In Monday’s post, I went through 6 lessons about passive income.  Today, I want to look at ways to make passive income.  Like I said on Monday, passive income is the key to building and maintaining wealth and, ultimately, freeing yourself from the confines of being an employee. 

But how do you get passive income?  What are some passive income ideas?  Where and how can you develop streams of it to supplement and, hopefully, exceed your earned income?  Here are 8 ways to make passive income:     

1) Rental Properties

This form of investing involves buying a property (an apartment, a house, etc.) and renting it out.  The rent payments cover the mortgage, insurance, and property tax payments.  What’s left over after you subtract the mortgage, insurance, and tax payments is passive income.  If you want to read more about this kind of investing, check out my post about investing in real estate for cash flow.

2) Ownership Of A Business

If you start a business, build it, grow it, and make it profitable, you can delegate most of the duties to reliable and responsible managers and employees.  When you do that, the business works and generates income without you having to be actively involved in it. 

3) Network Marketing

Network marketing is also known as “multi-level marketing.”  It’s a business model whereby a company markets its products directly to consumers through direct selling and referrals.  It recruits individual sales representatives to market and sell its products.  It doesn’t pay these individuals a salary and, instead, pays them commissions based on how much they sell. 

Sales reps also make money by recruiting a downline of similar individuals and earning royalties from the sales and referrals of those downlines.  In short, a network marketing company gives you the tools and training to build your own business, develop it, build a loyal customer base, and leverage the sales and referral efforts of your downlines. 

This latter aspect–the leveraging of the efforts of your downline reps–is what creates valuable passive income.  Like you, those downlines build their own businesses, which produce a consistent stream of royalties.  The more they develop and expand their own businesses, the larger your passive income becomes.  Their work provides you with income without you having to be directly involved.  

4) Internet Advertising 

Online advertising is the use of the Internet to market products and services and attract customers.  If you have a website or a blog that has a high level of traffic, you can leverage that traffic into passive income through advertising.  

You can place banners or links on your site or blog that generate income when people click on them; every time an ad is shown; or after having the ad shown for a certain amount of time.  Alternatively, you can sell ad space, (but that only works if you have a very high level of traffic).  Some programs that you can use to sell pay-per-click ads are Google Adsense, Bidvertiser, and Text Link Ads.

5) Affiliate Marketing

Affiliate marketing is a program that compensates participants for referring people to buy a product.  Like online advertising, if you have a website or a blog that has a high level of traffic, you can leverage that traffic into passive income through affiliate marketing. 

You put banners and links on your site or blog that advertise products or services related to your site’s content.  Interested consumers click on those links or banners, which redirect them to the site selling the related product or service.  If they purchase the product or service, you receive a commission for the sale. 

It’s passive income because, after you put in the effort to pick and choose the related products and place links and banners on your site, you simply have to sit back and (provided you have traffic) enjoy the income that comes in. 

Amazon’s Affiliate Program is one of the more well-known affiliate marketing programs.  Others include Copeac, Commission Junction, and Azoogle Ads. 

6) Ebay Selling

Ebay presents an endless array of entrepreneurial opportunities.  Many people have made a lot of money through the following process: Find a reliable wholesaler or drop shipper from which you can buy products in bulk, and then sell those products individually for a profit on Ebay. 

Once you achieve enough volume in sales, you can buy Ebay automation software that automatically buys your products from your wholesaler or drop shipper and runs your auctions for you.  Then, you outsource the shipping, and you will have created an automated online business that generates passive income for you.  All you have to do is eat, sleep, drink, and cash your checks.  To learn more, check out Ebay Passive Profits.             

7) Dividend-Paying Stocks

Some companies pay dividends to a certain class of shareholders.  A dividend is a distribution of part of a company’s earnings.  Buying stocks that pay dividends usually doesn’t generate all that much money unless you buy a lot of shares, (which requires a large investment).  It also typically falls into the category of portfolio income.  Nevertheless, it operates like passive income because it puts money in your pocket without you having to be directly involved in it.

8) Royalties From A Patent 

A patent usually requires unique creativity.  But if you’re one of those talented individuals who has a ground-breaking idea or an invention, you can patent it and then license your patent rights to a manufacturer in exchange for a royalty for each unit sold.  Thus, someone else manufactures, markets, and sells your product, and you relax while earning a royalty every time a sale is made.

Any one of these ways to make passive income will put you on your way to financial freedom.

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