How to Earn Passive Income from Home
As we gear up to return to the post-pandemic work culture, we can observe notable changes around us, which include how we work, our approach towards meetings and interactions, the ever-growing preference for hybrid working conditions, working from home, and so on. What hasn’t changed is the desire to make that “extra” money that will boost our financial journey. And what better way to do that than by earning passive income from home?
Before answering how to earn passive income from home, let us get a quick context.
Understanding Passive income
You can broadly divide your income into two categories:
- Active income is where you must be actively involved in a job or activity and get paid for the work done.
- Passive income is where you earn money by not being actively involved on a day-to-day basis and it requires relatively lower efforts in the long run.
The second one sounds interesting, right? It indeed is! However, don’t be fooled by the name. Earning passive income from home or anywhere else is not “free money.” You have to put in some serious time and effort in the initial stages and reap the benefits of your money “working” for you!
Essentially, you can think of passive income as a way of maximising returns, gradually allowing you to work less. Simply put, your efforts decrease, and your income increases over time. Now, to make a passive income from home, let’s jump to the next segment.
How to Build Passive Income from Home?
There are several ways to make passive income from home. However, before starting, you need to understand a few ground rules. Setting and following these ground rules will help you make sustainable passive income from home in the long run. You should be ready to make short-term sacrifices to achieve your long-term goals.
Assess your skills
The first thing you need to analyse before choosing passive income ideas is your skill set. Figure out things that you are good at. Then choose an idea that complements your skills and will help you make passive income from home. For example, if you are an IT professional, you can start your tech blog or post gadget reviews on YouTube. Or do both! You need to critically assess your standout skills that can be leveraged to make those extra bucks.
Set realistic goals for your time and effort
After assessing your skill set, now decide how much effort to put in. The idea of passive income from home seems lucrative. But it takes time and effort to build a sustainable income source. Suppose you have a tight work schedule along with other social commitments. In that case, it’ll be difficult to set up a venture that will earn passive income from home quickly. Set some realistic goals and expectations before starting. Take stock of your active job, work schedule, social life, and other commitments. Plan your earning strategy and ensure that you follow it consistently. A regular earning flow will bring discipline to your work.
Start by building a nest egg
A nest egg is a considerable sum of money or other assets that you invest or save for long-term goals, such as education, buying a house, or retirement. Create a habit of saving and putting your money to work through investments. Over time, you will accumulate enough wealth to make passive income from home without lifting a finger.
Ideas to Make Passive Income from Home
Having understood the background work to be done before exploring the ways to make passive income from home, let’s see how you can actually do it.
Become a silent business partner
Becoming a silent business partner can be your way out if you have big business ambitions but not the required experience, expertise, or time. Identify a business that best suits your needs and invest in it. However, you can leave the operations to your business partner.
The business will regularly pay you a percentage of its profits for your investment. Similarly, the invested amount is secure in the form of the stake you own in the company. This way, you can earn passive income from home without getting into the business.
Invest in real estate
Investing in real estate has been one of the most popular methods of building wealth. You can also earn passive income from the property. Once you purchase real estate, you can put it up for rent and earn rental income.
If buying a property is out of your budget, you can invest in real estate investment trusts (REITs). They operate similarly to mutual funds, i.e., they pool large amounts of money and invest in multiple real estate ventures. Such investments typically offer generous dividends and can be tracked on the stock markets. One huge advantage is that you can trade and diversify your REIT investment across different markets. This way, you can leverage the booming real estate market and earn passive income from home.
Engage in peer-to-peer lending
In recent years, peer-to-peer (P2P) lending has become a popular passive income stream. If you have extra money to spare, you can use P2P lending to make passive income from home. In P2P lending, you lend your money to companies that may not be eligible for a traditional loan. The process is typically facilitated by a third party who vets the borrowers and presents it before you. Once you loan the money, you can earn interest on it until it’s repaid.
However, you must note that P2P lending carries a high credit default risk. Hence, carry out due diligence on the facilitating website and, if possible, on the borrower before lending your money. Also, loan only that amount which you can afford to lose.
Build an app
If you are an IT professional or someone who loves coding, you can develop an app and let people download it. It can be a great way to earn passive income from home. The app doesn’t need to be a paid one. Several apps generate revenue through ads and app store commissions.
You can develop a no-code app even if you don’t know how to code. Multiple websites allow you to create no-code apps. However, such apps have some limitations. Nonetheless, if your idea is unique, it will help you make a passive income at home.
Sell ad space on your car/vehicle
Selling your car or vehicle space to advertisers can be an excellent way to make passive income from home. It may not always look stylish, but it should not be worrisome if you make a passive income from sticking some ads on your vehicle.
Starting an online business has never been easier in recent years. With the onset of the digital revolution, you can set up an online business without handling or seeing the product you wish to sell. Dropshipping has three primary elements — you, your supplier, and your customers. The customer will place an order with you through a digital mode, such as a website, mobile application, social media ads, etc.
However, the supplier will store, package, and ship the product to your customers. Thus, all you have is a storefront. Your supplier does all the legwork. Obviously, the supplier will keep some portion of the profits you make.
Dropshipping can be an excellent way to make passive income from home without massive business risks. You are not exposed to additional investments, such as buying or renting a warehouse. Also, you don’t have to worry about dead stock or maintaining inventory.
Rent out your household items
Rental income is another way of making passive income from home. With the growing popularity of the sharing economy, people are always looking to rent out various items instead of purchasing them outright. Suppose you have household items that are seldom used. In that case, you can rent those to earn passive income from home at no additional cost. These items could be furniture, appliances, cars, or even a parking space. You can lease these assets for the short term and set the monthly rental price. However, be aware of the maintenance cost that might come up due to constant leasing to different customers with varying degrees of use.
Start a podcast
A podcast is like an audio blog. If you have good communication skills and love to talk about different topics, then start a podcast. In recent years, the podcast industry has seen massive popularity. Listen to some of the most popular podcasts before you start. Understand how podcasts appeal to their audiences. Plan your podcast by talking about a topic that you feel confident about. The next step is to plan your script in a structured way. You only need a working microphone and a PC to record and edit your work. It can be a great way to make passive income from home.
Several popular sites allow free podcast hosting, and you can start building a loyal audience. Eventually, you can monetise your podcast through affiliates and sponsorships. However, building a loyal audience takes time. You will need to put in extra effort to research and fact-check the data you will present to avoid errors in your podcast.
Once you choose the perfect idea to make passive income from home, it is essential to manage that additional income properly. Ensure that the passive income you make by working from home is either invested or saved up in an account with a high-interest rate. Moreover, you can spend some money on improving your passive income venture. The key here is to keep doing your work consistently to accumulate wealth over time.
Can passive income make you rich?
Yes. But building sustainable passive income from home takes time and effort. You need to put on a strict schedule to achieve your financial goals.
What’s the fastest way to earn passive income?
There are different ways to earn passive income. You must assess your skill set and market it properly to earn your passive income.
Where can I invest my money for passive income?
You can invest in bonds, fixed deposits, the stock market, real estate, etc., to earn passive income. Passive income can be in the form of interest, dividends, growth in share valuation, or rental income. However, a proper analysis before investing is suggested.
How much passive income is enough?
You need to have steady growth in your passive income along with a margin of safety. The latter ensures that your passive income can easily cover your day-to-day cost of living. Experts recommend earning a passive income that is around 15% to 20% more than your annual expenses.
What are the different investment avenues in real estate?
You can buy and rent properties to earn passive income from real estate. Suppose you don’t wish to buy physical properties, then you can invest in real estate investment trusts (REIT) or realty funds to leverage the boom in the real estate market.