"Passive income" has become quite the buzzword. With the rise of the internet age and the sharing economy, the ways to earn income while you sleep (or lounge on the beach) appear to be multiplying by the day. This is good news at a time when saving for retirement is increasingly challenging. Here's a look at some of the many ways you might be able to stockpile cash for retirement, based on input from financial advisers and personal finance experts.
Investing in real estate is one of the most popular suggestions from financial advisers for generating passive income. This might mean buying property that you rent out, or even house flipping. Want to make this type of income even more passive? Use a property management company to handle the day-to-day issues that come up with tenants and maintenance, said Deacon Hayes, founder of Well Kept Wallet. Or simply invest in properties that are being flipped, rather than do the flipping yourself. "You can save the money generated by doing this or invest it for even more additional income for your retirement," he said.
If you don't have the money to invest in real estate entirely on your own, you can still get in on the action through real estate investment trusts. "REITS are an option that lets you pool your money with that of other qualified investors, so you can invest in real estate properties that are otherwise unavailable to you," Hayes said. This way, you don't have to put in the time-consuming work of finding properties and managing the investments. "There are experts who do this part for you, making all of the income passive."
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Joe Fairless, co-founder of Ashcroft Capital, calls this the best-kept secret in generating passive income from real estate. "In apartment syndication, accredited investors provide capital for a general partner, who then buys an apartment building and shares the returns," said Fairless, who has written books on the topic. The investors, referred to as limited partners, do not have any responsibility or control over any part of the process; they simply invest their money and decide how they want to receive the profits. "A limited partner investor is compensated either with a return on their investment, a profit split, or distribution from a refinance or supplemental loan, all of which are passive income opportunities," he said.
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As you approach retirement, your current home may begin to feel too big and costly. Instead of viewing this as a liability, turn it into an opportunity. "If you have been savvy enough to have bought a home at a young age, it will likely have been paid off by the time you are retired," said Ramya Menon, editor of Bayut, a real estate website based in the United Arab Emirates. "You can release some of the equity in your home to use as a deposit to buy another property." You can either relocate to the smaller property and rent out your current home to generate passive income, or rent out the smaller home and charge about 25% more than the mortgage payment for rent to generate income, while simultaneously having someone else pay off the mortgage on the investment property.
Having your own business — without having to actually run it — is another way to generate passive income. "Obviously it takes the right person to manage the business, because it must be someone you can trust," Hayes said. "If you don't have to do the hands-on, day-to-day work, you can sock away money to use in the future."
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Not familiar with peer-to-peer lending? It allows individuals to borrow money directly from other individuals, rather than going to the bank when in need of a loan. "The lenders can then collect interest on the loans the same way financial institutions do," said Craig Cecilio, co-founder and CEO of DiversyFund. "The returns generated from the interest produce a passive income stream for lenders." Upstart, LendingClub, and Prosper are just some examples of platforms where you can engage in peer-to-peer lending.
Robo advisers such as Betterment allow you to put stock market investing on autopilot. "Typically, these platforms ask you to select your level of risk and your financial goals," Cecilio said. "From there, algorithms choose the best stocks for meeting these goals and automatically purchase shares."
No list of ways to generate passive income would be complete without mentioning the elephant in the room. And that would be, of course, sites such as Airbnb and Vrbo, among others. If you have a room, granny flat, summer home, literally any type of space where someone could stay, there are plenty of ways to rent it out and generate some additional income.
Not ready to rent out your place on Airbnb just yet? "If you're not sold on the idea of having overnight guests, you can also list your house, office, or yard as an event space," said Kathy Kristof, editor of SideHusl. "What kind of event? Birthday parties, baby showers, corporate team-building exercises, anniversary dinners, photo shoots — whatever your particular space lends itself to." This type of rental typically is booked by the hour or in four- to 12-hour blocks, Kristof said. Sites that facilitate event rentals include Splacer, PeerSpace, and Thisopenspace.
Is your home or yard the perfect setting for a TV series or movie? Consider listing it as a potential location on an event rental site or on Giggster, Kristof said. Operating primarily in Los Angeles, San Francisco, and New York, Giggster typically arranges 12-hour site rentals to producers of professional and student films.
Okay, so maybe your house is not a sprawling mansion where TV shows can be filmed. But all is not lost. Do you have a spare set of wheels in the driveway? Kristof said it's possible to make decent money renting vehicles to travelers via such sites as Turo. This car-sharing marketplace will pay you between 60% and 85% of the trip price via direct deposit within five days after a rental has been completed. The site also covers you with up to $750,000 in liability insurance.
