Are you looking to create a steady stream of passive income that can help you become rich or at least richer than you are today? Regardless of why you are interested in building passive income streams, having multiple sources of reliable income can open up many new opportunities and bring financial stability.
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In this article we will look at passive income and the five types of passive income that can make you rich within five years if managed correctly. From investing in real estate to creating an online course, there are many ways to generate residual wealth today.
What is passive income
When you think of income, you probably think of active income. Active income is what you earn from a job or business. Passive income, on the other hand, requires minimal work to earn. Passive income usually takes effort to create initially, but then pays out repeatedly and automatically in the future.
Passive Income Ideas That Can Make You Rich
There are many different ways to earn passive income. There are passive income opportunities for people starting with an initial investment and even opportunities for those with very little money to get started.
A dividend is a regular cash payment from investing in a listed company. Another way to earn dividend income is to invest in dividend-bearing ETFs or mutual funds. Whether you invest in individual companies or through a fund, dividends are usually paid quarterly.
The more shares you own, the more dividend income you will receive. However, since most dividend-yielding companies only pay a few percent for each share owned, you need to own a lot of shares to make significant money. But on the bright side, investing in stocks requires little work and you can continually invest more money over time.
Once you receive the dividend, you can reinvest that money in stocks or withdraw it as income.
Property for rent
If you have extra cash, investing in rental properties can help you create a large amount of passive income. You’ll need to have cash up front to cover the down payment, plus the ability to qualify for a good loan. However, you will then be able to rent out the property to tenants and earn money through rental payments. Make sure your monthly rental income exceeds your expenses, including mortgage payments, maintenance, taxes, utilities, etc. Also, remember that you will gain financially when the property appreciates.
Real estate investing can be as passive as you want it to be. If you hire a management company to take care of everything, you can sit back and collect the checks every month, but you will have to pay the management company fee. However, if you want to keep more income, you can do more of the related work.
Book or course fees
Creating a book or course to sell requires a lot of effort up front, but you can continue to earn passive income from sales and commissions for years.
If you are knowledgeable about specific topics like dog grooming, investing in the stock market, or fitness programs, you can create a course to teach others. You can control everything about the course, including the content, the selling price, and who you want to advertise it to.
Books require a lot more work and time. You may need to find a publisher or self-publish. However, you can earn royalties from book sales for years, perhaps longer than courses.
Having an established following can make it easier to sell your book or course. If you have a following on social media, in a specific community, or elsewhere online, you can promote your book or course to those people. They are likely to buy your product since you already have a relationship with them.
Affiliate marketing is when you share and recommend a product to others and earn a commission when someone buys the product. Affiliate marketing can be done on social media, email, or a website.
Affiliate marketing only requires a little money up front to get established, but it takes time and work. You’ll need to reach enough people before you make any meaningful money. The more followers or website traffic you have, the more money you are likely to make from affiliate marketing.
Another passive income opportunity that can help you get rich is peer-to-peer lending. These loans are from one person to another. They are personal loans that exclude the financial institution as an intermediary.
You’ll earn interest based on the individual loan terms when you lend money to others through peer-to-peer lending. Websites like Lendingclub or Propser can be great tools because they will help facilitate the loan and provide a risk profile for the person you are lending money to. Peer lending does involve some risk, but you can mitigate some of that risk by lending to highly qualified individuals.
How to choose a source of passive income
Deciding which passive income sources to pursue will depend on several factors, including the amount of money you can invest, your interests, talents or skills, and the time you can devote to starting something. This will be different for each person. While one passive income model may be great for one person, there may be better ones for some.
After starting one stream of passive income, many people decide to create multiple streams. This will require more time and potentially a larger financial investment, but creating multiple passive income streams can be good financially.
The bottom row
Passive income can significantly increase your total income without working extra hours at your day job. You can make good money from passive income opportunities, but it depends on your financial commitment, how much work you are willing to put into it, and a little luck.
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This article originally appeared on GOBankingRates.com: 5 Types of Passive Income That Can Make You Rich in 5 Years