Build an investment portfolio that pays out dividends (Stocks / Bonds / Mutual Funds). Dividends are payouts that companies give to their investors as a portion of their earnings. They’re often paid out quarterly. If you’ve already got an investment portfolio, it’s time to take a good look at which stocks, bonds, or mutual funds you own. You’ll see consistent returns from the ones that pay dividends. This is a fantastic way to earn passive income. Invest once and watch the returns pile up.
If you’re familiar with the phrase “don’t put all your eggs in one basket,” you know that it applies to just about any area of your life including—and especially—your finances. In addition to retirement becoming an ever-elusive goal, no one has guaranteed job security so by diversifying your income you can feel more secure about saving for your future. You’ll be less likely to find yourself in credit card debt and happier as a result of being financially secure.
If you’re familiar with the phrase “don’t put all your eggs in one basket,” you know that it applies to just about any area of your life including—and especially—your finances. In addition to retirement becoming an ever-elusive goal, no one has guaranteed job security so by diversifying your income you can feel more secure about saving for your future. You’ll be less likely to find yourself in credit card debt and happier as a result of being financially secure.
I’ve been researching a path to financial independence, and the wealth of knowledge here is amazing, but at times overwhelming. I’m honestly not quite sure where to start. Whether it be paying off debt (which I’ve always heard is priority 1), or sinking money into realtyshares or CDs for growth. I’d love to generate a passive income (in a few years time) to supplement some of my day job to have time to spend with my little one during her golden childhood years, but not sure if there’s even a right order to go about it.
Establishing residual income allows you to accumulate wealth faster, have a more flexible lifestyle and maintain a diverse financial portfolio. As with any successful investment, hard work is required. With residual income, however, that work tends to be upfront. Once your revenue stream is established, the work and time involved is significantly lower than active income sources. With residual income, you’ll secure funds for your future, have a better idea of where you stand financially and enjoy peace of mind knowing you’re maintaining lucrative, long-term investments.  
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If you know anything well, a place, how to fix something, how to make something, how to do something, you can write a guide for it. You can sell your guide as an e-book, offer it as a download for a fee on your site or reach out to bloggers with similar content and ask if they will offer it as a paid download on their website (for a price of course).

It’s a (mostly) short term, higher risk, higher reward place to invest cash that has a low correlation with the stock market, but is far more passive than buying and managing properties, has more opportunity for diversification than private placements (minimums of 5-10K, rather than 100K), and most of the equity offerings (and all of the debt offerings) provide monthly or quarterly incomes. Unlike a REIT, you can choose exactly which projects you wish to invest in.
4) Treat Passive Income Like A Game. The only real way to begin your multiple passive income journey is when you are making active income. The initial funding has to come from somewhere. Hence, treat passive income as a game that has various levels. If you fail to achieve one level, it’s not the end of the world since you still have active income and can restart. Furthermore, a game is meant to be played with integrity. Using shortcuts (non passive income streams), someone else’s income as a supplement (spouse), or one-offs (capital gains) does not count. The primary purpose of any game is to bring enjoyment to the player and beat the boss.
The main advantage of the residual income metric is that it measures excess return earned by a department in absolute terms. A positive residual income means that the department has met the minimum return requirement while a negative residual income means that the department has failed to meet it. Return on investment (ROI) is another metric which measures return in relative terms.

Do you have any items you don’t use all the time that others would like to borrow? Useful items like a truck, trailer, trampoline, kayak, or even your own yard could earn you passive income as rental items. This also includes renting out spare rooms in your house with the help of websites like Airbnb. Hop on your favorite social media site, upload pictures of your items, set a price, and tell the world they’re ready for rent.
If you have decent writing skills you can start a retainer writer business. Mastering your pitch will put you in a position where you can land awesome writing gigs. You can then complete the work yourself as you establish yourself in this space, and from there, the sky is the limit. Outsourcing is key to creating a passive income stream from this idea.
The second category of passive income is drawing on sources that do not require capital to start, maintain, and grow. These are far better choices for those who want to start out on their own and build a fortune from nothing. They include assets you can create, such as a book, song, patent, trademark, Internet site, recurring commissions, or businesses that earn nearly infinite returns on equity such as a drop-ship e-commerce retailer that has little or no money tied up in operations but still turns a profit.

Awesome article…if this does not give somebody a clear roadmap, they probably were never going to get there in the first place! I’m kind of like you trying to figure out where to place “new” money and maturing CD’s in this low interest environment. Rates have to go up eventually…I dream of the days again where you can build a laddered bond portfolio paying 8%. I plan for a 5.5% blended rate of return, with big downside protection.
I’m hoping to have about 10g saved by this time next year, which I know is nothing huge but seeing as I’m at 2.5g right now and owned 3 dollars to my name on Aug.9 I’m pretty happy with my progress :). But at my age, without a stable career, while working part time and having to go to school full time, what is a realistic path I could pursue to create passive income online, or even income that requires effort such as writing, but one that is more flexible than working in a stationary low-paid position for 10 dollars an hour? I need to work for now to show taxable income for the government to get my residency, but after that I know my time could be better served than earning 8 dollars an hour, I’m just not sure where to go from here. I considered flipping domain names, or penny stocks, or sports gambling, but again that’s not passive income and in reality they are more or less just forms of me gambling.

