How To Create Passive Income

Make money while you sleep?

Is that even possible?

Is it legal?

The answer to all 3 of those questions is “YES”, but it’s not going to happen overnight.

You can’t kick back and relax without putting in the work first. If you have a problem with that, then you might as well close this article and scroll through your Facebook.

If you don’t have a problem with working, then you’re reading the right blog post.

Before we dive into the nitty-gritty of how to start creating passive income, let’s go over the benefits of creating passive income in the first place.

In fact, there are 3 benefits that come to mind when I think of creating passive income:

Benefit #1: Time Freedom

Our time is limited.

The sooner you realize this, the more conscious you will be about what you spend your time doing.

Creating passive income usually requires a lot of work up front to get everything set up and requires minimal maintenance once everything is in motion.

This is unlike a job where you have to physically show up each day in order to get your paycheck.

When you have passive income coming in like clockwork, you’re free to focus on other things. One of those things could be setting up an additional passive income stream.

Imagine if you had 3 or 4 streams of passive income paying you every month. Even if you were making just $500 per month from each income stream, that would add up to an extra $2000 per month being generated with minimal effort.

Benefit #2: Reduces Stress

Many people suffer from financial stress. And most of us have experienced it at one point or another.

Sometimes we worry about how we’re gonna cover a bill we have coming up.

Other times, it could be a bill that came out of nowhere that needs to be taken care of.

Whatever the case may be, passive income helps alleviate financial woes by providing a stable and reliable source of income. You can count on it in a pinch and be better prepared for the unexpected.

Benefit #3: Location Independent

Unless your passive income is directly tied to a specific geographic area (i.e. Real Estate), you’re usually free to live and work wherever you like.

When we go over the specific types of passive income, you’ll see that most of them aren’t confined to one particular location. For example, if you’re generating passive income over the internet, then you can do that from just about anywhere.

Now that we know the benefits of creating passive income in the first place, it’s time to go over the “how” of doing it.

There isn’t a single correct way to create passive income. Everyone has different strengths and what works for you might not work for others, and vice-versa.

With that being said, I’m going to share with you a few ideas that will help you generate passive income. My personal advice would be to choose one or two that looks appealing and focus on it like nothing else matters.

If you’re more visually-oriented, then check out this video by Nate O’Brien on 5 ways to make $7,200 per month passively.


Passive Income Method #1: Join A Network Marketing Business

Network marketing is a tried-and-proven business model for creating passive income.

In this day and age, there are dozens of different network marketing companies selling all kinds of products such as credit repair, vacations, coffee, legal protection, and more.

Network marketing, also referred to as multi-level marketing, existed as far back as the 1920s. Today, there are millions of distributors all across the world, sharing products and services, while building a team at the same time.

The team that you build beneath you is where your passive income originates from. In order for it to be sustainable, you need a system in place where you are constantly adding new people into your downline and training the people beneath you to do the same.

A wise man once said, “You need to bring the numbers to find the man, and teach the man to bring in the numbers.”

Both are needed or else you will never build sustainable, residual income. In the beginning, it’s up to you to bring in as many people as you can into your business. After a while, you need leaders under you that are doing the same thing you’re doing.

Now you’re working less and making more money because you’re leveraging other people.

Passive Income Method #2: Learn Affiliate Marketing

If you’re not into building teams, then online marketing might be more up your alley.

Affiliate Marketing is very similar to Network Marketing. In either case, you are selling products on behalf of a company and receive a portion of the sale.

Unlike Network Marketing companies, there is no incentive to build a team. The affiliate program of a company is usually of secondary importance compared to its overall scope. Network marketing companies are built on a constant inflow of customers and distributors who consume and promote their product respectively.

Becoming a successful affiliate marketer requires having a broad range of knowledge and skillset in the following disciplines:

  • Email Marketing – crafting high-converting emails that get open and generates sales.
  • Content Marketing – providing valuable content to your target to build your brand and authority.
  • Social Media Marketing – Creating compelling, relatable marketing messages on social media as an added way of interacting with your audience.
  • Copywriting – Writing in a descriptive, persuasive manner that gets people to buy.
  • Customer Value Optimization – Crafting a high-converting sales funnel that reliably turns prospects into customers.

…and that’s just scratching the surface.

This might seem like a lot, and that’s because it is. But once you have everything in place, all it requires is a bit of maintenance to make sure everything is running properly.

For more information on how to do marketing, I recommend checking out this post I wrote on how to market your business. All of the information herein is also applicable to affiliate marketing.

Passive Income Method #3: Create A Monthly Subscription Website

Do you have expertise in a specific area? If so, you might be able to sell that information to others.

Many online and offline businesses are able to generate passive income through membership sites. Some of them do charge one-time fees but many of them require payment on a consistent to maintain access.

