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How to generate passive income

Creating a passive income stream is a smart financial move. Find out how to develop one to strengthen your financial standing as a homeowner.

Vivian Tejada
March 15, 2024

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The earlier you establish passive income streams, the lighter your financial burdens will be. Establishing a passive income stream can help you create an emergency fund, grow your savings accounts, or pay off your debts – such as student loans and credit card balances. Passive income can also help you navigate financially challenging times, such as when you lose your job or a big client.

 

Passive income allows you to collect regular cash flow from a venture that requires little or no daily effort to maintain. However, just because passive income streams are easy to maintain, that doesn’t necessarily mean passive income is easy money. Many passive income streams require a certain amount of sweat equity, monetary investment, or both to get started. Before reaping the benefits of passive income, you’ll need to put in some work.

Luckily, there are several ways to grow your money and create multiple streams of income from the comfort of your own home. If you’re wondering how to generate passive income with no initial fund, continue reading. In this blog, we’ll discuss five ways to create passive income streams and how to maintain them once they’re up and running. 

5 ways to create a passive income stream

In today’s world, there is no shortage of passive income ideas. However, it’s important to choose a passive income stream that you’ll enjoy setting up and maintaining. Here are five creative passive income streams homeowners should consider to obtain and grow finances. Some of these ideas require initial funds, but most only require time! 

Sell your knowledge online

You’d be surprised at how much money you can make from the knowledge you possess. Subject-matter expertise and lived experience are intangible assets that can be monetized online. You just need to know how to package them and find the ideal customer. 

Whether you’re an expert on real estate, parenting, travel, or another topic, you can compile this expertise into a digital product that you can then sell online. Consider creating online courses, e-books, or webinars and selling them on one of the following platforms:

  • Kajabi: An all-in-one platform that allows educators to sell online courses, membership sites, and other digital products. Kajabi has integrated features to assist educators in course creation, marketing, and sales.
  • Thinkific: A platform dedicated to creating and selling online courses. Thinkific is unique because it allows educators to create their own course websites.  
  • Skillshare: A well-known platform focusing on online courses that teach practical skills to aspiring creatives. Skillshare tends to attract educators who sell courses in design, photography, writing, and other creative areas.
  • Teachable: a platform designed to create and sell courses independently. Teachable offers its educators more control over their pricing and branding than other platforms.
  • Gumroad: a platform that allows creators to sell digital products directly to their audience. Gumroad tends to host e-books, guides, tutorials, and online courses.

Create a blog or YouTube channel

Selling your expertise online can be incredibly profitable. However, it can be difficult to know what kind of expertise is valuable to others. If you’re unsure about whether or not your technical knowledge is in demand, test out your idea by creating a YouTube channel. 

Someone who has years of graphic design experience under their belt will likely be able to create tutorial videos about how beginners can get started with a career in graphic design. Someone who is a financial advisor by day could make educational videos about budgeting strategies such as zero-based budgeting. If viewers find your videos helpful, they’ll subscribe and continue to watch your content, which will grow your channel. 

Monetize through ad revenue

As your channel grows you’ll be able to monetize views through advertising tools. Ad networks such as YouTube AdSense allow you to earn revenue through ad impressions and clicks. Ad revenue payments are ongoing—the more clicks and impressions you receive, the more money you make. On YouTube, you only need 1,000 subscribers and 4,000 total watch hours to begin monetizing with ads.

How much you’ll earn in ad revenue depends on the industry you serve and how long you’ve been on the platform. If your videos have an ad rate of $5 for every 1000 views, you’ll need 100,000 views to generate an extra $500 per month. Educational YouTubers typically upload 1-3 videos per week.

Other monetizing options

In addition to selling digital products and making ad revenue, bloggers and YouTubers can monetize in the following ways:

  • Offer exclusive memberships: YouTube allows creators to offer premium content through monthly subscription fees. Bloggers can do the same through third-party websites such as Patreon and Substack. 
  • Consult and coach: Some readers and viewers will come across your content and want to access more in-depth knowledge. This is a great opportunity for you to offer services as a consultant or coach. 
  • Host events and workshops: Creators can also host in-person or online events, workshops, or webinars where attendees pay an admission fee. This is a great option for creators who want to feel more connected to their audiences. 

Bloggers and YouTubers can also make money by posting sponsored content on their main platforms and other social media channels. Read more about how to make money through sponsored posts, below.

Post sponsored content on social media

Sponsored posts are pieces of content generated by a creator that promote a brand’s product or services. Creators receive an entire payment upfront or multiple payments at separate times. Most sponsored content is produced for 1-6 months, although some brand partnerships can last longer. 

You don’t need to be a YouTuber or a blogger to post sponsored content on social media. However, you do need to have a strong following on at least one social media platform to attract brand deals. You can grow your social media presence organically by collaborating with other influencers in your niche, regularly engaging with potential followers, and including relevant hashtags in your posts. 

It’s important to note you don’t need a massive online audience to land your first brand deal. Creators with a relatively small following can still make money off of sponsored content.

Leveraging a small following

Creators with a few hundred to a few thousand followers are valuable to many brands because they often have a deeper connection with their online community. These kinds of creators are known as nanoinfluencers. They frequently interact with their followers and may even know their followers personally. 

