28 Ways to Create Extra, Passive Income

Today we’re finishing up some thoughts from Passive Income, Aggressive Retirement by Rachel Richards, which I think should have been titled “How to Become Financially Independent by Creating Multiple Streams of Passive Income”. Haha!

If you missed parts one and two about this book, check out Passive Income, Aggressive Retirement and Five Categories of Passive Income and How to Evaluate Them.

I really liked this book and if you haven’t had the chance to check it out yet, you should certainly add it to your reading list.

In this post we’ll get into the 28 passive income ideas the book covers and I’ll share my take on them.

If you recall, the book lists five categories of passive income as follows:

  • Royalty Income
  • Portfolio Income
  • Coin-Operated Machines
  • Ads and E-commerce
  • Rental Income

Now let’s take a look at the ideas under each category…

Royalty Income

For each category the author lists a brief summary of time and money costs readers can expect (in general) from the category.

She summarizes this one as follows:

Requires mostly time; minimal or no money

Then she lists nine ideas:

  • Books, eBooks, audio books
  • Music
  • Photography
  • Downloadable content
  • PODs
  • Online courses
  • Software or app development
  • Franchising
  • Mineral Rights

Here are my thoughts on the category as well as her ideas:

  • Generally this category requires a TON of time for the chance of little to low payout. Some hit it VERY big here, but those are few and far between.
  • It also requires at least one of two things that make the category mostly a crapshoot IMO: luck or unique talent.
  • As such, this category isn’t a favorite of mine since it’s likely a big time suck for no return.
  • I have thought about writing a book, but there’s so much time involved and the payout is likely low — I can probably make more money simply by writing blog posts (more on that in a category below). That said, the author of this book makes several thousand dollars a month on book royalties without being Dave Ramsey or Suze Orman, so maybe it’s not as hard as I think it is.
  • I think a course is similar to a book in the initial time commitment, but a course (or downloadable content or print on demand (POD)) has a much higher chance of succeeding at a much higher price point. So I’m keeping an online course on my “maybe” list.
  • I give a complete “no” to music and photography. I have no talent in these areas and even for people that do, the chance of creating something with any meaningful income is very low indeed IMO.
  • Software or app development, franchising, and mineral rights are all out based on skill set (or lack there of), knowledge (don’t have it), and interest (don’t want to learn it since it sounds unappealing to me).

So from this category, online courses is the only one I’m interested in at this point.

Portfolio Income

She summarizes this category with:

Requires no time; lots of money

I’m your Huckleberry. This category is just my game. Hahaha!

Her seven ideas here are:

  • Dividend Income
  • Bond income
  • Interest income
  • P2P
  • MLPs
  • REITs
  • Crowdfunded real estate

Here’s my take on this category and these ideas:

  • As you can tell from my comments above and from reading this site, this is a category I have used in the past, am currently using, and will probably use throughout the rest of my life. I like that it’s pretty hands off for the most part (or high on the “passive” scale if you prefer).
  • I earn dividend income from my index funds (dividends aren’t the primary reason for investing in stock index funds (growth is) but they do throw off about 2% per year in cash) and have invested specifically in dividend stocks to generate extra cash. I’ll be adding to the latter over time as opportunities present themselves.
  • I am not a big bond fan primarily because interest rates are so low they will eventually have to go up, which will kill current bondholders. So I avoid them.
  • I earn interest income in a couple ways. The best is investing in private real estate loans. I also earn interest from cash in “high yield” accounts. It’s a joke.
  • I have spent several years liquidating my P2P holdings. I should be completely out next year. The returns just weren’t there for me, so I moved on. But I put so much in that’s it’s been a long process getting out. Overall I earned about as much as a “high yield” savings account.
  • I don’t know much about MLPs. Anyone out there use them? Do you like or dislike them?
  • REITs are fine, but I prefer direct ownership in rental real estate. We’ll cover that soon.
  • I haven’t gotten into crowdfunded real estate because I want to see where it shakes out. I was an early investor in crowdfunded lending (P2P) and you see where that got me, so I’m being cautious here. Besides I invest in real estate in other ways, so it’s not like I’m ignoring that asset class.

In the future I’ll, probably do more dividend investing and am willing to fund more private loans if they come available and I have the cash. The rest aren’t likely to be something I’d consider.

