Passive Income Investments: 2020 Best List

Passive income, while highly sought, is often misunderstood. Adding passive income into your financial portfolio will definitely help you accelerate your financial goals and can increase your earnings tremendously.

However, let us first clear up one major misconception surrounding passive income – the word “passive” doesn’t mean that you are not required to put any work into the business. As a matter of fact, all passive income streams require one of the following elements:

1. Time investment when setting up the company, and also to maintain the business
2. Upfront monetary investment

Earning a residual income requires a combination of the above two items. The passive income ideas presented in this article will require both upfront monetary and time investment.

Passive Income from Upfront Monetary Investment

Just as is the case with any entrepreneurial venture, the following passive income ideas require an upfront monetary investment. Don’t worry, with some of these ideas, you can start with $5.

Dividend Stocks

Dividend stocks are a safe way to earn passive income, and they are a tried and tested investment strategy. For example, established companies like IBM and GM pay their shareholders dividends regularly and quarterly. These payments are from the company’s profits and are safer than the profit or loss from buying and selling stocks. The percentage that a company pays in dividends, compared to their total profits, is called a payout ratio. A payout ratio of 70% generally indicates a stable company.

You do not need to be a financial guru
to invest in dividend stocks. Conduct research to establish which stocks are
performing well. Invest significant amounts of money to receive sizeable
checks.

The other way to go about it is to consistently invest money over a period of time, so that you can amass residual income over time. Open an account with the best brokerage, especially an online one, and receive rewards while doing so.

Peer to Peer Lending

There are people who do not qualify for traditional loans. This is where you come in, as a lender with a P2P lending business. As the lender, you can choose borrowers so as to spread your investment and mitigate your risk. The simplest way to become a P2P lender is by joining a peer lending online platform, for example, Lending Club or Prosper.

On the Lending Club platform, you can earn 4-6% returns on average, in passive income. The set up is pretty straight forward – you lend your money and receive the principal and interest on the loan. A 4.1% median return on cash flow is better than most, if not all, money market funds out there. The Lending Club and similar platforms are an excellent alternative to CD (certificates of deposits).

Peer-to-peer lending is a good way to diversify your investment portfolio. Be careful to lend wisely because if borrowers do not honor their loans, you can lose your investment.

Rental Properties

A rental property that provides cash inflow is a fabulous way to make income every month. However, the only way to make this usually profitable venture an avenue for passive income is by outsourcing the maintenance of the property to a management company. In today’s real estate market, you can buy homes and become a landlord, or, become a limited partner in a large commercial or residential property – online! If you want to learn more about investing in real estate, check out our article on Real Estate Investing.

Invest in Single-Family Units

This is a more traditional path with a modern twist. You can purchase single-family rental units via Roofstock online. The wonderful thing about the Roofstock platform is that the rental income is strongly passive because they do all the work for you, i.e., valuation of the property, inspections, and finding tenants. Do your research on Roofstock and if it meets with your requirements, sign up and start searching for properties today.

Invest in Large Developments

If you want real estate income and experience, without the hassle of becoming a landlord or developing your own property, consider partnering up with a land developer in a project. You do not do any of the hard work, yet receive the tax treatment and income of a regular real estate owner.

An online platform that can facilitate this type of investment is RealtyMogul. With some developers, you can invest from $1,000 and also participate in private placements and REITs, which are typically not offered to the public. Investors have the option of buying an equity share in a property or fund real estate loans.

Please note, with RealtyMogul, you can only invest in crowdfunded commercial real estate if you are an accredited investor who has a minimum net worth of $1,000,000. The RealtyMogul REITs program is open to both non-accredited and accredited investors.

Invest in Agricultural Land

Farming isn’t glamorous, but depending on the crop or produce, it can be lucrative. It is a slow and steady business that pays consistent rent because human beings have to eat. Compared to other types of real estate, farmland is stable and not as volatile. You can become an internet farmer via AcreTrader. Check out our article on 8 ways to profit from vacant land. Or even our article on leasing your vacant land to growers in the cannabis industry.

Accredited Investors

If you are an accredited investor, on the platform EquityMultiple, you can venture into real estate with a minimum investment of $5,000. This platform has a good blend of mixed-use residential and commercial properties, in addition to single-family units.

Money Market Funds and High Yield Savings Accounts

If you want your money to work for you without putting too much thought into it, your best bet is to deposit it in a money market fund or a high yields savings account. The difference between the two is where it’s located and the account type.

Money market funds are provided (location)
by both investment companies and banks and are sometimes FDIC insured.
Meanwhile, high yield savings accounts are offered by banks and are FDIC
insured.

With the rising interest rates, having a savings account can generate a passive income stream, albeit with minimal returns.

CD Ladders

Building a CD Ladder requires purchasing CDs or certificates of deposits from banks, in increments, so that you may earn a higher return on your investment. Banks offer CDs, and because they are low-risk investments, they yield a low return. If you are risk-averse, CD ladders will be a good option.

