5 Strategies For Earning Passive Income
I recently wrote a post on the importanceof adding passive income to your income stream. Passive income can make yourlife a whole lot easier by increasing the amount of money that you earn anddecreasing your dependency on your work income. A passive income stream caneven shave years off your active working years until retirement. Today, I wouldlike to take a look at a couple of strategies for generating passive income.Remember, passive income is money you make even when you’re sleeping and notdoing anything. Some people like to think of freelance work as “passiveincome.” That’s not true, it would be considered an alternative stream ofincome, not passive income. These ideas are ones that will be making you moneyeven when you’re not doing anything:
1.Dividend Investing
One of the easiest ways to generate passiveincome is by investing in high yielding dividend paying stocks. You can buyhigh yielding stocks like Verizon or AT&T which are currently paying almost7% in dividends. Real estate investment trusts (REIT) are also great incomeproducing investments. REIT’s are required by law to pay out 90% of theirearnings back to shareholders. REIT’s like Hatteras Financial are yieldingnearly 15%.
2.Rental Properties
It was quite popular to buy a property andrent one out during the early 2000s. Many property speculators left the marketafter the real estate market tanked in 2007. Now is a great time to invest in arental property. With federal regulators tightening up lending regulations, itwill be difficult for potential homebuyers to obtain financing for a home. Thereal estate market will be overrun with individuals looking to rent a house inthe future. The rental payments will be a nice income stream for the shrewdinvestor.
3.Royalties
You can earn royalties for life off of anycreative work that you develop. If you are a skilled writer, write a book or aplay. Submit your finished work to a publisher or sell it independently. If youare a great singer then you can record a CD. You can market it to a major labelor sell it yourself online. Once you have finished your masterpiece, you cancollect your royalties. Royalty payments are typically based on sales volume.Remember to obtain a copyright or patent on your work. This entitles you toreceive residual income for years into the future.
4.Website
Using the internet as a means for makingmoney has grown dramatically since the 90s. Starting an ecommerce business isnot the only way to make online anymore. You can create a website and get paidby ad companies. Advertisers are always looking for new sites to market theirproducts and are willing to pay large sums to do it. You can register withGoogle Adsense, Yahoo Publisher, Commission Junction, and WidgetBucks. You caneither go the route of selling a product on a website or creating aninformation-based website. This could be considered not passive if you’reactively running the website, maintaining it, and writing content. But, if youhire someone else to manage it, then it could be something that you benefitfrom in a passive way.
5.Limited Partnerships
A limited partnership is a partnership inwhich one or more of the partners is a limited partner. Limited partners havelimited liability and no input in the day to day operations of the partnership.All income is deemed as passive since limited partners are not activelyinvolved in the management of the partnership. Limited partnerships oftenrequire an initial investment in order to participate in the partnership’sprofit sharing structure. One of the most popular limited partnerships is amaster limited partnership (MLP). MLP’s are publicly traded limitedpartnerships that pay out quarterly distributions to investors.
Which of these five forms of passive incomedo you think is the right one for you? Do you have any other good ideas when itcomes to ways to generate passive income streams?
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