Normal people earn a paycheck and spend most of it every month. Wealthy people invest their money and time into income producing assets and business ideas that make money. What better way to start 2018 than by creating new passive income streams to help free your time and build wealth? To get you motivated, I’ve compiled a new list of 20 passive income ideas to consider building this year.
Most of the passive income ideas in this list require an upfront money investment which will earn a yield and generate an income stream. Others require a significant time investment to build a product or business that can generate income.
I prefer a combination of multiple income streams to help protect against market fluctuations, economic cycles, and job loss. Some of these are favorites from last year’s list that are easy to initiate. Many are first-time mentions on this site.
With that, here are 20 passive income ideas for 2018 to power your wealth building machine.
Note: The items in this list are provided as suggestions for further research by the reader. Please perform your own analysis to determine what investments and activities are right for you. Some of these require that the investor is accredited. Read a full definition of what accredited means here.
My favorite passive income idea for 2018 is still real estate crowdfunding.
Fundrise is one such platform that empowers ordinary investors to own high-quality real estate at attractive yields. This Washington D.C.-based company is a crowdfunding innovator that has changed the way investors can access profitable returns.
UPDATE 11/13/2018: Fundrise investors now have significant exposure to the Amazon HQ2 in Crystal City. Read more here.
When you invest at Fundrise**, your money is instantly diversified among dozens of real estate properties. Any U.S-based investor can invest on the Fundrise platform (non-accredited OK) for as little as $500 with the Fundrise Starter Portfolio which currently yields above 7%. Here’s an explanation of why Fundrise eREITs can pay higher yields than traditional REITs.
Self-directed IRAs are available for tax savings. Fundrise is one of two real estate crowdfunding sites that I invest on. Keep reading below for the other one.
Read more: Fundrise Review
2. Create an Income Pie of Index Funds or Dividend Stocks
Since M1 Finance completely eliminated their fees in December 2017, it’s become my new favorite online brokerage for long-term investors. On the M1 Finance platform, users create pies to design their perfect portfolio. When you fund your account, M1 Finance allocates your money according to the pie allocations.
The platform has access to all stocks and ETFs. So, for example, you can create a diversified Dividend Aristocrats pie, stick with Vanguard index ETFs, or create your own portfolio masterpiece. For now, all dividends are reinvested back into the portfolio but expect the company to give the option of taking them as cash in 2018. Tax-advantaged accounts such as IRAs are available.
Build your M1 Finance pie on desktop or mobile.
Read more: M1 Finance Review
3. Veteran Business Bonds
A company called StreetShares helps mostly veteran small business owners (also some non-veteran owned) acquire capital for their business cash flow needs by providing loans. What’s really cool is that these loans are funded by investors. For a $25 minimum investment, all U.S.-based investors can earn a flat yield of 5% on their money by investing in StreetShares Veteran Business Bonds.
StreetShares lends money to business owners at a higher rate leaving plenty of margin for non-performing loans. Higher yielding investments are available to accredited investors.
4. Turnkey Rental Properties
Finding cash flow positive rental properties is difficult, especially if you live in an expensive city or suburb. But services are now available to help you purchase cash flowing rental properties in cities and towns where the numbers work. Properties that are rented upon purchase are called turnkey properties.
That means that an existing landlord would like to sell a property, but has a tenant in place and doesn’t want to kick them out. You are buying an investment property already rented.
There are several advantages to this. Namely, the numbers already work and the tenant is in place. This is particularly helpful if you are investing from out-of-state.
The leading online turnkey rental property broker is Roofstock. Sign up for free on their website to browse existing properties. Last I checked, several hundred were listed as available.
Roofstock only operates in cities and counties where the rental numbers work and rent comfortably covers expenses and there’s cash leftover.
They’ve made themselves to be a one-stop-shop for investors looking to build passive income through single-family rental properties. From the website, you can buy properties sight-unseen. Then they’ll set you up with a selection of property managers, making this a completely passive investment.
You own the property just like any other piece of real estate.
Click here and sign in to check out their current inventory for free.
5. Interest on Cash
The U.S. is in a rising interest rate environment. We’ve seen interest rates on cash savings increase nicely in the past year or so. When you make an investment, you need to weigh the risk against what you’d earn on cash.
CIT Bank now offers a Savings Builder account which pays up to 2.15% interest on cash. That’s 100% risk-free return and FDIC-insured.
Some CD rates are even higher.