Do you have a classic or distinctive car? Another option for making passive income is renting out vehicles for use in movies using Giggster, the same site that lists homes as filming locations, Kristof said. You can dictate whether the car can be driven by someone else or whether you prefer to drive it yourself.
Another way to earn passive income with your car is to rent advertising space on it. Naturally, a variety of websites have popped up that allow you to do this. Some of the top choices, according to Kristof, include Wrapify, Carvertise, and My Free Car. They pay between $50 and $450 a month in exchange for plastering your car with (removable) advertising.
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Don't have extra wheels to rent? You can also rent out the spare parking space in your garage or driveway to generate some passive income, said Ryan Underwood, who's with U.K.-based YourParkingSpace. Online platforms such as his allow users to advertise for free to a wide audience of drivers in need of a parking space. "It's a good way of earning extra cash each month with minimal effort," Underwood said. Pavemint and CurbFlip are platforms for doing this stateside.
There appears to be no end to the things you can rent out these days to generate passive income. Another option for people with extra space in their home or garage is peer-to-peer storage rental. "Websites like HopperStock act as a marketplace between the renter and host, so that you can earn a passive income from unused spaces in your home," said Sebastian Edwards of Online Passive Income 101.
Investing in a website — a profitable one — is yet another approach to developing a recurring income stream that can help you save for retirement. "I've personally bought multiple websites that return a few hundred dollars to a few thousand or more in profit every month," said Stacy Caprio of Her.ceo. "And once you make your initial investment back, each month's income becomes pure profit, something not possible with most types of investments." A variety of platforms broker the buying and selling of sites, including Flippa, EmpireFlippers, and Latona's. It's crucial to find a site that is already profitable, Caprio said. This could be anything from an online store to niche content site for hobbyists.
While investing in the stock market does come with risks, Mike Pearson, founder of Credit Takeoff, said one of the best vehicles for capital appreciation and no effort on your part is high-dividend-paying index funds. "For example, the Vanguard High Dividend Yield Index Fund invests in blue-chip companies that pay good dividends, and its current dividend payout is 3.22%," Pearson said. "If you had invested $10,000 into this fund in 2009, it would now be worth over $37,000, all truly passive." Additional examples of dividend funds include the Columbia Dividend Opportunity Fund, the Vanguard Dividend Growth Fund, and the T. Rowe Price Dividend Growth Fund.
Do you have a literary bent? Is creative writing your thing? Then put that talent to good use. Entrepreneur and digital marketer Jeremy Harrison points out that it's possible to self-publish ebooks and paperbacks through Amazon's Kindle Direct Publishing for free and offer them to a worldwide audience. "This is an awesome way to write about something you are passionate about and share it with the world, and build passive income all at the same time," Harrison said. "I have books that were published years ago that still make me hundreds of dollars each month consistently."
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Blogging has been a craze in passive income generation for years now, and it offers a variety of ways to earn revenue. But how to begin? "Find a niche that has an audience but not a ton of competition and write SEO-optimized articles that will continuously bring in traffic over time," said Rebecca Safier, founder of Remote Bliss. Easier said than done, of course. But once your blog is up and running, you can place ads on it through a network such as Google AdSense or use affiliate marketing to generate revenue. "As an affiliate marketer, you refer readers to a product or service with your unique affiliate link. If someone clicks through your link and buys your recommendation, you'll receive a small commission of the sale," Safier said. "With enough sales, you could make significant revenue from your blog."
Do you own a boat that doesn't get used all the time? There are now sites that let you rent it out to others to generate income, Kristof said. One option is GetMyBoat. "Large crafts are often rented out with the services of a captain, the cost of which you can fold into the rental rate."
Similar to that boat sitting in the slip not getting enough use, an RV that isn't seeing enough action can be rented out on a sharing site to generate some cash for retirement. RVshare, one of the largest of these platforms, said its users earn anywhere from $10,000 to $22,000 a year.
Is there no end to what you can rent these days online to make some passive income? Apparently not. You can now rent out a saw, nail gun, power washer, or carpet cleaner, among other tools. You can list such items for rent either by day or by the hour through sites such as Fat Llama and Loanables. The typical tool rents for between $4 and $20 per day, according to Kristof.
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If you have a closet full of Jimmy Choo shoes or Diane Von Furstenberg clothing you've grown tired of, or can spot a gem at the thrift store that can be flipped for cash, a cottage industry has developed online for selling such duds. Make passive income after listing it all on Poshmark, ThredUp, and Tradesy, among other options.
One last suggestion to consider: If you have a garage full of unwanted stuff, or household clutter you want to get rid of, turn it into extra cash by selling it online. Marketplaces includes eBay, OfferUp, and Craigslist.
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