Finance July 7, 2016 Last updated April 23rd, 2021 1,211 Reads share

How To Create A Passive Income With These Tips

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Passive income is one of the things most people talk about nowadays. It seems to be a shared dream of millions yet only a relatively low percentage of them manage to escape the tyranny of a punch clock.

Why is it so? Let us try and figure it out.

Misconception About Passive Income

In a somewhat exaggerated fashion, a usual picture of what passive income looks like is this. Hire a bunch of freelancers from India who are ready to work for food, have them create an information product dealing with some super niche topic, arrange an online ad campaign and wait for the money to start streaming in. There are many reasons why such an approach is very unlikely to work, but the most important is the general misconception of your own role.

The thing is, money can’t be created out of thin air. In order to create money, you have to invest time, ideas or even more money sometimes. Passive income is not as passive as you may think , any passive income scheme requires maintenance and the only difference from truly active income is that the amount of this maintenance is usually less.

If you have no start-up budget or no idea on how to create such a budget and don’t want to invest your own time then you’re out of luck. These three elements can replace each other to a certain extent, but you can’t go without all of them.

If you have spare funds, you can listen to the news and look for opportunities. For example, a recent report on Google Fiber shows that in a very foreseeable future gigabit Internet connection is going to become a reality in many American homes. While being accompanied with, on average, an 11 percent growth of rent. An excellent time to invest in real estate, but if you don’t have capital to go on this news is worth nothing to you.

How You Can Acquire Passive Income

If you’re reading this article chances are, you belong to the category of people who are looking for ways to make money without making a large upfront investment. If you want to do so, it’s possible. Don’t expect the results to be quick, enormous and effort-free.

Micro-Niche Websites

Probably the most affordable and easiest way of acquiring passive income is through online advertising. It won’t require enormous investments like real estate, is less volatile than the stock market and can serve as an excellent source of experience that may come in handy when and if you tackle more complicated and high-risk ventures.

Earning a living online starts with finding a low competitive small niche, picking up keywords that wouldn’t be too expensive to work on and building a small, cheap but clean-looking website to use it with Google AdSense or Clickbank. All your investments boil down to the time you spend researching the niche and keywords and building some backlinks to the site. Websites are easy to make and can easily make on your own.

Real Estate

Real estate isn’t just a passive income option viable only for those with a couple hundred-thousand tucked into an old safe. With services like Airbnb allowing you to rent your own living space for short periods of time, you can start making money off it right now. If, for example, you own a house that is getting too expensive to maintain it isn’t necessary to try and sell it off immediately. Renting it out and moving to an apartment yourself you can make quite a bit of headway. Just make sure that local legislature doesn’t prevent you from it.

Ebooks

Previously we’ve been rather sarcastic about this way to passive income, but it doesn’t mean that ebooks as such are to blame. You simply have to understand that in this situation both passivity and income come after a great deal of work. If you want to write and market an ebook you have to do a lot of research to find a topic that isn’t widely or deeply covered in existing literature. Research to improve your own knowledge of the subject and write and compile to create an end product. You may delegate some aspects of the work to freelancers, but not everything.

Equities

Equities can be called a middle ground for the average person seeking passive income. The one who is neither looking for completely risk-free investments with microscopic income, nor ready for the prospect of losing an entire investment for a potentially higher profit. When investing in mutual funds, you can limit yourself to choosing a relatively reliable equity (e.g., 10 years’ track record, an average rate of return per year at least 7% per year over the last 10 years, and so on) and not thinking about it much later on.

Peer-to-Peer Lending

Another interesting option slowly but steadily gaining popularity in the recent years is peer-to-peer lending, often viewed upon as a viable alternative to bank loans due to their easier availability. Although it may look fishy for some people, p2p lending can provide returns of about 7 to 10 percent per annum. The idea is that when somebody uses a p2p lending platform to get a loan, the sum of the loan is distributed among all investors in the platform, thus mitigating their risks. A borrower can default, of course, but you won’t lose much off every particular.

As you may see, getting passive income is quite possible. If you are ready to do a bit of work for your passive income, then it is alright. If, however, you are looking for ways to grow money on trees, it may be a bit problematic.

Images: ” Passive Income and Financial Freedom Concept. Hand opening a wooden door and found a new world to success.  / Shutterstock.com

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Melissa Burns

Melissa Burns

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