If you have a traditional job that requires you to work in an office 40 hours a week, your paycheck only reflects the 40 hours you worked.
Essentially, you’re trading your time for money.
But what if you could reclaim some of that time? Wouldn’t it be great to put in the time and work upfront and reap the financial benefits months and years down the road?
Residual income can allow you to do just that. It can give you the freedom to spend more time doing the things you love while still earning a living.
With a residual income stream, you can make money regardless of where you are or what you’re doing. Your bank account has the potential to grow, even when you’re sleeping, traveling, or golfing.
What is Residual Income?
Residual income is the act of making money long after you’ve completed the work. Instead of getting paid for doing work that you continue to perform, you do work once and get paid for it over and over again.
By creating residual income, you can focus on a hobby, your family, or another job without having to devote time to any additional marketing or managing. Once you’ve invested time, effort, and maybe money upfront, you can sit back, relax, and watch the money come in.
Is Residual Income Actually Passive?
Residual income is recurring money you earn as the result of a single effort. Instead of earning an hourly wage or salary, residual income involves making an initial time and money investment with the goal of getting paid on a continuous basis.
After you make the initial investment, the ongoing income that you earn is typically passive in nature as you don’t have to put in additional time, money, or effort.
5 Ideas to Create Residual Income if You Have Money to Invest
If you have some money to invest upfront, there are a number of residual income streams to consider.
1. Invest in Real Estate
Real estate is one of the top passive income ideas for investors today. When you invest in real estate, you invest in a property or land with the intention of eventually selling your investment for a profit or renting it out for monthly cash flow.
Real estate investing allows you to build equity, which is the difference between the market value of your investment and the amount you owe. As you build equity, you can use it to increase your cash flow or acquire other real estate investments.
Passive Real Estate Investing: REITs
Real Estate Investment Trusts, or REITs, are companies that own and manage real estate portfolios. REITs give you the chance to invest in large-scale real estate without the high expense or responsibility of being a landlord.
The Fundrise online investment platform was designed to allow investors with smaller amounts of money to pool together their resources and buy shares of private REITs. With Fundrise, you can buy into private residential and commercial properties for as little as $500.
$500 Account minimum
0.85% Management Fee Investors pay a 0.15% annual investment advisory fee, which may be waived under certain circumstances.
How Fundrise stands out:
Fundrise is a platform designed exclusively for crowdsourced real estate investing. It offers diversification, access to experts to ask questions, and several options for balanced investing, long term growth investing or supplemental income investing. Real estate investing has other risk factors to consider than traditional investing in the stock market, but Fundrise is a viable avenue for people who want to pursue that alternative route.
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- Limited liquidity
- Methodology hasn’t been tested in a strong market downturn yet
- Taxable accounts
- IRAs (account min. is $1,000)
Once you’ve invested your money with Fundrise, its real estate professionals handle the details. You don’t need to do a thing. As your investments appreciate in value or turn a profit, you earn money over time.
Active Real Estate Investing: Become a Landlord
Becoming a landlord involves buying a property and renting it to tenants to make money. If that sounds like something you’d like to do, you’ll need to:
If you like the idea of being a landlord but don’t have the time to commit to it, consider hiring a property management company. They can market your property, find tenants, maintain it, and get collect rent on your behalf.
2. Become a Lender
Peer-to-peer lending connects borrowers directly to individual lenders who fund their loans in small increments. As a lender in a peer-to-peer lending platform, you can fund a portion of one loan or multiple loans individually.
LendingClub is a peer-to-peer lending platform that gives you the chance to become a lender. After you open an account, you can automate investments based on a pre-set strategy or browse loans and manually purchase small portions of them.
1.00% Annual Fee
4–8% Historical Returns
Lending Club Summary:
Lending Club offers a practical way to diversify your portfolio and boost the income from your fixed-income investments. Despite the 1% fee, the historical 4-8% yields are attractive. Investors can create a highly customized credit portfolio based on whatever criteria they choose (like credit score, loan type, employment history, and more).
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- Potentially higher returns than other fixed income investments
- Automated investing
- Customized Filtering Options
- 1% Annual Fee
- Location and income requirements
- Limited liquidity
You make money on the interest paid by your borrowers. The annual percentage rate for LendingClub borrowers ranges from 6.95% to 35.89% and is based on their credit. Borrowers with good credit will likely get a lower interest rate while those with average or poor credit will get a higher one.
3. Invest in the Stock Market
The stock market allows investors to buy and sell stocks, which are shares of ownership in a company. To invest in the stock market, you need to understand your risk tolerance, which is how much of a risk you can emotionally handle in your investment portfolio. Understanding your risk tolerance can prevent you from making investments that make you feel anxious or uneasy.
Use Robo Advisors
Deciding how to invest in the stock market can be tough, especially if you’re new to it. Robo advisors can help. These online investment managers use algorithms to build portfolios and manage your investments.
Once you let them know your risk tolerance and investing goals, you can use robo advisors like Betterment, Wealthsimple, and M1 Finance to handle your portfolio. With robo advisors, you can automate your investing and make money in the stock market with minimal knowledge and effort.
$0 Account Minimum Betterment Premium has $100k minimum
0.25% Annual Fee For account balances over $100k, fee is 0.40%. No trade fees.