For example, the following estimates
show the rise of the rates over different periods:

• 2.50% – 1 Year CD
• 2.90% – 2 Year CD
• 3.05% – 3 Year CD
• 3.10% – 4 Year CD
• 3.15% – 5 Year CD

While the returns are not as impressive as the other items on this list, CD ladders are better than nothing. If you find the concept complicated, stick to money market funds or high yield savings accounts.

Annuities

Annuities are an insurance product that
can provide you with monthly passive income. The only benefit of investing in
annuities is that they have zero risk. Otherwise, they are not necessarily a
great deal. Because of the vastly differing terms, before purchasing an
annuity, it’s best that you talk to a trusted financial advisor.

Invest in the Stock Market Automatically (Robo-advisor)

If choosing dividend-paying stocks doesn’t interest you, you can still invest passively in the stock market via a robo-advisor. A robotic financial advisor (robo-advisor) spends around 10 minutes answering your questions and setting up your account. Thereafter, the system takes over.

One of the more popular robo-advisor platforms in the market is Betterment and Wealthfront. With both platforms, you set up your account to invest automatically, and then they handle the rest for you. Betterment has one of the lowest fees, and they make automatic stock market investing very comfortable. Acorns has a slightly different format. They automatically invest a user’s spare change, starting from $1 per month.

Some extra features offered by these
platforms are:

• Consultations
• Tax advice
• Professional human oversight

Real Estate Investment Trust (REIT) Investment

If you are a non-accredited investor
or are nervous about investing directly in real estate, don’t worry, you can
make use of REITS – Real Estate Investment Trusts.

REITs are investment vehicles that hold property. You, as an owner, benefit from the income (or loss), gains, refinances, and sale on the property. For example, when the value of the shares appreciates, or when rental income is collected, the investor earns money. FundRise is a popular online platform where you can invest in a REIT, starting with a minimum amount of $500.

Refinance your Mortgage

While you may think that refinancing a mortgage for passive income is strange advice, this strategy can free up a significant portion of your income, while saving you $100,000s during the life of your loan. That should be good enough reason to refinance. Shop around for the best rates on LendingTree.

Reduce or Pay Off Debt

You will make incredible progress in
your financial portfolio if you reduce or pay off debt. Think of this strategy
just as you would, refinancing your mortgage. The best thing about paying off
debt is the straight return you receive.

For example, paying off a credit card that
has a 10% debt will represent a massive 10% return on your money! It may be
helpful to refinance, e.g., a student loan debt, credit card debt, etc.

The two approaches that you can use to manage debt is; consolidate or refinance; alternatively, you can pay down a balance.

Credit cards: If you have credit cards
or other forms of debt, consolidate them with a personal loan. This would be
your best option if you want to lower interest but are not able to pay off any debt
within a year. Transfer debt to a different card, with an introductory APR for
balance transfers. Some credit cards do not have balance transfer fees.

Obtain a 0% balance transfer card and use the time to pay off debt. Some credit cards offer 15 months at 0%, without fees. This means that you will have more than a year to pay off any debt.

• For student loans, get better interest rates
  through refinancing.

Get more information from Credible without a hard credit check.

Become an Entrepreneur

One way of becoming an entrepreneur
while earning passive income is by becoming a silent partner in a start-up or
already established business. While this could be risky, this format has the
potential for high returns.

For example, several years ago, Uber
and Lyft were looking for investors. Today, both companies are worth billions
of dollars, and new investors can only reap benefits if they got acquired or
went public via an IPO – that’s risky. To reduce risk, you can take the safe
investment route by lending many companies small amounts of money via small
bonds.

Worthy Bonds and StreetShares are online tools where you can invest in bonds which provide a 5% return annually – passively. You can get started with Worthy Bonds for as little as $10, and $25 with StreetShares.

Receive Cash Back for Shopping and Dining

Some apps and websites give cash back for everyday expenditures. Some favorites are:

eBates: Shop online and earn cashback
through eBates. The standard cashback amount on purchases is 2-5%. There are,
however, special double-cash-back seasons and other incentives. You will get
your cash through PayPal or quarterly checks.

Seated: This app gives a user rewards when they dine out. Dine at a restaurant recommended by the app, upload an image of the receipt, and receive Seated rewards. You can use your rewards to purchase Amazon, Starbucks, and Lyft gift cards. Swagbucks: Earn points when you shop online, watch videos, take surveys, and more. Trade-in your SwagBucks points for gift cards or cashback. Payments are disbursed through PayPal.

Save for Retirement

The ultimate passive income stream is a retirement fund. Each dollar saved is money available for you to spend when you stop working. Saving for retirement also helps you in the present moment – putting your income into a 401k lowers your taxable income. Most employers match 401k contributions, up to 3%-5%. In addition, consider investing in a Roth IRA.

