The term “residual income” refers to two different things. From an accounting perspective, residual income is the amount of money you have left over each month after you pay the bills.
From a business perspective, residual income (or passive income) is income you gain by doing one-time work or very little work yet still earn income, similar to passive income.
Both definitions have the same goal: increase the amount of money you have to do what you want to do with it. I’ve listed below some ways you can build your monthly passive income levels so that you’ve got more money coming in each month.
1. Consider Crowdfunded Real Estate
Real estate investing has long been touted as a smart way to build passive income. However, not everyone can afford to put the necessary twenty percent down on a rental property. Also, not everyone is interested in owning and managing rental properties directly.
Enter, crowdfunded real estate investing. The premise behind crowdfunded real estate investing is amazingly simple: a group of investors each borrow a pre-determined amount of money to a person or company that owns and manages real estate rental properties.
The expert real estate investor then uses that money to purchase or improve upon residential or commercial real estate properties, which they then flip or rent out.
Here are the basics about Realty Shares.
- Realty Shares requires a minimum investment of $5,000
- They charge an annual asset management fee of one percent
- They have commercial and residential investment options available
- They only allow accredited investors to participate
An investor is considered accredited if they meet one of two different financial parameters.
They can either have a minimum of $200,000 individual or $300,000 joint-with-spouse income (for the last two years and expected to continue at that level), or they can have a net worth of $1 million.
Here are the basics about Fundrise.
- Fundrise requires a minimum investment of $1,000
- They charge an annual asset management fee of 0.85%
- They invest in commercial real estate transactions only
- They allow non-accredited investors to participate
If you want to start making residual income via real estate investing but aren’t interested in physically owning and managing properties, this might be the way to go.
It’s important to know, however, that there is a potential of loss of initial investment amount, just like with other types of investing.
2. Start Investing in Dividends
Financial experts such as Warren Buffett swear by dividend investing as a path to building residual income. Dividend stocks are generally blue chip stocks (stocks in companies with a long history, such as McDonald’s, Coke and 3M) that pay dividends back to customers.
If you are going to trade stocks, check out Ally Invest as they charge as little as $3.95 per trade. This is great because many brokers charge around $10 per trade.
Many investment firms charge hefty fees for investors that participate in their dividend investment strategies, but robo-advisors (companies that have automated management systems in place) make investing affordable and increase potential profit margins by charging lower fees.
One of the top robo-advisors is Motif which is known for low fees and diversified portfolios.
Keep in mind that investing with robo-advisors does hold a potential risk of loss of investment funds, just as there is with traditional investment management firms.
However, with the right picks and a healthy stock or bond market, you can also use dividend investing to increase your passive income.
3. Open an Online Store
Online stores can help you increase your residual income one of two ways. You can have your online store function as a drop-shipping site, meaning that you collect the orders and then send them to the distributor of the product.
The distributor houses and delivers the products, and you get a slice of the profit for actually selling the item.
Or you can keep an inventory of the products you sell online and ship them directly from your house or warehouse to the client. This route would be more time-intensive, however, and not be as passive of an income source.
Either way, whether you choose the drop-ship method or selling directly, companies such as Shopify can help you with setting up a professional online store, online shopping cart, etc.
But know that you’ll be sharing your profits with Spotify or any other e-commerce company for that service.
4. Write a Book
Publishing a book can be a great way to increase passive income because once the book is done and published, the only work left for you to do is market it.
If you choose this route to make residual income, you’ll have to make some decisions, like:
- Do I want to offer the book in e-book format only or as a paperback or hardcover as well?
- Will I create and publish the book myself or use an outside source?
- Will I edit the book myself or hire someone to do it for me?
5. Work with Affiliates
Affiliate income is fast becoming a popular way to make residual income. Blog and website owners can make affiliate income in a couple of different ways.
Placing Ads on the Site
If you look on most web sites or blog sites, you will probably see ads for different products or companies off to the side. Companies such as AdSense and MyFinance can install ads on web or blog sites.
6. Make YouTube Videos
Yes, it is possible to make residual income through YouTube. Ads placed on videos pay the video creator for every view. Although the amount paid per view by advertisers is small, it can add up over time.
7. Create Product Designs
Websites such as CafePress are becoming more and more popular as a way to create residual income.
8. List a Room in Your House
Hotel rental prices can be expensive, but sites such as Airbnb can offer affordable alternatives to hotel stays for travelers.
9. Sell Digital Designs on Etsy
This idea is genius, if only because the designs you create don’t require real shipping. Etsy has thousands of different items for sale such as jewelry, handmade flash drives and more.
A person selling an actual hold-in-your-hand item on Etsy has to do the work of not just creating the item, but storing the inventory, the supplies to make the product and of packaging and shipping the item to clients.
10. Create a Mobile App
How many mobile apps do you use each day on your smartphone? Mobile apps are great at making life more convenient for people. If you have an idea for a great mobile app, you can create and sell it online.