Nanoinfluencers can influence their followers’ purchasing decisions through genuine, everyday content in a way large-scale influencers can’t. They can also drive word-of-mouth marketing through authentic interactions online and in person. Even with a small audience, nanoinfluencers can generate sales for a company because of the trust they’ve established with their followers. 

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Try affiliate marketing 

Another way to leverage your online presence is to engage in affiliate marketing. Affiliate marketing is a performance-based marketing strategy where creators earn a commission by promoting products or services for a third-party company. 

This is how it works:

The company will create a unique affiliate link for a specific creator. The creator will then include this link in their bio, video descriptions, or other parts of their social media profiles. Every time a customer clicks on the link and purchases the company’s product or service, the creator earns a commission.

It can be easy to confuse affiliate marketing with ad revenue since both digital marketing strategies are based on clicks. However, affiliate marketing generates income for a creator only when the click leads to a purchase. Ad revenue generates income for a creator as soon as someone clicks on the company’s ad. 

Affiliate programs with zero sign-up costs

Certain affiliate programs come with sign-up costs. However, several affiliate programs come with no sign-up costs, making it easy for anyone to get started with affiliate marketing. ShareASale and CJAffiliate are some reputable affiliate networks. Some companies, such as Amazon, manage their own affiliate programs. You can reach out to these companies directly and request a partnership.

How to be successful as an affiliate marketer

Once you’ve set it up, you can almost forget about your affiliate marketing link. However, it’s not guaranteed to make you money. Being successful as an affiliate marketer depends on five important factors:

  • Be transparent about your affiliate relationships: It’s important to only recommend products and services you genuinely believe or have used. This helps establish trust between you and your followers and secures future purchases through your affiliate link(s).
  • Choose relevant products: You also want to choose products and services that align with your brand. Promoting a company that has nothing to do with your content niche and doesn’t appeal to your audience’s interest will result in limited clicks and purchases. 
  • Create quality content: This is a given for anyone trying to make money online. However, it’s especially important for creators working with affiliate links. Maintaining the quality of your content keeps visitors engaged and secures affiliate sales.
  • Promote across multiple channels: If you want to grow your affiliate marketing income, make sure to promote your affiliate links(s) across multiple channels. Include your affiliate links on your blog, website, social media platforms, and email newsletter to maximize exposure.
  • Regularly engage with your audience: Lastly, you want to validate your audience’s experience with affiliate links by engaging with them. In addition to recommending a product or service via an affiliate link, you also want to answer your followers’ questions and respond to their comments.

Rent out extra space in your home

Another practical way to generate passive income is to rent out extra space in your home. There are many ways you can put your extra space to use. Here are a few ideas:

  • Extra room rental: If you have an unused bedroom, consider renting it out to tenants on a short or long-term basis. You can list your spare room on rental websites such Airbnb and Roomi.
  • Storage rental: Homeowners with spacious garages and backyard sheds can offer these spaces as storage rentals. You can promote your storage rental through word-of-mouth in your neighborhood and in your social circles. 
  • Parking space rental: If you have an extra parking space on your property, rent it out to people who need to leave their vehicles somewhere safe overnight or while they are away. This can be a lucrative opportunity in urban areas with limited parking options. 
  • Workshop rental: Homeowners with extra space in their basement may consider renting it out as a workshop rental for artists or craftsmen looking for a dedicated workspace. 
  • Accessory dwelling unit (ADU): If you don’t have extra space on your property for any kind of rental, consider creating one by building an ADU. This is a great investment option if you would like to make your money work for you. These standalone units can be designed as guesthouses, home offices, workshop studios, or any other kind of rental. In addition to generating rental income, ADUs can increase your property’s value. Make sure to check local regulations before getting started on construction.  

How to maintain passive income streams

Once you’ve started generating passive income, do your best to keep that passive income consistent. This will help you maintain financial security in the long run and eliminate the need to constantly invent new ways of making money. 

Healthy passive income streams also protect you against having to take on high-interest debt such as peer-to-peer lending. P2P lending has become a popular financing option for individuals with less-than-ideal credit. However, interest rates on P2P lending can be as high as 36%, making them a risky financial tool. 

Another thing to note is that there are plenty of passive income streams to explore. It’s easy to get distracted and want to branch out into new passive income streams before your first one is fully established. 

Resist the urge to create a new passive income stream until your first one is generating a satisfying amount of income. This is especially important for passive income streams that require an upfront investment such as ADUs. Be sure to make a return on your first investment before moving on to another one. 

You should also consider setting SMART financial goals and committing to frugal living, at least for some time. This will help you obtain and grow finances so that you can live a more comfortable life in the future, not just right now. 

Final thoughts on generating passive income

The process of generating passive income isn’t as “passive” as some would assume. However, establishing a passive income stream can be lucrative and fulfilling if you choose one based on your lifestyle and capacity. 

Establishing multiple streams of income requires careful planning and regular maintenance. It’s best to earn passive income in a way that supports your financial goals and aligns with your commitment levels. 

Whether you decide to create and sell your digital products, promote third-party products and services on social media, or rent out extra space on your property, there’s a passive income stream that’s right for you. 

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