Coin-Operated Machine Income

She summarizes this category with:

Requires some time and some money

Her six ideas in this category are:

  • Vending machines
  • ATM vendor
  • Arcade games
  • Car wash
  • Laundromat
  • Slot machines

Here are my thoughts:

  • I have given this category a lot of thought — so much so that I have considered entering it on three occasions.
  • The first time I began looking for an existing coin-operated business to purchase. But finding one was harder than finding a needle in a haystack, so I gave up. That said, I’d still buy one if the right opportunity popped up.
  • The second time, I actually had a friend who was doing this. He had purchased a couple machines, fixed them up, placed them in decent locations (in schools — he offered healthy snacks), and they were doing well. He said he eventually wanted to have enough of them to replace his day income. I offered to be a partner and the money man to fuel his expansion, but he said he wanted to do it all himself.
  • The third time I heard a podcast interview from a guy who had a franchise business. It sold stickers in school vending machines. I got some information and looked at it, but decided against it.
  • What I like about these businesses is that they generate cash and lots of it — even when I am not there. What I dislike is the time commitment — stocking the machines, caring for the equipment, etc. My ideal situation would be one where I would fund the effort and have a partner (maybe one of my kids) who would do the filling, maintenance, etc. so I didn’t have to invest so much time.
  • In particular I like vending machines, arcade games, and maybe even a laundromat (I’d have to do more research into what operations takes on this one — there’s a huge capital expense with laundromats).
  • I’m not excited about being an ATM vendor (sounds like the potential to lose a ton of money if a machine gets robbed), owning a car wash (I was until someone told me about the massive maintenance costs), or slot machines (I am not a gambling fan).

I’m leaving this idea on my list as a possibility in the future.

Advertising and E-commerce Income

She summarizes this category with:

Requires mostly time; minimal money

Her three ideas in this category are:

  • Affiliate marketing
  • Advertising
  • Dropshipping

My thoughts:

  • As you know, I’m all over this category and have been for over 15 years now. In fact, I’ve grossed just about $1 million in blogging (income and capital gains).
  • I think blogging (and thus affiliate marketing and advertising) can generate a good side income for many people. That’s why I wrote Five Steps to Creating a Winning $25k Blog — to share what I know so others could do the same.
  • Blogging is NOT a passive income activity, even after you get the site up and running. It’s a content-eating machine that needs to be constantly fed.
  • I’m not a big fan of dropshipping, so I’ll take a pass on that.

I’ll probably be in this category for a long time since I enjoy it, it challenges my mind, and I earn a decent income from it. It’s an awesome retirement activity.

Rental Income

She summarizes this category with:

Requires some time and some money

Her three ideas in this category are:

  • Airbnb or VRBO
  • Storage space
  • Residential real estate

My thoughts:

  • Love, love, love this space, as you know.
  • In my experience, this requires lots of time, money, and willingness to take risks, especially at the beginning. If you manage these yourself, it requires a decent amount of time after the purchase as well.
  • I know people who are buying up properties just to turn them into Airbnb places and they are making a fortune. One guy told me something like, “I make more on an Airbnb place in three months than I would if I rented the place out for a year.” Of course we live in a vacation destination, so I’m sure that helps quite a bit.
  • That said, I don’t think I’ll get into vacation properties unless we buy a place somewhere nice, live there part of the year, and rent it out the rest of the time.
  • I’ve considered investing in storage units but so far haven’t taken the plunge. They’re building one near our house (we walk by it all the time) that has a great view of Pikes Peak. Ha!
  • Residential real estate is right in my wheelhouse and I’ve done well with it.

I’d be willing to buy more real estate, but prices remain high in the markets I’d consider, so I’m on hold for now.

How the Income Stacks Up

So here are the multiple streams of income I’m interested in and my thoughts on the future of each:

  • Rental Real Estate — If I simply keep what I have, I’ll be fine, but I wouldn’t mind adding another place or two. My preference would be to buy in Grand Rapids, Michigan where my other places are so I could roll the new homes into my property manager with no problem.
  • Blogging — I’ll probably keep at this for some time as there are other reasons for doing it in addition to the money (enjoyment, challenge, retirement activity).
  • Dividend Income — I am watching about 20 stocks and will buy if and when the opportunity presents itself.
  • Private Real Estate Loans — I could add one or two more and would like to. This depends more on the group I’m lending to (and their expansion plans) that it does on me.
  • Online Course — I would say this one is likely to happen. All I need to do is muster up the willpower to spend the time on it.
  • Coin-Operated Machines (vending machines, arcade games, laundromat) — I’ll keep my eyes open here and see if anything pops up. If there’s anyone reading who invests in these sorts of businesses, I’d love to hear from you.

Well, that’s it for this book.

As I said earlier, I’ll probably add this book to my list of 12 Books that Will Make You a Financial Expert in One Year — most likely the lead book for month six where I discuss non-career income ideas.

What did you think of it? And which of the ideas above are you using to generate income (or would like to use)?

 


Originally posted at https://esimoney.com/28-ways-to-create-extra-passive-income/

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