Here are a few different types of monthly subscription sites:

  • Drip Feed – Every month new content is available for access in a private members’ area.
  • Community – Members are given exclusive access to forums and messaging tools to connect to one another.
  • Service – Membership site is used for the delivery of a service.
  • Online Course – Membership site is composed of different modules that relate to one central topic.

Passive Income Method #4: Peer-to-Peer Lending

Image Credit: InvestmentZen

Peer-to-Peer Lending, also called P2P, is the practice of lending money to individuals through online services that match lenders with borrowers.

Besides generating passive income, this is a great way to get your feet wet with investing. Most P2P companies have a high degree of transparency and allows you to see exactly where you’re money is going towards and how it will be used.

P2P lending also helps with diversifying your risk so you don’t end up putting all your eggs in one basket. You can invest your money across various loans with varying degrees of risk.

Some P2P companies like LendingCrowd assign a credit rating to the loan so investors know the risks specific to a business. Many P2P loans are unsecured, so there’s always the risk that you may not get your money back.

Passive Income Method #5: Invest In Dividend Stocks

Imagine if someone paid you to own something. You probably wouldn’t even think twice.

Well, that’s exactly what companies do when they pay out dividends. They are paying their shareholders for owning their stock. Most US companies that pay out dividends do so every quarter, which aligns with their legal requirement to report earnings on a quarterly basis.

Besides quarterly distributions, there are companies that pay out monthly, which includes many, but not all, real estate partnerships as well as master-limited partnerships, annually, semi-annual, or on no set schedule whatsoever.

Besides providing a regular income stream, dividend stocks tend to hold up better in down markets. This is especially true if they’re backed by quality companies.

Passive Income Method #6: Invest In Real Estate

Real Estate investing has been around since the Middle Ages, and possibly even before that. Property ownership has long been considered a symbol of wealth and was brought over to the United States by European colonists.

If done properly, your real estate properties can pay for itself. The money that you generate from tenants can cover repairs, upgrades, property taxes, and a property manager. Everything that’s left over becomes your cash flow.

Real estate investing also helps communities by improving available housing, maintaining properties, and increasing tax revenues. It’s a win for you, a win for the tenants, and a win for everyone around you.

Passive Income Method #7: Create a Phone App

Market researchers claim that by 2020, the mobile app market will reach $101 billion in revenue. Even if you got only a fraction of that amount, you would still be living comfortably.

We can trace the roots of the mobile app ecosystem back to Apple when they released their app store for the first time back in 2008. Back then, Apple only had 500 apps to download. As of January 2017, they had 2.2 million apps and counting.

The Android market, which later became the Google Play Store, launched 3 months after Apple in October of 2008. By June 2017, they reached 3 million applications and is growing at a rate of 1,300 apps per day.

The most obvious way to make money from your phone app is to sell it for a certain price. However, you can make a lot of money by selling your app for “free”.

There are about 6 different ways you can do it:

  • In-app purchases – Charge users to unlock additional features or new content.
  • Subscription – Require a monthly fee for full access or unlimited usage for the app.
  • Ads – Advertisers pay you to show ads from within your app.
  • Freemium – Users have access to a few basic features and pay an additional fee one-time or recurring for additional features or full access.
  • Crowdfunding – Utilize crowdfunding platforms like Kickstarter or Indiegogo to fund the development and promotion of your app.
  • Sponsorship – Form an exclusive partnership with another company to show their ads from within your app.

Passive Income Method #8: License Your Photos

Do you like taking pictures? If you have a knack for it, then you should consider getting paid for it.

There are a ton of websites online where you can upload your photos and sell them for a fee.

Before we get into that, let’s talk about the different types of licenses you can offer for your photos.

In general, there are 3 general categories you can license your photo under:

  • Exclusive – This limits your ability to offer your photo to multiple users. It also limits the user in how they can use the photo.
  • Non-Exclusive – Allows the same license to be granted to multiple entities.
  • Rights Managed – Peruse basis.

Photos under exclusive licenses tend to sell higher. The only caveat is that once you sell that photo, it can’t be sold again to anyone else.

Now that we got that out of the way, let’s talk about actually selling your photos.

To spare you the trouble of finding websites to sell your photos, I’ve compiled a list of 5 websites courtesy of Penny Hoarder where you can sell your photos for at least a $100 a pop (or more):

  • 500px Prime –  It claims that over 5 million photographers have listed their photos with them. You make 70% net for each license sold. A standard license runs about $250.
  • SmugMug Pro – They offer a generous 85% payout for each image sold. However, you must buy a Pro subscription in order to receive this payout. No free options available.
  • Shutterstock – Earn up to $120 per image download. The more you earn, the more you take home for each image.
  • iStockPhoto – You’ll receive a minimum of 15% of any sales. If you have “Exclusive Status”, your earnings can increase to 45%.

If you want even more ways of creating passive income, check out this article by Business Insider.

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