What Is Passive Income & How Do I Build It?

Do you fantasize of retiring early? Maybe you may make enough money to meet your basic necessities as well as a few of your desires? Yes, those are some fantastic goals—and they're definitely within reach if you can expand your horizons beyond the paycheck that comes with your 9-to-5.

We're not talking about getting a second job here. We're discussing passive income.

What is the definition of passive income? It's a way to make consistent money with little to no work on a daily basis. It's important to note that we didn't state "no effort at all." Passive income is not a sit-on-your-buttocks-and-make-quick-money scheme. You'll have to put in the effort, at least in the beginning. Building a blog or an app, for example, takes time (and sometimes money) to get up and running. However, if you play your cards correctly, they may finally pay you as you sleep.

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Why Build Passive Income?Your income is your most powerful instrument for accumulating wealth, and it normally needs you to work five days a week. Even if you enjoy your current career, we're willing to bet you'd welcome the opportunity to earn some additional cash without the blood, sweat, tears, or time commitment of a second job. Here are some of the benefits of creating a passive income:

• Boost your net worth
• Allow you to retire sooner
• Protect you from losing your entire income if you quit your job
• If you outlive your retirement money, have a backup plan in place.

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How Much Money Can I Make?

Passive income isn't going to make you rich fast, so forget about any get-rich-quick schemes you've heard about. However, over time, consistent and effective passive income alternatives might add up to a substantial sum of money. Depending on which option you choose, you could spend anywhere from a few thousand dollars to hundreds of thousands of dollars.

How to Build Passive Income

There are so many ways to generate passive income that if we listed them all, we'd be here all day. So, we've limited it down to nine viable passive income options:

• Invest in Funds
• Invest in Real Estate
• Rent Out Your House
• Store People’s Stuff
• Rent Out Useful Items
• Start a Blog/YouTube Channel
• Sell Digital Products
• Advertise on Your Car

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1. Invest in Funds

When some individuals hear the term "passive income," they immediately think of investing because it can yield the most profit with the least amount of effort. That is correct! Investing may be the simplest method to kick back, relax, and earn when compared to the other options on our list. But there's one thing we want to be clear about: investing is best used as a long-term plan.

Investing in a 401(k) with a business match, as well as other tax-favored plans like a Roth IRA, is a terrific way to generate passive income... but only for retirement, not for today's cash. The objective behind these types of investment accounts is to enable your money grow while remaining invested for the long term. If you take money out too soon, you may be subject to high taxes and fees.

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Waiting till you're 65 to touch your money may sound horrible if you're in your 20s or 30s. But keep in mind that with the appropriate investment strategy, you can retire far before the age of 65! In fact, according to our National Study of Millionaires, 8 out of 10 millionaires stated their employer-sponsored retirement plan, such as a 401(k), helped them reach a million-dollar net worth (k). It's difficult to disagree with that!

If you've paid off your debt and want to start investing, consult with a reputable financial advisor. Don't get too caught up in stock investing if you have no understanding what you're doing—a it's surefire way to lose all of your money.

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2. Invest in Real Estate

Buying real estate and renting it out to renters is one approach to generate passive income (if you're debt-free and have some cash saved up). However, before purchasing a rental property, pay off your own mortgage and buy your investment property with cash. Never borrow money to acquire a rental property.

It's also worth noting that, while a rental property might be a terrific way to supplement your income, it's not the most passive option. If you want it to be a source of money, you'll need to promote it and keep up with maintenance and cosmetic changes. It takes time and effort to figure out how to rent out and manage the property—unless you employ a property management company, which means less money for you.

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We recommend purchasing a home in a location that is convenient for you to visit so that you can keep an eye on it. Find a real estate agent who is familiar with your neighborhood and understands what will appeal to tenants.

If you decide to invest in a rental property, you must maintain control over it. Avoid real estate investing choices that pool your money into properties, such as a real estate investment trust (REIT). A REIT (pronounced "reet") is a mutual fund that invests in real estate rather than stocks. While this may appear to be a wonderful concept, you have no way of knowing whether the people in charge are making wise decisions with these properties (and your money). It's highly volatile and, in general, not a wise strategy to invest in real estate.

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3. Rent Out Your House

Consider renting out a spare room if you still have debt to pay off or can't afford to take on a whole rental property. If you don't mind sacrificing some privacy, having a roommate or the odd Airbnb visitor is a terrific way to sit back and add extra money to your budget.

And, hey, just because you only have one home doesn't mean you can't rent it out in its entirety. Remember how everyone was so excited about the total eclipse in 2017? People paid exorbitant prices for hotel rooms and rental properties in the "zone of totality," where the eclipse will bring darkness to the day.