Those rates are the highest we’ve seen in a decade. CIT is at the top of the list of highest interest rate banks. Investors have ignored savings accounts for years since rates were so low. But now is the time to open an account and keep all your excess cash working for you. Rates are expected to rise over the coming years.
An interest-bearing savings account is perhaps the most passive income stream of all. Let your cash earn money for you. Learn more here.
Read more: CIT Bank review
6. Refinance Your Mortgage
Even in a rising interest environment, long-term mortgage rates are still historically low. If you can refinance your mortgage and save a few hundred dollars a month, you’ll struggle to find a better investment for your money.
For example, if a mortgage refinance costs you $3,000 in closing costs, but your monthly payment decreases by $300 per month, you’ll break even in the first year. That’s a 100% return in less than a year. The $300 in savings is technically not a passive income stream, it will increase your cash flow after one action. Definitely worth the effort.
That’s why everyone should regularly look at their mortgage numbers to determine if a refinance is right for them. For our last refinance, we used LendingTree to find the best interest rates.
7. Lending Club
I’ve invested on the Lending Club platform for more than four years. Returns have been solid for me, averaging 6%-9% annually. 2016-2017 saw a decline in returns prompting the company to change their underwriting standards and lower investor expected returns to 4%-6% by eliminating higher-risk loans for retail investors.
On the Lending Club platform, investors make micro-loans of as little as $25 to borrowers in need of a loan. By investing small amounts in multiple loans, you spread your risk. Late last year, Lending Club eliminated the higher-risk “F” and “G” loans for individual investors, hopefully lowering investor default rates going forward.
For borrowers* in need of a loan for various uses including debt or credit card consolidation, Lending Club provides lower interest rate loans compared to credit cards. The platform is modern and easy to use and can save borrowers thousands.
Read more: Lending Club Review
PeerStreet is the third real estate crowdfunding platform I started investing on in 2017. This platform offers debt deals on various real estate projects nationwide for a $1,000 minimum investment. You can easily invest in multiple deals to spread your risk and earn returns in the 6%-11% range.
Automatic investment selection is built into the platform. Investors set their criteria for the loans they want to invest in, and when one becomes available, the system invests your money for you. After that, you have 24 hours to perform due diligence on the loan. PeerStreet is the most transparent and elegant real estate crowdfunding platform I’ve used. Unfortunately, it’s for accredited investors only at this time.
RBD readers get a 1% yield bump on your first investment!
Read more: PeerStreet Review
9. Buy a Dividend ETF
If you want to keep things simple and diverse, use your online brokerage account to buy a dividend-focused ETF. These ETFs are relatively low-cost and pay a higher dividend than a total market index ETF like VTI. Some examples include:
- Charles Schwab US Dividend Equity ETF (SCHD)
- Vanguard Dividend Appreciation ETF (VIG)
- ProShares S&P 500 Dividend Aristocrats (NOBL)
- iShares Select Dividend ETF (DVY)
- SPDR S&P Dividend ETF (SDY)
You can buy these in a commission-free account such as M1 Finance or a more traditional online brokerage account like Ally Invest which charges $4.95 per trade. Buy within an IRA to avoid paying taxes on your dividends.
10. Solar Energy Funds
A Colorado-based company called Wunder Capital has created investment funds that enable individuals to invest in large-scale solar energy projects. These funds are like solar index funds giving you exposure to a diversified range of solar projects, funded by the crowd. It’s not a solar stock, and investing in individual projects, not companies.
For a minimum investment of $1,000, investors can earn 6% to 7.5% returns which are paid on a monthly basis. Wunder Capital is for accredited investors only.
11. Sell Your Designs
Creative designers have a wide selection of places to sell their designs as merchandise. Etsy stores are a popular choice for crafty types, but selling on that platform is work intensive.
A more passive option is to utilize a platform such as CafePress to sell your designs. It’s a simple model. You create and upload a design. CafePress sells your designs on t-shirts, hoodies, and a variety of other products. Then you make money from the design you create and upload once. Designs need to be good to earn. Or really funny.
12. Litigation Finance
Litigation finance is a type of alternative investment offered on the YieldStreet platform. Legal investments come in different forms including pre-settlement financing, legal advertising, and post-settlement finance. I learned about this investment class listening to YieldStreet CEO Milind Mehere on Episode 59 of the Invest Like a Boss Podcast.
While this sounds kind of shady, these investments are sound and have an excellent track record. Investors can earn 8%-20% yields but must be accredited. YieldStreet also offers real estate crowdfunding investments.
