How to Create Passive Income

To quote Pat Flynn, a very successful passive income expert (he’s made millions), “We don’t have to trade our time for money one to one. Instead, we invest our time upfront, creating valuable products and experiences for people, and we reap the benefits of that time invested later.” He adds, “It’s not easy. I just want to make sure that’s clear.”

I think he sums it up very nicely. Create valuable products, services and experiences for people, and reap the benefits of the upfront time invested later, keeping in mind it is not going to be easy.

Doing this correctly means you can actually start to work less, but earn exponentially more. So where do you start?

1. Invest in Real Estate

Investing in real estate has been around for ages. Whether you are looking to buy your first duplex or getting into a large commercial property, rental properties can provide passive income through rents with some very appealing tax benefits. This method can be harder to get started with given the initial capital needed in most cases, but is certainly a great way to generate passive income.

2. Own a Portfolio of Dividend-Producing Investments

This is a very passive way of generating income, but the catch is you need a lot of money to build this passive income machine. For example, you find a combination of dividend-producing stocks and bonds (this also can be done with CDs and other cash equivalents) you are comfortable with, and the yield (or passive income) generated on the portfolio is 5%. In order to generate $50,000 a year in passive (dividend) income you would need $1,000,000 in your account.

3. Earn Royalties From Creative Works Like Books, Music and Screenplays

Creating original content that other people love can be very rewarding to you from a personal growth perspective (people value something you have created) and from a financial perspective (people are willing to pay you for it). You create something once, but keep getting paid a royalty for it long after you completed it. Music is a nice example.

4. Build a Financial Planning, Investment and Insurance Business

When you sell insurance (property and casualty, life, disability, etc.) to your clients you are paid an initial commission, but more importantly you would continue to get renewal (passive) income from the policy you sold for many years into the future, as long as you serviced that client to keep them happy and on the books. You could also do this by charging for financial plans and managing people’s investments.

5. Generate Ad Revenue From Your Website, Blog and Social Media

A great source of passive income is advertising dollars from other businesses and people. If you have a website, blog or strong social media following, other businesses will start to take notice. A trick I have learned in this space is that it is much less expensive and faster to go where people already are then to try and create it yourself. But, if you create it yourself, then others will come to you. This is how you turn your blog, etc. into passive income.

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