We know a couple who put their home on Airbnb just to see if they'd get any interest, and boy, did they! On that one day, they made enough money to pay for the construction of a pier on the lake where they lived. They only had to tidy up the house, spend the night with family up the road, and return the next day. Thousands of dollars are at stake! So the next time a big event comes to town—it doesn't have to be a total eclipse—give it a shot!

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4. Store People’s Stuff

People have a lot of stuff, and they're always looking for methods to store it for less money. If you have some space in the basement or the garage, what could be easier than having people pay you to store their stuff? All you have to do now is make sure their belongings are safe and secure

To get started, go to websites like Neighbor, iStoreit, or Store At My House. These are services that can help you make the most of your indoor or outdoor area. Will customers pay a premium to have their off-season clothing stored with you? Perhaps not, but it does build up over time! People will pay extra to keep vehicles, boats, campers, and other high-dollar items secure and weatherproof if you have a barn, garage, or even simply a carport. Set it and forget it (safely)—talk about passive revenue!

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5. Rent Out Useful Items

Do you have any items that you don't use on a regular basis that others would be interested in borrowing? Rental items such as a truck, trailer, trampoline, kayak, or even your own yard or backyard pool could provide you with passive income. Examine well-known rental websites such as Fat Llama (yep, that's the name). All you have to do is post photos of your stuff, establish a price, and announce that they are available for rent to the rest of the globe.

If you're not quite ready to tell the world yet, start with your immediate area. Do you have a lawn aerator, a chainsaw, or a pressure washer? Larger instruments can cost $30–70 or more to rent for a full day at retail outlets, so there's a lot of money to be made.

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Start posting on your community's social media platforms, or hand out fliers the old-fashioned manner. If you time it perfectly, your flyers can obtain a prime location on your neighbors' refrigerator doors, resulting in phone calls. Just keep in mind to set some ground rules so you don't end up with ruined tools that you'll have to replace out of your own money.

The more popular the peer-to-peer leasing model becomes, the more sites pop up. If you're not handy but have a lot of sporting equipment that you won't use in a week, rent it out on Spinlister (not just for bicycles). On a weekend when you won't be on the water, check out Boatsetter to generate some extra passive income with your pontoon boat.

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6. Start a Blog/YouTube Channel

If you have a wonderful idea that appeals to a specialized audience, you may start an instructional blog or a YouTube video series that generates traffic without requiring continual new content. You might sell ad space on your blog or ad slots on your channel if your material is engaging and receives enough daily traffic. You can sit back, relax, and enjoy streams of passive revenue for every set of eyes that watches your material once you've done the tough job. Not bad!

Keep in mind that some kinds of passive income require more effort than others. In the digital arena, there's a lot of rivalry, so even if you don't have to spend a quadrillion dollars on cutting-edge technology and advertising to get noticed, you still need to refresh your material on a regular basis to stay visible. That could include introducing brand-new videos and posts, or simply updating the keywords and obsolete information on a regular basis.

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7. Sell Digital Products

Consider how you could turn that content into a product if you've figured out how to create content that generates enough traffic to host ads. It could range from a simple e-book or meal-prep guide to a full online course or app.

Get Creative

You might also make money by selling something that utilizes your artistic abilities. Sell stock photographs on sites like Foap or build preset photo editing filters for anyone to download if you're a competent photographer. If you're a musician, license your songs and sell them to YouTubers and podcasters who can use them in their videos.

Writers, too: There are numerous self-publishing methods available, many of which are free, such as Kindle Publish Direct (KDP). If you have some marketing abilities and nice friends who will help you spread the word, as well as the fact that your books are truly enjoyable to read, then go for it! Years down the road, royalties may still dribble in. Passive money, yay!

Teach What You Know

You can utilize your skills to build a course on learning platforms such as Udemy. It doesn't require any extra maintenance once it's published, and you get paid when people take your class. It's a low-output approach to make some additional money while still helping others. That's a win-win situation...

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8. Advertise on Your Car

Is it possible to get paid to drive your own car? It doesn't get any more straightforward than that! Sites like Wrapify will set you up to get paid for using your car as a mobile billboard if you don't mind slapping a gigantic logo on it (or maybe covering the entire car or riding with one of those big soda cans on top). Sure, you'll lose some cool points for driving a little ridiculous-looking vehicle, but you'll make quick cash without putting in any time, effort, or money. For traveling to areas they already need to go, the average person who performs a full wrap on their car makes roughly $264–452 per month. That's not awful at all!

Car-wrapping pro tip: If you live in a subdivision, check to see if it’s okay with your HOA. The risk of being punished may outweigh any potential reward. It's insane, but it's true.

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So for today. I hope you learned something from this article that will help you grow and create a passive income.

See you soon with the next article!

All good,

Gabriela