7 Passive Income Streams to Build Wealth on Autopilot

passive income

We all dream about it – making money without trading our precious hours for dollars. Winning the game, beating the system, having a chemically-correct pipe dream of cold hard cash rolling in while we’re poolside sipping margaritas.

That’s the beauty of passive income. It’s money working for you rather than you working for money. Instead of donating the fresh hours of your finite life to an employer, you put assets to work. Those income-generating assets are the workers, hustling away to generate cash flow while you live your glorious life.

Sound too good to be true? It’s not. Millions of regular people are growing their wealth through passive income streams. And you can too, with the right strategies.

Passive Income Stream #1: Rental Income

Buying a rental property and renting it out is one of the oldest passive income strategies in the book. You pay the upfront cost of purchasing a property. Then you find a tenant who pays you month after month in the form of rent.

That rent payment covers your mortgage, taxes, insurance, and maintenance costs. The excess above those expenses is positive cash flow – magical passive income deposited straight into your bank account.

Even better, most rental properties appreciate in value over time as the land beneath them increases in value. So you make money from cash flow and equity growth. Talk about a financial double-whammy!

Sam bought a rental house near his hometown in 2016 for $200,000. He rents it for $1,800 per month. After expenses like the mortgage payment, insurance, property taxes and maintenance, he nets around $500 per month in passive rental income. Not a life-changing amount, but an extra $6,000 per year puts a nice dent in his annual finances.

Passive Income Stream #2: Dividend Stocks

Here’s another classic approach to passive income: buying dividend-paying stocks and funds. When you purchase a stock or fund that pays dividends, you’re acquiring a partial ownership stake in those companies. As an owner, you get a cut of the profits in the form of dividend payments.

Most dividend stocks pay shareholders quarterly (four times per year). The payments transfer directly into your brokerage account. From there you can reinvest the dividends to buy more shares, compound your wealth, and turbocharge your income stream!

Dividend investing is powerful for creating semi-passive income. Why semi-passive? Because you’ll need to routinely analyze your holdings to buy prospective investments and rebalance your portfolio. It’s still passive in the sense that you don’t personally work for those dividend payments – the companies you’ve invested in are doing the work. Pretty sweet deal, right?

Passive Income Stream #3: Affiliate Marketing

Affiliate marketing is like being a freelance salesperson. Except you don’t have to do much selling.

Here’s how it works: You promote other companies’ products or services on your website, social media platforms, etc. When someone purchases through your special affiliate link, you earn a commission.

The beauty is that affiliates don’t have to handle inventory, shipping, customer service – none of that operational overhead. You just send buyers to the company through your custom link and make money off the sales you facilitate.

One of the most popular affiliate programs is Amazon Associates. Sign up as an Amazon affiliate and you can earn up to 10% in advertising fees by promoting products on Amazon within your content.

Michelle Schroeder from the website MakingSenseofCents.com made over $1.5 million in 2022 as an affiliate marketer across dozens of affiliate programs. Not too shabby for sharing her personal finance expertise and recommending relevant products to her audience!

Passive Income Stream #4: Online Courses/Info Products

Got expertise in a certain subject? Transform it into an online course or information product to generate passive income.

Online course platforms like Udemy, Skillshare and Coursera allow you to create and sell video courses on any topic. Information products span ebooks, workbooks, checklists and more in digital format.

The upfront work is creating amazing content that delivers insane value to your audience. But after that, your digital product has unlimited inventory and can be sold automatically over and over again with no extra effort from you.

Take Pat Flynn from SmartPassiveIncome.com as an example. He created courses teaching people how to start businesses and market themselves online. Each month those courses bring in over $100,000 in passive income! All because Pat put in the work upfront to create incredible educational resources.

Passive Income Stream #5: Blogging/Monetized Website

Blogging

Speaking of Pat Flynn, blogging and monetized websites are another form of passive income generation. The key is creating insanely useful content that ranks in Google so it keeps pulling in free organic traffic month after month.

Then you sprinkle in income streams like affiliate marketing, ads, sponsored content, selling your own digital products, etc. Once the evergreen content machine is up and running, it can passively generate revenue for years to come with minimal extra work.

Michelle from MakingSenseofCents.com (mentioned earlier as an affiliate marketing queen) also makes over $1 million per year from her personal finance blog and the various income streams she’s built around it like affiliate marketing, sponsored partnerships, courses and ebooks.

Talk about living the dream! Create awesome content assets up front, then reap the rewards of passive income for years down the road.

Passive Income Stream #6: Peer-to-Peer Lending

Peer-to-Peer Lending

Peer-to-peer lending is like being the bank – except more passive. You loan out money to borrowers through an online platform and earn interest on the payments they make to you over time.

Lending Club and Prosper are two of the most popular peer-to-peer lending platforms. You can open an account, transfer funds from your bank, and start investing in bundles of loans within minutes. As borrowers payback their loans, you earn interest income directly into your account.

The potential returns can be juicy. LendingClub’s longest-tenured investors have earned average annual returns of around 5-7% historically. While that might not set your world on fire, it beats the heck out of the interest rates offered by big bank savings accounts these days.

But like any investment, there are risks. Some borrowers will inevitably default on repaying their loans. That’s why diversifying across many different loans is key to smoothing out your returns.

Passive Income Stream #7: Licensing Intellectual Property

Licensing Intellectual Property

Last but not least, you can earn passive income by licensing out your intellectual property – things like photographs, videos, software code, templates, fonts, and more.

Digital stockhouses like Adobe Stock, Getty Images, Shutterstock and others allow you to upload and license your creative works to their marketplaces. When a customer purchases a license, you earn a cut of the fee.

For instance, let’s say you’re a photographer with a portfolio of eye-catching images. You upload those photos to stock photo sites, granting licenses for others to use them in designs, documents, websites, etc. As people pay to license and download your images, you collect royalties without doing any extra work.

It’s like being a multi-talented independent contractor – except you get paid over and over again for the same work product across a multitude of “gigs.” Not a bad way to generate passive income from your creative assets!

The possibilities are limited only by your imagination (and intellectual property). Podcasters could license edited audio clips, graphic designers could license fonts and templates, coders could license scripts or apps, and so on. Why not monetize your creativity into passive income?

In Closing…Combine Multiple Streams

While each of these passive income strategies can generate wealth over time, the real magic happens when you combine multiple streams together.

Think about it – if you earn $500/month from rental properties, $300/month from dividends, $500/month from a blog, $200/month from peer-to-peer lending, and $100/month from licensing intellectual property…that’s $1,600 in passive income per month before you know it!

That’s the power of passive income. And the more streams you build in parallel, acquiring revenue-generating assets as you go, the faster you’ll accelerate your financial freedom. So get started turning your energy into passive income streams today!

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