As for me, I started focusing on passive income last year, but have owned rentals for 5 years. $25k now outside retirement accounts in mostly real estate. Looking to invest another $500k cash into real estate to get about $65k, and then 1031 under performers next year to hopefully boost that a bit higher. Heavy in real estate, but feels lower risk than the stock market to me if you have cashflowing properties. Real estate is inflation adjusted, and built in cashflow raise when the loan pays off.
If you have decent writing skills you can start a retainer writer business. Mastering your pitch will put you in a position where you can land awesome writing gigs. You can then complete the work yourself as you establish yourself in this space, and from there, the sky is the limit. Outsourcing is key to creating a passive income stream from this idea.
However, the RI-based approach is most appropriate when a firm is not paying dividends or exhibits an unpredictable dividend pattern, and / or when it has negative free cash flow many years out, but is expected to generate positive cash flow at some point in the future. Further, value is recognized earlier under the RI approach, since a large part of the stock's intrinsic value is recognized immediately – current book value per share – and residual income valuations are thus less sensitive to terminal value.[5]
So many great tips in this big post, thanks! I think it’s so true that people should focus on the things they do well at and are interested in. And yes save, save, save in the beginning and throughout. I have several interest and dividend earning investments and am looking to expand further. Diversification is a great goal for all of us so we can avoid having all our eggs in one basket.
If you need cash flow, and the dividend doesn’t meet your needs, sell a little appreciated stock. (or keep a CD ladder rolling and leave your stock alone). At the risk of repeating myself, whether you take cash out of your portfolio in the form of “rent”, dividend, interest, cap gain, laddered CD…., etc. The arithmetic doesn’t change. You are still taking cash out of your portfolio. I’m just pointing out that we shouldn’t let the tail wag the dog. IOW, the primary goal is to grow the long term value of your portfolio, after tax. Period. All other goals are secondary.
1) If your property is not under rent control, you have the ability to raise rent to market prices with proper warning. In SF, I have to give tenants a one month warning for up to a 10% increase and a two month warning for up to 60%. Rent control limits to an inflation index, usually around 2% a year, which is why initial pricing and tenant turnover is important for better profitability.
What I Do: I’ve set up multiple investment accounts outside my main operations bank that deals with working capital e.g checking, paying bills. By transferring my money to a couple brokerage accounts and two other banks as soon as it hits my main bank I no longer have temptation to spend on frivolous things. As a result, I can wake up 10 years later and reap the rewards of compounding. My 401(k) is the best example where constant contributions over 18 years has grown to over $500,000 without any savings pain given it just became a part of life. Real estate is also a fantastic asset class for the long term. It’s fantastic to enjoy your home, pay down your mortgage each month, and end up with a paid off asset that has likely appreciated during your time of ownership. 
When done correctly, investing can be a great way to generate residual income. There are many different types of investments you can choose from to earn income passively — whether you choose to purchase high dividend stocks, try peer to peer lending, or choose to invest in real estate. No matter what you choose to do, make sure you do your research first and talk to a tax advisor to ensure you understand your specific situation and what option is best for you.

2. Real Estate: Real estate is #2 for one simple reason, leverage – using smart debt and other people’s money. When looking at real estate rents and the potential for income real estate provides, it is the trifecta of residual income. First, a home or rental property can appreciate, so capital appreciation is the first long-term benefit of owning a home. Second, rent. Other people are paying the mortgage, insurance, property taxes and maintenance while you own that piece of real estate. Third, tax protection. Rental income is taxed at a lower rate than ordinary income and you can depreciate real estate by taking a paper deduction on your annual tax return not to mention expensing the cost of mileage, mortgage interest, and updates to the property. Rentals done right can generate almost double what the stock market can in dividends and interest. The fourth and maybe most hidden, but important benefit is that over time rent’s rise, protecting your cash-flow against inflation, while your mortgage interest can be at a fixed rate potentially.
The most liquid of the private investments are investing in equity or credit hedge funds, real estate funds, and private company funds. There will usually be 6 month – 3 year lockup periods. The least liquid of the private investments are when you invest directly into private companies yourself. You might not be able to get your money out for 5-10 years, depending on the success of the company and upcoming liquidity events.

Online courses have exploded in the past five years. Experts and creators can now create video courses to teach others their craft. A course can be about anything that people want to learn. Friends of mine have created courses and say the amount of effort is similar to writing a book. But once its done and starts to sell, it’s a solid passive income stream.
There are many people who get paid vast amounts of money to become the CEO of a company, play professional sports, or star in a movie. Earning a high active income is often a lot of hard work and requires a dedication beyond most of us. It’s also limited because no matter how much money you get paid you still need to show up to work to earn your money.
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