Passive Income Ideas That Require an Upfront Time Investment

The next section of this article will focus on passive income ideas, which require an investment of time. You will need sweat equity to make this investment happen. The advantage of the following approaches is that they are incredibly affordable. You can get started with a personal blog and or website.

Sell eBooks

Amazons platform has enabled self-publishing
to become mainstream. When purchasing a book from Amazon, there’s a good chance
that you are buying a self-published book. Self-publishing is ridiculously
easy, what with the simple processes. 

First, you’ll need to write and edit an original book, create a cover, copyright it, and upload it to Amazon’s Kindle Direct Publishing. An easy process doesn’t translate to instantaneous success. The books that you author will also require a substantial amount of upfront marketing, e.g., on social media platforms. After that, the sales will gain momentum and turn into a passive income stream.

Sell a Course on Thinkific

Thinkific is an online platform where the users are students who sign up for the video courses that cover a variety of subjects. If you create a video course, you can sign up with Thinkific, who will give consumers access to users who will purchase it. Thinkific is a fantastic option for those who are knowledgeable in a specific subject. Traditional tutoring becomes a passive stream of income with Thinkific. You don’t even have to create the courses yourself. Www.urbizboost.com offers full service course creation for reasonable prices.

Sell Stock Photos

Ever wondered where your favorite blogs, websites, and magazines get their photos? They normally purchase them from photo websites. Even if you are a novice photographer, you can submit your photographs to photo sites. The largest photo selling marketplace is DepositPhotos. Every time someone purchases your photo on DepositPhotos, you receive a commission.

Licensing Music

You can earn a royalty from your music if you license it, and someone chooses to use it. The music is often licensed for commercials, YouTube videos, podcasts, etc.

Create an App

If you own a tablet or smartphone, it’s safe to say that you probably have a couple of apps downloaded. However, do you have an amazing idea for an app? Consider hiring a programmer to bring your app to life. You can sell the app on Google Play and earn residual income.

Affiliate Marketing

Affiliate marketing is when you partner with a company to sell their product. In essence, you become their affiliate and earn a commission with every purchase. This method is especially advantageous when you have a website and or blog, where you can provide the users of your sites with links to products that contain your unique affiliate code. Affiliate marketing requires a good deal of patience for it to build up and make substantial amounts of money.

Network Marketing

Multi-level marketing or network marketing has been on the rise since the mid-’60s. Companies such as AdvoCare and Avon are all network marketing companies. You earn a passive income by building a team, which is referred to as a down-line. You earn commissions from your team without having to do much. Please note, if your down-line doesn’t sell, you don’t make any money. So, you will need to invest a lot of time in hyping up and training your team to become motivated sellers.

Design T-shirts

Café Press is a platform that invites users to custom design T-shirts. Popular designs that make sales earn royalties. Amazon has a similar service called Merch by Amazon, where you upload your designs, and Amazon handles the rest, i.e., they make, pack, and ship your t-shirts.

Create an Online Store

Running a store sounds detailed and
time-consuming. However, services like Amazon FBA make owning an online shop
that much more straightforward.

Sites like Shopify provides you with
an e-commerce store account and lovely, convenient themes. Shopify enables
anyone to begin an online store because it is drop shipping friendly. With drop
shipping, a store owner doesn’t need to have inventory on hand.

Dropshipping works as follows:

1. Design or source a fun product, e.g., an
   “Coffee makes me chuckle” coffee mug
2. Connect with a manufacturer who will produce
   or who already sells the mug
3. Create and customize your Shopify or Amazon
   store
4. When a customer purchases an item, you notify
   the manufacturer to mail the item to their address. To make drop shipping a
   passive income stream, you should hire an affordable virtual assistant to
   manage the store daily
5. The manufacturer receives payment from you and
   ships the product to the customer

Sell Digital Files on Etsy

Sell your artwork on Etsy, where users look for unique and original products. For example, if you are working on your home décor, you can purchase digital files of artwork on Etsy. An Etsy seller will usually make a bunch of wall art, digitize it, and list it on Etsy for convenient downloading. Other popular digital files on Etsy are monthly planners, bumper stickers, etc. If you are into graphic design, this could be a lucrative residual income idea

Create YouTube Videos

YouTube gets billions of views per
day. This vast audience is always craving for new content.

You can create videos on any topic.
Start by asking:

• What kind of videos do I/other people find
  entertaining?
• What cool subjects can I cover, that other
  people AREN’T talking about?
• What information do I have that others don’t?

Find something unique, whether it be humorous,
educational, or quirky. Market your channel or various social media platforms,
e.g., Instagram and Twitter, and new YouTube viewers will subscribe to your
channel. With a substantial number of viewers and subscribers, e.g., 1000
subscribers, you can pursue advertising revenue, which may lead to significant
passive income. Content creators are very competitive and add new videos to
YouTube every couple of days. So, you will need to figure out a way to
distinguish yourself from the crowd.