream or/and you regularly have to invest at least a bit time, effort or money to maintain that income. There are thousands of passive income ideas you can come across on the internet for earning monthly residual income. But we can filter these down to some easy passive income ideas and strategies that actually work.
Here are some of the best passive income ideas and strategies that actually work.
1. Crowdfunded Real Estate Investment
Bankrolling a real estate deal has always been the top choice for tried and tested passive income ideas. You may not be constructing anything on that specific property. But you stand to gain something in the future as land never depreciates. If you do not have that much spare cash, you can still invest in the real estate market with this money making scheme. What is great about this is that your money will not be tied to just one project. You can invest in as many projects as you want.
There are many ways to make passive income in real estate and passive real estate investing is considered a “smarter strategy” in real estate investing. There are two basic ways to make profit in passive real estate investing; one of them is direct income from rentals. Once the income surpasses the expenditures, then you are on the winning side. The other way you can benefit is by increasing the value of your investment property and mining the equity that you generate. You either can take low interest loans against the equity or sell your investment property for a profit and reinvest by buying more rental properties.
If you are a beginner in rental property investing, it very important to read good real estate books and learn from the savvy investors who have made fortunes by investing in some of the best real estate markets Montgomery Alabama Real Estate Market and Jacksonville Real Estate Market. We also recommend these 8 hottest real estate markets for investors looking to make passive income in real estate.
3. Investing in REITs
You can invest in REITs in a variety of different ways, including purchasing shares of publicly traded REIT stocks, mutual funds and exchange-traded funds. REITs generally own and/or manage income-producing commercial real estate, whether it’s the properties themselves or the mortgages on those properties. You can invest in Retail REITs, Residential REITs, Healthcare REITs, Office REITs and Mortgage REITs. REITs will provide you high dividend yields along with moderate long-term capital appreciation. Investing in REITs is a very good way of earning passive income in real estate.
4. Renting Out that Spare Room
If you have a spare room in your house, then you can have it rented it out. This is one of the passive income ideas where the risks are quite minimal. All you have to do is put up an advertisement online that such room is available for rent. You will just have to wait for people to check your spare room and rent it. You can partner with Airbnb and earn passive income as an Airbnb host by renting your room.
5. Buy Bonds
This is often included in most passive income ideas because you can just sit back as the money rolls in. Buying bonds are considerably safer compared to investing in stocks because bonds are considered as liabilities by the company that issued them. On the other hand, stocks are considered as equity. If ever that company files for bankruptcy, they have to settle their liabilities first before anything else. Governments can also issue bonds but not stocks.
6. Stock Investment
We have separated this from investment in bonds because of the nature of the two. In the previous paragraph, it was mentioned that this is a share of ownership of a certain entity. Some entities pay their stockholders every quarter so it is an excellent way of making a living without doing anything. But you have to be careful in choosing the company to invest in.
7. Time Deposit
This is one of the passive income ideas that present very minimal risks. Unlike other savings account, a time deposit has stated date of maturity. You cannot withdraw such deposit before the maturity date. The interest rate of this type of savings account is considerably higher compared to other accounts. Once you will withdraw your savings, you have to notify the bank at least 30 days before the said date.
6. Affiliate Marketing
This is one of the passive income ideas that do not require any investment from you. This would be an excellent money making venture especially if you already have an existing website and a band of loyal followers. In this scenario, you post a link that will send the viewer to a certain website where they can buy the item. If they do purchase, you get a commission.
8. Lending Money
This is probably one of the few passive income ideas that involve high risks. But it is quite profitable. You can lend money to people who cannot qualify for conventional financing means. You could lend money with an interest of 6 to 10%. A good way to lessen your financial exposure is by investing in a company that will act as a mediator. They will ensure that you are paid back.
Another easy passive income idea through lending is called peer-to-peer lending in which you can give loans to other individuals who don’t meet all requirements for conventional financing. With returns of 6-10%, investing with a company like Lending Club can get you substantially higher passive income than normal investment funds or bank interests.
9. Financial Partner
You can also bankroll the business of your friend or family. They will then be able to run the business for you. If this is an ongoing operations, you must study their financial statements and other aspects of their business before shelling out anything. But if you are investing in a new entity, you must know if your business partner is trustworthy. Although this does not lessen your financial exposure, you can sleep peacefully at night knowing that your money is in safe hands.
10. Vending Machine Business
This is one of the often underestimated passive income ideas. But it is a great way to make money especially if you have found the right place to install your vending machine. Consider the number of people going in and out of that place, you will stand a big profit if you have placed the machine in a strategic area.
11. Cash Back Websites
This may not be considered as something that will help you go to an early retirement. But you can still earn money with no effort required from you. Not to mention that this is completely free. All you have to do is sign up in cash back on shopping websites. They will give back a portion of the total amount that you spend on your purchase.
12. Writing Books
Selling books can be an incredible way to create some genuine passive income in the form of royalties. In today’s day and age, once your book is accessible on a site like Amazon, you could get a check every month for doing literally nothing. Clearly, the more time you spend promoting your books, the more cash you’ll make online and offline.
13. Drop Shipping
With the blast of eCommerce, drop shipping has turned out to be extremely famous. Here’s the means by which it works: you make an online store that offers items from certain manufacturers. A person visits your site, orders an item, and your system sends the order request to the manufacturer of that product. The maker at that point completes the order by shipping it directly to the person who had placed the order on your site.
A cool aspect concerning this kind of business is that you don’t have to stock products that you are selling – No inventory required from your side. Customer pays for the item; you collect the commissions, and the manufacturer or seller of the items stores and ships the items to the customer.
14. Passive Income in The Form of Blogging
The passive income through blogging has allowed many to stop exchanging time for money. For example, as a travel blogger, you can set up a WordPress blog and share your experiences with your readers. Whenever you go to a new place, you can write about all the cool things you saw and did there. You can make money in a few different ways.
You can apply for ad programs like Google Adsense and set them up on the sidebar of your site. If any of them click through, you will get a small fee from your advertising partner like Google. You can also sign up for some of the affiliate programs. As mentioned above affiliate marketing is one of the various ways to make money online by promoting products or websites to earn a certain percentage as a commission.
Do Passive Income Ideas Really Work?
Yes, all these passive income ideas do work and can supplement your existing income. Even better, you could use some of them as main source of income. You get to earn without having to exert a lot of effort. All you have to do is find the right one for you. These 14 passive income ideas & strategies are apt for beginners who want to make passive income without much efforts. Do you have any better passive income ideas that you would like to share? Let us know in the comments below.
*The information contained in this article was pulled from third party sites mentioned under references. Although the information is believed to be reliable, Norada Real Estate Investments makes no representations, warranties, or guarantees, either express or implied, as to whether the information presented is accurate, reliable, or current. All information presented should be independently verified.
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