The Smart Passive Income Guide (2015)
Chapter 6: 5 Best Passive Income Options
And now it is the time that you have been waiting for. If you have made it this far in this guidebook, you understand the way passive income works and are still interested in making this work for you. You like the idea of being your own boss and getting to choose the way that you live your life while still making some significant money. You might have a couple great ideas on how to get started and understand there are some big risks involved but it's also possible that you can make it big at the same time.
For those who are still interested in making a good passive income, here are the 5 best options that you can take in order to get started on the right foot.
The first option you may want to consider for making a passive income is dividend investing. This is a particular strategy for making money that is based on building up a nice collection of stocks that are considered safe. These stocks are not only safe, they are also ones that you will be able to make a considerable amount of money on through the whole year. Those who do this kind of investing in a wise way will be see a lot of cash go into their accounts each month on regular basis.
You will get the money from these dividends based on how much the company which issued them makes. They will take from their profits and pay back the shareholders based on the amount that you have purchased of the company. The company will usually not disperse all of their profits. They might put half back into the company for uses like advertising, expanding, or other projects to make more money and then give the other half to their shareholders.
This is a great way to make a passive income because you really do not have to put in much work other than handing over some money to the company. But there is a reason that not everyone will do this; there is a high risk involved and you could easily lose all of the money and more that you put into the company if you do not choose wisely and are not paying attention to the economy and the company you purchased from. If you make smart decisions and pay attention to what you are doing, this is a good way to make a lot of money without having to do as much work. Just remember, high payouts mean high risks, and you could easily lose out more with this method than when compared with some of the other options explored in this guidebook.
You need to be a smart consumer when it comes to doing dividends. Many people fall into the trap of just purchasing the stock that has the highest dividend because they think that they will make the most money with this idea. While that might make sense on paper, you really need to do your research. Often the companies that are offering really high dividends are the ones that are having problems. For example, the business that is offering the dividend might have a ratio of paying out that is so high that it is threatening future growth, so you will lose money in the future, or a ratio of debt to equity that is so high that the company is going to sink, taking your money with it. It does not matter how high the dividend is if the company goes under and you do not make any money.
There are a few things that dividend investors should think about in order to determine if they are a good investment or if the stock is going to be a waste of their time. Some of the things that you should consider include:
High dividend yield— although we just warned against investing in companies with too high a dividend yield, it is worth trying out a few with higher yields because they can be useful ways to make more money. There are plenty of reputable companies who will offer you a good investment if you give them a chance. Just make sure to do your research to ensure that you are making the right decision. Look for stocks that have a dividend that is higher than the interest you will make on treasury bonds through the United States government, to make it worth your time.
High dividend coverage— this is a process that you can use in order to determine if a dividend is actually safe for you to make money from or if there is some danger of you getting cut. You can ask yourself a few questions to figure out how safe a particular investment is. Ask if the business earns their money from a large pool of businesses or does it all come from just one business? If it’s the latter, this could mean that your money could be harmed if something happens to that one business. You should also ask how much of the company’s profit is paid out to you and how much they are investing in themselves or putting back. It is a general rule that the amount of profits paid should not be more than 60 percent.
Qualified dividends— you will need to be aware of how the stock you are purchasing will be taxed, or you could lose money. Those who are just in it for the profit and quickly buy and sell stocks will find that they can be taxed pretty heavily. The government is looking for investors who will stay in the market for a long time so they tax less on those who remain in the market and more on those who are making a large profit by going through stocks like crazy. You can sometimes find stocks that will be taxed less by the government if you stick with them, which means more money in your pocket.
Basically, dividend investing is an excellent opportunity if you are looking for a way to make some good money either on the side or in place of your current job. It is important that you are careful with which companies you invest in. Your profits are going to be tied to the company, so the more money they make, the more you will make, but it also works in reverse, and you can lose out by quite a bit. Doing your research and understanding the market and its trends can help you to make the right decision for your needs and to make some money from this strategy.
If investing does not sound like something that you are interested in or you are worried that you would not be able to understand it all, this next idea might be the one that you should consider. Many people have been taking advantage of Kindle publishing in order to make some good money. There are hundreds of thousands of people who are looking for books on a wide range of topics, and if you are able to read the market and keep ahead of the game, you might be able to give them the material that they need. The earlier you get the information out, the more money you can make until the competition catches up.
Kindle publishing works on the basis of the simple idea that you will write and publish your own books for sale online. You can write on any topic that you would like, and you do not have to worry about finding a publisher or even printing copies and hoping they will all sell. Kindle will do all this for you, so the biggest investment of time is going to be in writing the book.
