8 Passive Income Machines (Make Money While You Sleep)

The rich are different and they have a secret. Sure they work hard, but they don’t work harder than the average person. The real secret is harnessing the power of passive income machines. The secret to how people retire early, have greater options in life or gain financial independence is simply passive income. Most folks in the US retire off social security, a small pension and/or small withdrawals from a 401k built up over many years. But what if you could build passive income machines 10, 20, 30 years before your 65th birthday! In fact, to be wealthy, it will most likely take a couple decades to build passive income machines. Every wealthy person I have met has various passive income “machines”. These “machines” may take management on occasion, but they do not take daily or constant work on your part. They do typically take hard work and astute deployment of capital on the front end to set up properly. But after they are set up, they produce money and income as you sleep. If you seek F.I.R.E. (Financial Independence Retire Early) or perhaps you just seek more flexibility and freedom, you must build passive income machines.

Make money while you nap.

Takes Time

The main thing for most people is that it takes time and capital to set these “machines” up to provide you with substantial income. But I would simply encourage someone to start small, get a taste for saving/investing, and then explore and learn about passive income machines.

Definition of Passive

It is important to note that passive does not mean no work. All investments tend to require some attention, research and management. All of life’s activities require some form of attention and management. To me, “passive” means that I do not need to devote 9-5 on the effort. There is no special place I need to sit at each day in a cubicle responding to a boss and hierarchy. Passive to me actually has more of ownership stake involved. I have an equity and ownership interest in the asset.

Some Remarkable Passive Income Machines

Here are seven popular passive income “machines” used to generate extra income, some are quite easy to get started and simply require an initial investment, others would take many years to structure and put in place:

1. Individual Retirement Account (IRA, 401k, etc.)

One of the main ways people create passive income for their future self is by each and every month adding to an individual retirement account (IRA) or 410k through their employer. The trifecta of dollar cost averaging, a company match and compounding have a powerful wealth building effect! With these amounts saved, one can generate a certain amount of “passive income” from their investment account. For example, with about $1 million invested, a person can generate about $40k a year in income with a low probability of depleting the account too quickly.

2. Rent Out Extra Space

I have used Airbnb and had friends that have rented extra rooms to foreign exchange students. Again, this is a straightforward way to turn a liability (housing) into an asset that generates cashflow. With Airbnb you can closely screen prospective guests. This is perhaps a good time to mention that the word “passive” is relative. Passive usually means that a person does not need to work on the effort 9-5, 5 days a week with a boss and hierarchy over them. Passive income machines do take some level of effort, and renting out extra space is a good example of this.

3. Invest In Private Real Estate Deals

Real Estate is probably the oldest form of passive income. But it typically takes large amounts of capital to start enjoying the passive income gains. But not anymore with the miracle of technology and crowdfunding. With platforms like Fundraise.com, for as little as $1,000 you can invest in real estate developments all over the country that are professionally constructed and managed. I personally use this platform to earn 8-10% returns and so far it has been great. http://oracle.davidkanter.com/2018/11/11/fundrise-real-estate-investing-review/

4. Dividend Paying Stocks

Here at The Money Vikings we feature a lot of posts about dividend paying stocks. One reason is that these are a simple and straightforward way to start creating passive income flows. There are many advantages to this approach. For one, it can be done almost instantly. If a person goes onto Robinhood, they can buy a share of a dividend King like Johnson & Johnson or Kraft Heinz and receive passive income almost instantly. SEE RELATED: Dividend Kings List http://oracle.davidkanter.com/2018/09/23/pfizer-dividend-snapshot/

Dividend paying Real Estate Investment Trusts (REITs)

REITs are some of my favorite dividend paying passive income machines. REIT’s are required to return 90% of profits back to the shareholders as income. Anyone can own a publicly traded REIT. SEE RELATED: Realty Income Monthly Dividend Payer REIT

5. Traditional Rental Property

One of the classic passive income plays is real estate rental property, both residential and commercial. But this can be challenging for the average investor. It typically takes a large amount of initial capital and time to make this machine work properly. One tactic that works is over the years make sure to hold onto properties previously purchased and renting them out. This way you can test the waters and see if you have the patience, skills and resources to rent out property. This takes people skills, business skills and some knowledge of maintaining a property. Remember as the landlord you deal with the late night calls that the pipe burst or water heater crashed.

