3 Common Ways to Receive Passive Income

If you are a hardworking individual with an 8 to 5 job, you currently make a living with “earned income”, which is paid either per hour or by a yearly salary. If you are suddenly unable to perform at work anymore, you will no longer receive checks and your income will plummet to $0. This is why “passive income” is so important! With passive income, you would perform your work with very little or no pay in the beginning, but once your project is complete, the paychecks will continue to come in (sometimes for a lifetime!). Every person alive should be looking for these 3 common ways to receive passive income.

What are the different ways to create a passive income?

1) Dividends – The idea is pretty simple. There are quite a few companies that pay a quarterly dividend if you become a shareholder. This method is great for a long term focus, but it definitely won’t allow you to quit your job anytime soon (to do this, you will need about $1 million in the market).

2) Rental Income – This method has been around for quite some time and the general concept is simple – purchase a property and allow someone to rent it from you. As long as the resident is on your property, you will continue to receive those rent checks, month after month.

3) Profits from a Business – This is probably the most lucrative way to make a passive income, and there are countless methods within this category.

  • Website business – The latest craze has been blogging (pretty much what I do here on this site). If you receive a consistent flow of visitors to your pages, advertisers will want to post their business on your site. This provides income month after month. And, once you establish your website with quality content, less and less effort is necessary to continue to receive your income (which is what makes it passive).
  • Network Marketing – I tried my hand at this once and it is a tough gig. You must believe in the product you are marketing. If you do not, don’t even try; your clients will sniff out your fake enthusiasm. If you are excited about the product, then this could be an amazing opportunity. I know quite a few people that make a very good living in this category.
  • Develop an iPhone application – This is a new idea that I’m becoming more interested in every day. If you have an idea and can get an app made for it, there could be an enormous amount of passive income coming your way!
  • Begin a business and franchise the system – Anyone can start a business, but few really know the tools to make one run successfully. If you have this talent, you can make a lot of residual passive income by teaching (or selling) the system to others.
  • For the gifted: Write a song or book – authors and song writers make royalties each time their work is sold. All of the work is done up front, and they reap the benefits for years and years. I think Elvis still makes more money in a month than I’ll most likely see in my lifetime (and he hasn’t been alive in decades)!

Passive income can come from many avenues, but the key is finding what’s right for you. I honestly love writing these posts every day! I can’t wait for comments from my readers each time I post a new article. I hope to be able to monetize this site enough so that I can spend more time helping others through my writing!

Do you have other ideas for creating a passive income? Share with the rest of us, even if it’s just a slight variation from what was written in this post!

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15 comments to 3 Common Ways to Receive Passive Income

  • Johannah B

    Curiously missing is interest income. This can be from your own CD’s or Savings, even checking account – and it sure doesn’t amount to anything much but it’s available. You can also get interest from loaning others money, or buying their loans – so they pay you monthly instead of the primary lender, altho could be risky.

    Rental income — also a bit risky, as it takes $$ to start, and money to maintain, and could be great or miserable depending on your tenants, and local economy!

    • Interest income is certainly passive, but you’re right, it typically doesn’t amount to much. And, rental income can be tricky for sure. It’s best if you’re in an area that is growing economically – plus, it’s best not to get a place in a run-down neighborhood. Crappy looking places will no-doubt lead to crappy tenants. Don’t buy the most expensive house either; you have to find a medium between the two.

    • Diane

      yes having a rental income is much more than collecting a rent check…….do alot of research! It can be very expensive as well! Laws here state, everytime a tenant moves out the interior must be painted, now I know not everyone does that – but imagine 2 tenants in a year! There are many laws ~ check your local government agency that governs rentals….also short term rentals…laws are different!

  • I always think about passive income and I want so badly to find a way to generate some and get a few different income streams flowing in. In my daily life I see far too many people who are ruined by a company’s decision to lay off employees, etc. It scares me that I live such a live myself, always at the whim of an employer. All it takes is two words for your whole life to be turned upside down. Just gotta get that novel sold…Great article!

  • You know, I’m glad you mentioned the iPhone app. I have an idea I’ve been sitting on for a while now. Time to get in gear. Good tips!
    Debt Free Divas recently posted..Unleashing Your Inner DIVA

  • My husband is a software engineer…I wonder if he could come up with a iPhone app idea and get rich off of it. ;)
    Crystal @ Get Out of Debt Mom recently posted..Not Keeping Up With the Jones’

  • [...] Life and my Finances – “Three Common Ways to Earn Passive income” – A well written primer on how to earn income through passive [...]

  • It truly takes money to make money (in terms of passive income).

    One thought I had…

    There are always eager entrepreneurs out there looking for investors. If you’ve got the cash, you can take a position in a start-up without having to do much work (you’re just the investor). Obviously this is a risky approach to passive income, but it works if you find the right partner.
    Trevor @ Financial Nut recently posted..Coach- Inc COH or Aeropostale ARO

  • Diane

    I believe the most important way to protect yourself from your income plummeting to 0 zero because of an accident – is buy disability insurance – protect yourself from the unknown!

  • Myself

    I’d imagine as a general rule, your statement about dividends would be spot on. However, if I had just about $500k in SDRL right now, I would have brought in a cool $50k/yr. You see this past dividend was $0.82/share, and an additional $0.15/share for an extraordinary dividend. So $0.82/$35 (approx price/share currently) = 2.34%/qtr on the low side, it would be $0.97/$35 = 2.77%/qtr on the high side.
    Full disclosure: I am long term on SDRL currently.

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