How Betterment stands out:
Betterment is one of the most well popular robo-advisors and investment apps in the industry. The sign up process is very easy, they offer tax loss harvesting, simple asset management, good retirement calculators, low management fees, and the option to use a human advisor.
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- Not designed for DIY stock traders
- Can’t balance asset allocation with external accounts
- Taxable investment accounts
- Smart Saver account,
Related: The Best Investing Apps for Beginner Investors
Manage Your Own Portfolio
If you have some knowledge and experience in the stock market, you can choose to manage your own portfolio. This may be a good option if you prefer control over when you invest and what you invest in.
The first step to managing your own portfolio is finding the best online broker for your individual needs and preferences. Then, you’ll need to make regular investments and review your portfolio periodically to make sure it still meets your objectives.
By investing in the stock market, you can make good use of your disposable cash and save for your future.
4. Buy an Online Business
If you know where to look, you can start making money online almost immediately. Websites like Flippa, Website Broker, and Vineclick allow you to buy established online blogs and businesses that are already making money.
Rather than buying the least expensive online business you find, choose the one you believe you can double or triple within a year or so. This way, you get a much higher return on your investment.
Before you buy an online business, check these items:
If you buy an online business, you don’t have to start from scratch and can earn money from someone else’s great idea.
Related: 16 Online Business Ideas That Anyone Can Start (with Little or No Cost)
5. Build a Self-Storage Facility
Self-storage facilities rent storage spaces or units to tenants on a short or long-term basis. If you build a self-storage facility, you can get paid to rent storage space to people who need somewhere to keep their personal belongings or business inventory.
The key to building a successful self-storage facility is choosing the right location. If possible, build your facility close to a highway to give customers easy access and ensure it’s visible to the public. You should also make sure it meets the zoning rules and regulations in your area.
Once you determine the location, you’ll need to take the following into consideration:
Since there are many self-storage facilities today, you’ll have ample opportunities to learn about the costs and investment required for this type of business.
5 Residual Income Streams You Can Create with No (or Little) Money
Fortunately, you don’t need money to create a residual income stream. These ideas involve little or absolutely no money.
6. Earn Cash Back
Believe it or not, you can earn cash back from the shopping you already do when you make a purchase through Rakuten. When you install the Rakuten browser extension, you’ll receive alerts any time you’re shopping on one of their partner sites. Activate the cash back deal with one click and then continue shopping like normal.
Free Price Company makes commissions on your purchases.
Rakuten at a Glance:
Rakuten (formerly Ebates) is a free rewards website that gives users cash back on everyday purchases. Earn up to 40% back on sites like Amazon, Ray-Ban, Overstock, and Sephora. Install the browser extension to receive cash-back alerts when you shop on Rakuten’s partner sites. Every quarter, Rakuten will send your Big Fat Check through the mail or straight to your PayPal account.
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- Easy and free to create an account
- No personal or credit card information required
- Rewards for purchases you already make
- Browser extension for convenient alerts
- Bonus for each friend you refer
- Rewards sometimes slow to show up
- Payouts are every quarter
- Rewards voided if you return your items
You can also earn cash through credit cards that offer 1% to 6% cash back every time you make a transaction. To maximize cash-back rewards through credit cards, follow these steps:
7. Start a Blog
Starting a blog or website with written or video content can be a great way to express yourself and earn residual income. To get started, you’ll need to:
Once you’ve started a blog and built an audience, you’ll be ready to make money online through:
Earning residual income from a blog won’t happen overnight, but if you follow these steps, you’ll be well on your way.
8. Rent Out Your Home
Sites like Airbnb provide the opportunity to take the spare space in your house and turn it into residual income.
To earn the most money possible, take quality pictures of your space and write a detailed, enticing description for the listing. This will ensure that when someone performs a search for a place to say, your home will show up.
If you do decide to rent out your home, be sure to:
Since people typically read reviews before selecting an Airbnb, the more positive reviews you have, the more renters you’ll get and the more money you can make. To ensure that you have as many positive reviews as possible, ask all of your guests to leave one.
For more tips, check out our guide on how to become an Airbnb host.
9. Host a Podcast
A podcast is a series of audio episodes that usually revolve around a particular theme or topic like entrepreneurship or travel. To make money from a podcast, you first need to lay some groundwork:
Once you’ve recorded multiple episodes and established an audience, you can focus on monetizing your podcast through:
While it may take some time to build a following and make money from your podcast, it can be a great way to share your thoughts and ideas with others while building a residual income stream.
10. Write a Book
Earning residual income from writing a book is possible, but it takes a lot of upfront marketing efforts. There are millions of books out there, so to ensure yours is profitable, you’ll need to develop a strong marketing strategy.
Here are some tips to help you get started:
These are just some of the tips to create residual income from your book. Marketing your book is hard work, but if done right, you’ll earn income for years to come.
Create Multiple Residual Income Streams
To build stability and reduce risk with residual income, it’s important to diversify and create multiple residual income streams. Doing this ensures that if one doesn’t go as planned or takes a dip, there are others to fall back on.
Markets are tricky and you never know what can happen. You don’t want to compromise your financial security because of their unpredictability.
Remember, residual income does take upfront time and, sometimes, money to build. Fortunately, this investment almost always pays off and leaves you with more time, money, and freedom than you thought possible.