Real Estate Has Great Tax Benefits

The tax benefits of owning physical real estate are very attractive. The first $250,000 in gains is tax-free per individual and for married couples you receive $500,000 in tax-free gains upon sale. Then there’s the ability to exchange a property you own for another property via a 1031 Exchange so you don’t have to pay any capital gains tax. If you own rental property, you can take expenses to reduce any rental income tax. Owning property over the long term is one of the most proven ways to build wealth and generate passive income for the average American. http://oracle.davidkanter.com/2018/06/26/rental-property-from-the-80s-blood-sweat-and-tears-literally/

6. Start a Blog and Podcast

Jerry, Bob and I started The Money Vikings blog in December 2017. Our mission is to learn, inspire, teach and achieve new levels of wealth and financial freedom. We share ideas with others to inspire them to do the same and build a healthy, productive life and community. By inspiring and motivating each other we have already achieved new levels of net worth and passive income on our journey to “conquer financial freedom!” We have seen tremendous success with our blog and podcast and are even more excited about the future. We truly love the connections we make with other investors and folks building wealth. There are so many great ideas out there that almost anyone can harness! Starting a blog is a huge labor of love and takes time and commitment. I would advise a person to discover a topic they are passionate about and that others are interested in. It must also be a topic or theme that people want to learn about.
“Perhaps blogs are the new academy or advanced school?”
This is the only way you will stick with it and hopefully help and inspire others along the way. Blogs are monetized through placement of ads or affiliate links depending on the main topics of your blog. Even if you do not earn any money at it, blogging is a fun, creative and value added adventure in my opinion. HOW TO GET STARTED: a. Pick a topic you are passionate about, learn to write well and structure your thoughts and ensure others are also interested in the topic. b. Pick a good domain name, think about creating a brand identity, sign up with WordPress and find a host for the domain name. c. Research and write good quality content that helps people. Engage with others on social media. d. Develop your privacy policy, legal disclosures, etc. e. Apply for adsense or other advertisement platform to monetize. Examples of blog income: Cost Per Click (CPC) Google Adsense…$1,800/month Revenue per thousand impressions…$800/month Selling an eBook…$1,300/month

7. 12 Month CDs

Does anyone remember the era when you could earn 3-5% on a certificate of deposit (CD) at a bank? With interest rates rising there may be some relief in site and CD rates should begin to gradually rise. The best I could find at the moment are CD’s offering 2.55% max.

8. Creating Your Own Products or Books

If you’re a creative person, you might be able to produce a product that’s able to generate a steady flow of passive income for years to come. When a person makes a product or work of intellectual property, they can receive royalties for this product for years to come. I have done this personally with a book that I wrote and illustrated in 2012.

#9 Extra Secret Way (Grid Trading w/ Crypto)

SEE RELATED: Grid Trading With A Crypto Bot

Other Forms?

There are of course other forms of passive income. A person needs to decide if they want to specialize in one or build many. I have seen successful examples of both. Social security is a nice form of passive income, but you have to wait a long time to collect on that one. Why not build passive income machines earlier? There are also risky passive income ideas like crypto currencies, but these seem to have some maturing and development required. There is also development of intellectual property and patents as mentioned previously. This can include books, inventions, artwork, etc that pays a royalty. You may want to be building other sources step by step during your working years in order to accelerate your path to financial independence! What about options trading? Here is another area of passive income worth exploring. Jerry and Bob have quite successfully built such passive income methods. What others can we think of as a community?

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