Passive Income 101 - How to Get It
Do you know what passive income is and how to get passive income - making money without really having to do anything? Many people don't realize that earned income is not the only form of income - that is money that you make from working and using your time, such as your primary job. This is non-passive income. There are actually other forms of income you can get that make your life a wholie lot easier. Below I will teach you what passive income is and show you how you can actually start making passive income today, fast and easy.
What Are The Three Types of Income?
You have active income, which is working a job, portfolio income, which is dividends from stocks (also could be classified as passive) and you have passive income.
Passive Income - How Do I Get It and What is It Exactly?
Investopedia has a great definition of what passive income is. They define it as "earnings an individual derives from a rental property, limited partnership or other enterprise in which he or she is not actively involved." This means that once you set up your business, it operates without your presence and you still make money every month, despite not being involved. Pretty sweet, right?
Multi-millionaire real estate investor Robert Kiyosaki is one famous person who swears by passive income. He makes his money from businesses such as residential and commericial real estate, book sales, and businesses such as his Rich Dad board game, Cash Flow 101 -
You put in the effort in the beginning to get the businesses up and running, then you let them do the work. That is the idea.
Another great person to read up on is Pat Flynn from Smart Passive Income who makes his money on his niche blogs and websites.
Top 3 Examples of How to Make Passive Income Easily
How do I make passive income fast! Do you want to make passive income fast and easy, but don't know where to start.
First, it is important to know that with passive income, it is NOT just making money easily and being handed to you. You must put some hard work in at the start and then probably in the begninning of your business.
*Example #1 - Buy Stocks that Pay Dividends
If you have $5,000 in your savings account, why not put it in a stock that pays dividends? This way you will make money from your stock every month or quarter without having to do anything. Plus, you get the chance that the stock appreciates in value, making you more money.
Dividends are paid by companies when they have surplus of cash each quarter - they are giving money to shareholders for simply owning the stock.
What are the best stocks that pay passive income from dividends? We will use McDonald's, Coca-Cola and Bank of America as an example.
Say you have $5,000 to invest - and you put it in each stock we mentioned.
McDonalds dividend distributes 3.08 a year and the share price is currently $87, so the dividen yield is 3.5 percent. You buy 57 shares of MCD (around $5,000 to do this). From dividends, every year you will make this much - (3.08 times 57 shares = $175.56). This amounts to about $15 a month.
Coca-Cola's dividend distributes 1.91 a year and the share price is $37.31. You buy 135 shares. 135 times 1.91, equals about $258 a year in dividends, or $21 a month.
These numbers aren't exactly exciting, however remember that you aren't doing anything to earn this except owning the stock! Plus you have the upside that the stock goes up in value, AS WELL as the chance that the company raises its dividend (which often happens with good companies). Pretty cool, right?
Example #2 - Blog Online for Money
Making passive income with an online business is another way. Right here on InfoBarrel there are people making thousands of dollars in online passive income, from articles they have written.
It works like this - you write a bunch of articles and when someone clicks on an add in the article, you receive a small commission from Google Adsense. You can also make money from Amazon if someone buys a product. This is an easy way to earn extra side money and it only takes a couple of hours to sign up and start writing.
You can expect to make about $10-20 a month in the beginning, but once you get going, it's not unreasonable to earn anywhere from $100 - $1,000 or more. Join here if you are interested.
Example #3 - Invest in Residential or Commercial Real Estate
If you have some money saved up, you might want to consider purchasing investment real estate such as a multi-family building or a single-family home.
You make passive income from rent checks - the rental payments should be more than your total expenses and debt payments, and the money left over is all yours. If you buy a $200,000 multi-family home, and you put $40,000 down, you should shoot for a cash-on-cash return of at least 20 percent - or $8,000 a year.
I know what you're thinking - why should I put $40K down to make just $8K? Well, you are forgetting that you also build up a ton of equity in your home, as your tenants are paying off your mortgage. You can then use that equity to buy more homes. You also make money, of course, if the price of the home goes up in value. And $8,000 a year isn't bad considering in just 5 years, you will have all your money back. Try doing that in the stock market!
Putting $40,000 was just an example - there's are other ways you can get the money for a down payment on your first home, and it certainly doesn't have to be that much. How do you get started investing in real estate for passive income? I would suggest first reading up on good real estate investing books.
I hope you enjoyed this article on the examples of forms of passive income and how to make it easily!
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