Ways to Build a Passive IncomeFebruary 15, 2019
The key to financial independence is to build a passive income. An income that you earn every month (or year) without you having to do anything at all. Passive income can be generated by invested money, assets you own or employees doing the work for you. Most passive revenue streams contain a combination of all of the above. You can create a passive income by investing money or time. If you have money, then you can invest it to get a passive income. If you do not have money, then you can invest your time and work to build a new passive revenue stream that can continue to earn you money even after you stopped working on it yourself.
Dividends are perhaps the most commonly known type of passive incomes. Dividends are paid to shareholders in corporations. How much money you get depends on how much money the company made, how much of that they decided to pay to the shareholders and the number of shares you own. Buying shares in companies that pay a high dividend is an easy way to create a passive income but require a lot of money. You can earn a 3-5% yearly return from dividends while still maintaining a diverse portfolio. This means that you need to invest at least USD 1 000 000 if you want to earn USD 50 000 a year. Most of us do not have the money to invest USD 1 000 000 in stocks and will, therefore, have to look for another way to earn a passive income.
The last example on how to build a passive income required a lot of money. This example does not. It requires almost no money if you are willing to do the work yourself. Building a website that earns money from advertising does not have to be hard and can be done for next to nothing. You can get a domain for about $10 and hosting is available for less than USD 5 a month.
Most websites will not make their owners rich but they can make a few thousand each month and they are a great way to get business experience. Once you have built a website that earns a few thousands you can sell it and use the money to invest in another project that can earn more money. Having started a successful website can also make it easier to convince a bank to give you a loan to start another business. You have shown that you can bootstrap a business (your website) and make it profitable.
You can build more than one website to be able to earn more than you could from any single website.
Real estate is a great way to build a passive income. Banks love real estate, and it is very easy to be able to borrow money to invest in real estate. This allows you to leverage your investments and earn a lot more money than you ever could without the credit. It is possible to go from one to more than 10 properties in just a few years.
Your main obstacle is to be able to afford the down payment on your first house. A good way to clear this hurdle can be to buy a cheap fixer-upper and do the work yourself. This allows you to turn sweat equity into real equity that you can use when you want to buy your second property. Renovating a fixer-upper is a great way to create equity if you have little money as it allows you to convert your free time into money.
If you flip the house then you will earn a quick profit but you will not build a passive income unless you are able to have employees who do the work for you. The best way to build a passive income is to keep the houses and rent them out. This way you earn rent each month. The properties will also appreciate in value and earn you money when you decide to sell them. Managing one rental often require you to maintain the property and will not be a 100% passive income. If you invest in more properties you will be able to hire someone to manage everything and turn it into a 100% passive business. You often need 10 units or more to be able to turn real estate into a passive income. You can accumulate a portfolio of this size in about 5-7 years. Expect that you will add most of the units towards the end of that period. It will start slow and go faster and faster as you add more units.
Having others working for you is a tried and tested method of earning passive money from others people work. Most entrepreneurs and company owners will choose to lead their own companies and owning your own company is therefore in most cases not a way to build a passive revenue stream. Some owners will, however, decide to let go of the reins of daily operations and when they do the company turn into a passive source of revenue. The key to being able to turn your company into a money making machine that works without you is to hire the best people you can find. People who can make a better job than even you could. This way you know that the company is in safe hands while you waste your days doing whatever you want. Having your own company can also earn you a lot of money that you can invest in other passive revenue streams such as real estate and dividend stock.
Building a company with employees that can earn money for you is one of the best ways to become financially independent and be able to live off passive incomes. To do so requires a lot of hard work and dedication. It does however not require you to be well educated or especially intelligent. Everyone can build a successful company if they are willing to work hard as long as they chose to start a company in a business that suits them and their skills.