How Do You Develop A Passive Income Stream?
- Buy it.
- Create it.
- Dividend paying stocks
- Rental real estate
- Interest on loans.
- Misc. other ways, but same principle. Big sum of money today for a small sum of money monthly/quarterly,annually
- Royalties from books, photos, movies, music, etc.
- Start a small business that doesn't need your to actively manage it (no matter how long it takes)
- Amazon Affiliate programs where you link products to your Amazon acount and if others buy them you get 3%-5%-8% depending on product and ammount.
- YouTube Channel: various ways to generate income, but actively creating videos is not very passive. So this would mean creating a lot of content at once and then trying to monetize with no new content. VERY difficult, but not impossible.
Passive Income is Not Easy
It might sound easy because the word 'passive' is involved. But in fact it either takes A LOT of work up front to get, or it takes a lot of studying and preparation. And even then, it still usually takes some monitoring.
But if you are trying to get multiple streams of income (and I recommend that you do) you will find it difficult to do if you already have one job unless you seek passive income streams. You only have to much time in the day, so if you are selling your time for money, like most jobs require, then you have a cap on how much you make.
Instead, if you focus on increasing your passive income at all times, even if it's just a little bit at a time, then you will see HUGE results if you remain consistent and patient.
2 Easiest Ways:
Rental Real Estate:
I beleive the two ways that are the best and or quickest are rental real estate and dividend paying stocks. I say this because ANYONE and EVERYONE has access to this potential (living in the USA at least).
Be conservative, and do your homework. But generally, an individual's access to a primary mortgage is a very under utilized tool.
Many Americans find out how much they qualify for, and then purchase a home at the top end of the spectrum and then wonder why it's difficult to save money.
But in general, anyone has the potential to purchase their first home with a low interest primary mortgage. I prefer minimum of 3 bedrooms. Move into one bedroom and rent out the other two.
This allows you to save money and pay down your mortgage. In some markets this works much better than others.
If you follow this path and do not over extend yourself, you can repeat this process by renting out your room and purchasing a second property where you do the same thing.
There are limits to your mortgage options and markets are always changing, but if you are willing to put in the work, there is a lot of potential that can be had after 10 short years.
As a young 20 something kid, I thought 10 years would take forever. It didn't. I ended up with multiple rental properties and substantial cash flow.
Disclaimer: I began this process at the bottom of the recession. My results were probably as good as they could possibly be. But the general outline holds true in any market. Various real estate and market factors do come into play, so that is up to you should you decide on this route.
Dividend stocks are simply stocks that pay you a monthly, quarterly or sometimes annual dividend. A young person who begins investing in dividend stocks consistently and never sells will greatly enjoy (early) retirement.
Stocks are a great tool because unlike real estate, you can start with much less money, diversify over several sectors, and are more liquid should you need access to capital.
For me, I have always focused on both of these. I started with Dividend stocks because I could start with $100. When it came to buying my first place I did so knowing I wanted to be an investor that owner multiple properties.
When I made money from rent, I re-invested that money into dividend stocks.
- I initially invested do into dividends
- I used those dividends to put as a down payment on a property
- That property earned rent
- That rent was reinvested into more dividend paying stocks.
This is what people mean when they say
- Put your money to work, or
- have your money work for you, or
- make money while you sleep.
Technically, this is all passive income now. But it took A LOT of activity early on. The difference is
- Working A LOT for NO MONEY early on, so that I could make a little bit of money for the rest of my life
Is there risk? Yes
But I also had a good income from a stable job with health benefits and all that jazz, only to be fired from that job when a recession that I had no control over hit.
To me, that is risky. One job. One income. Selling finite time for money.
I am not saying do exactly as I did. It worked for me and if I had to start over again today I would do the same thing unless I found something better.
WHen people say real estate, there are really 100's of different types of real estate, ways to make money in real estate, etc. The term real estate is so general. So do your homework
Same with dividend stocks. People say the market is too risky. That's ok, it can be. So do your homework. Give me a boring utility stock that raises its dividend regularly every 3 years over a tech start up any day.
Passive income isn't easy, but it's worth it.