While this sounds easy, you will have to put in some work to make sure it is profitable. There are a lot of people who choose to go with this method of making money, so being ahead of the competition is critical if you want to achieve success. But the process of doing this is pretty simple; write the book and edit, format to the Kindle publishing specifications, put it on the site, and market to make money.
Here are some of the ways that you can make money using Kindle publishing:
Take a look at the books— before you get started, go and look at some of the popular books that are on Amazon right now. These can be in either printed or online format. You should look at the prices that are charged as well as how long the books are. You can then go through different blogs and other things in order to figure out what is popular right now. Next, choose one of these topics to write about and maybe make it a bit longer and for a lower price than those offered on Amazon in order to attract the audience to purchase. If you are not interested in writing a book that is already done, you can take some time to find a topic that is popular but that has not had many or any books written about it. This will put you ahead of the competition because you will be one of the first to offer it and can make a lot of money from it.
Learn the formats— you have to make sure that any book you write for Kindle publishing is in the right format. Kindle requires that you use a certain format because it fits into their e-readers better and makes the book more enjoyable for the customers. You need to make sure that you are using the right format and appropriate fonts so that customers will enjoy your book.
Promotion— if no one knows anything about your eBook, you are never going to make any money from the endeavor. You need to be able to come up with the right keywords so that customers are able to find you. It is important that you post information about your book anywhere that someone would be interested in it might visit. This might include places like websites, blogs, YouTube and so on.
Choosing Amazon— you may be curious why so many people want to use this platform in order to make their money online. Amazon has made the whole process easy to use, and since it has such a great reputation, you will be able to make a ton of money without doing as much work as on the other platforms. The key is just to stay ahead of the competition and work hard, and you will find that you can actually make some money with this endeavor.
Investing in Rental Properties
Next we will talk a bit about investing in rental properties. This is something that a lot of people will choose to do, but you have to be really motivated and organized in order to get it to work out for your needs. There is a lot of money that can be made with rental properties; many people are not able to afford a new home or can’t get it because of their credit scores, but they still need a place to live. They are going to turn to rental properties and, depending on the size, the location, and the market, you can make a good amount of money from these.
In order to start, you need to go and find a property that is for sale. Sometimes there will be some that are already rentals and that are in a good area. You could purchase a property that already has tenants, and this can save you some work at least in the beginning. Just remember the nicer the location, the more expensive it is for you to purchase it, but the more you can potentially make in the process. On the other hand, you could purchase a piece of land and make your own rental property. This will require more work because you will need to entice the tenants to you in order to start making money.
Once you own the property, the work is not done. You will need to keep the place maintained and answer any complaints that come in from your tenants and fix anything that may be broken. When a tenant moves out, you will need to get the apartment ready for the next tenant, advertize the vacancy, and get it filled. You will also need to collect rent and possibly start the eviction process if things do not go the way that you would hope. It is also important that you are a good landlord if you want to keep people in the apartments and not have to pay the bills out of your own pocket.
That is just the work that you need to do to keep up with the properties that you have. If you want to expand, you will need to find new properties, purchase them, and then keep up on all of the work that goes into each one.
Some landlords will pay a property manager to help them to keep up on everything. This is usually not worth your time or money if you just own one or two apartments, but if the business grows really large, you may want to consider it. This might cut into your profits a bit, but you are not able to be everywhere at once, and the manager can help you to get things done around the properties so that money will keep coming in.
Peer to Peer Lending
Next on the list for making money is peer to peer lending. This is a practice where you will lend out money to your peers, or others who are not related to you, without having a bank or other financial institution involved. This kind of lending will often take place online through various companies who will set it all up. Many of these companies will offer different platforms for lending, as well as ways to check the credit of those you are lending too. This works because you can lend money to someone who needs it but who may not be able to afford to get lending through other forms and you will make money on the interest that they pay back to you.
Some of the characteristics involved in peer to peer lending include:
-It is done so that the lender can make money.
-There does not have to be a relationship between the borrowers and lenders before the process happens.
-There is usually a lending company available for help if needed.
-The transactions will occur online.
-Lenders will be able to choose who they will lend to.
-The loans will be unsecure, and there is no protection from the government.
-The loans are securities, which can be purchased by other lenders.
This is a great way to make some extra money because you will not have to do as much work day-to-day. You will need to make sure to do your research though; if the other person skips out on the loan and does not pay you, it is your own fault and you are out of the money since there is no protection from the government. But if you do your research and find the right person, you can end up making a good profit from this method.
There are also some great advantages, but also some criticisms to do with this kind of lending investment. These would include some of the following:
One of the biggest advantages for the borrowers is that the lending rates will be less than that at a bank. This is going to entice a lot of borrowers to the idea, which means that you could have a lot of potential for making money. The advantage for you as an investor is that there is a higher return possibility compared to other investments and from savings accounts.
This is a way for investors to not only make some good money, but to help out others who are in need. This is a break-through for many borrowers because they are able to do the things that they want for prices that are lower than what is offered at the bank. You are giving these borrowers a break, and you are making money.
Those who choose peer-to-peer lending have often been turned down by a bank or other option because of their credit scores. This is something that you will have to pay attention to because past performance is often indicative of future performance. If someone has not paid their bills in the past, who is to say that they are going to pay them in the future? When the borrower does not pay money back, they end up being a huge risk to you because you will not be able to make any money. Take a look at past credit history and determine if it is a good idea to invest in a person and if you will get your money back.
Protection from the Government
Unlike banks and other lending institutions, you will not be getting protection from the government if the loan falls through. This means that all of the risk is on your shoulders, and if the person does not pay you back, you are left with no help at all.
While peer to peer lending is a good way to make some great money, you need to do so in a smart way. Do not just jump into the idea thinking that you will make a ton of money in no time, because that is just not going to happen. You have to do your research and make smart investments in order to see the best returns.
Sell your Own Informational product
There are a lot of people who have a talent or know a craft, and they are able to use this expertise in order to make some money. It is possible to sell your product and the information that you know in order to make some passive income. If you have a talent or information that others do not have, you can find an audience and help others. Here are some ways that you can sell the information that you have to make an income.
Make a course and sell
In some cases, you could sell a course to make some passive income. Have you ever seen those infomercials for great new exercise programs that are out there or the programs for learning a new language? There are many different niches that you can explore and best of all; it will be all about the skills you already have and are passionate about. If you know how to speak a language well, you can create a course to teach people how to speak it. If you know how to do different hairstyles, create a course in order to teach people how to do them. There are even people who will create courses on how to be more confident or how to make more money!
First off, you will need to figure out what skill you have that people would want to know more about or do better. You can then develop the course. Sometimes this will be done through an eBook process so people can read about it. Other times you can make a video series, similar to a lot of those workout videos, and then sell that. The idea that you come up with is going to determine the method that you use in order to get that information out. Sell the idea to others with some good marketing, and you can make some good money.
You have to remember that with this mode of passive income, you will constantly need to be updating and adding value to the customer. No customer is going to purchase your product more than once, so if you want the money to keep coming in, you need to come up with new information to add into it.
Sell your services
In addition to selling your own informational product, you can also sell your own services. If you have the secret to making a lot of money quickly, you can sell your services by doing keynote speeches to others for a price. You can open a consulting firm to offer help with advertising services or for helping with investments.
Even if you do not have an informational service to offer, you can still make a passive income from you skills. Sell some of your other services, such as cleaning, giving rides, or writing books for other people. These are great ways to make some money, and once you get your name out there, you will find that it is a lot easier to keep going and turn this into your new income.
Sell your hobby
Do you have a product that you can make that will help other people out and make their lives easier? If this sounds like something that you can do, and even a hobby of yours, you will find that there are a lot of people who are really interested in these kinds of things. Making crafts and other things with your hobbies is a big thing right now, especially if you are able to make objects that are unique and no one else has thought of before. While you are going to have to work hard in order to market your product and put the product up for sale, it can be a lot more fun to do something that is your hobby rather than making someone else rich.
These are the top 5 ways which I highly recommend if you are just starting out for making some passive income. They are definitely ones that you should check out if you have decided that making passive income is the right choice for you.
Making passive income is definitely a great way to get out of the rat race and to have all the time and freedom to do the things you love. However, passive income is not permanent income. Some types of passive income may last a few years. Other forms may keep going for decades or even for centuries across multiple generations. But all forms of income can eventually dry up for one reason or another, so it's important to keep up the work and be aware of the market's demand, especially if you are planing to build an online business.
While it is possible to make a significant income from passive income, it is always a good idea to remind yourself that earning passive income takes a lot of hard work and dedication, so you won't just give up when you are not seeing progress. Building any form of passive income takes time. Do not expect to see instant result within a few week. Also, providing value is the key to sustain a passive income business. Make sure the work or the product you provide is outstanding, and you will achieve success in no time.
This guidebook is not intended to scare you away from making a passive income, but rather to help you understand the true nature of passive income, so you can have a growth mindset to deal or overcome any kind of obstacles when you are trying to build passive income streams. Please use this guide to make an informed decision on earning real passive incomes. If you have the patience and the desire to succeed, the results will come.