13. Create and Sell a Digital Download on Your Website
If you have a blog or other kind of website, you can easily sell a product directly from your site using a service called Gumroad. Gumroad makes it easy to sell your product to any visitor. Or, create your own website for the purpose of selling a product.
Your product can be as simple as a PDF or spreadsheet you’ve created that can help people. You create your product one time, then put it up for sale on your website and Gumroad handles the financial processing. Improve your product, create more, and grow a mini-business without having to rely on a larger platform such as Etsy, Amazon, or Shopify.
Gumroad charges $10 per month for the service plus 3.5% + 30¢ per charge. Utilize a blog or social media to drive sales.
14. Create an Online Course
Online courses have exploded in the past five years. Experts and creators can now create video courses to teach others their craft. A course can be about anything that people want to learn. Friends of mine have created courses and say the amount of effort is similar to writing a book. But once its done and starts to sell, it’s a solid passive income stream.
An online marketplace called Udemy is the most popular platform for creating courses. Udemy has a built-in audience making selling easier. However, Udemy takes a sizable portion of the income and controls some of the pricing.
Another option for people with an online presence is Teachable. Teachable is an all-inclusive end-to-end solution to create and sell a course on your website.
Best of all, if you want to learn anything, nowadays there’s a course for it on Udemy. Learn how to earn passive income via a course, or build your own course to earn passive income!
Prosper is another peer to peer lending company, similar to Lending Club, where borrowers can get unsecured loans and investors can fund them and earn a return. I prefer Lending Club simply because I’ve used them for so long. But Prosper is the second largest platform and also worth checking out.
16. Invest with a Conscience
You don’t need to own oil stocks, firearms, and other vice stocks in your index funds to earn a return. Various options are out there for investing with your conscience, be that of a pacifist, vegan, or environmentalist.
A new venture was started under the wing of Pacific Life Insurance company last year called Swell Investing. They’ve created investment portfolios to cater to the values of certain people. These portfolios contain a number of stocks that fit the theme of the portfolio such as green tech or renewable energy. Dividends received are automatically reinvested to help compound your wealth for now.
Read more: How To Invest With A Conscience
17. Create a YouTube Channel
Did you know YouTube is the number two search engine behind Google? Of course, Google owns YouTube too, so we’re all at their mercy. So why not join the party?
It still blows my mind that a 6-year-old boy is one of the top ten biggest YouTube stars in the world having earned $11 million last year. My kids love Ryan.
But you don’t need to be a mega-star to earn money. I use YouTube to learn about DIY projects like fixing my leaf blowers and replacing my shower faucet. If you have expertise, YouTube is a place you can showcase your advice to teach and/or entertain.
Ads displayed before, during, and after the video drive revenue. But you can also send viewers to your online store or blog to drive sales. The cost to get started on YouTube is very low and monetization funnels are plentiful.
18. Bond ETFs
Less sexy than stock ETFs, bond ETFs are the simplest way to invest in fixed income. Bonds are simply a way to loan an entity money. In return, you receive interest payments and eventually the returned principal.
Instead of buying lots of individual bonds, you can buy a bond ETF to diversify among many bonds and leave the selection to the ETF managers. Bond ETFs come in many different varieties including government, corporate, short-term, long-term, junk, municipal, international and in variations and combinations of each type. Like most investments, higher yields mean higher risk. So choose your bond ETFs based on your risk tolerance, asset type, and liquidity.
Some of the more popular Bond ETFs include:
- Vanguard Total Bond Market ETF (BND)
- iShares Core U.S. Aggregate Bond ETF (AGG)
- iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD)
- SPDR Barclays High Yield Bond ETF (JNK)
- iShares iBoxx $ High Yield Corporate Bond ETF (HYG)
Bond ETFs can be purchased on the stock exchanges through an online broker.
19. Start a Blog
I’m ending with this one because a blogging side business has been my path to creating significant passive income through a massive time investment. But now that I’ve invested the time into my blog, much of the income I earn is completely passive. I’ll explain.
When you write a blog post on your website, that article immediately goes out to your followers. But the content also remains on the website for others to find via search engines or social media. Each time somebody reads your content, there’s the potential to serve them an ad, product for purchase, or affiliate link (many links in this post are affiliate links). Each set of eyeballs that read your content carry the potential for passive income.
It’s harder than it sounds. You’ll need lots of high-quality content and numerous eyeballs to read it to generate income. So you need to create more eyeball traffic through promotion, building an audience, and collaborating with other bloggers. Earning money takes time.
This blog took three years to generate any significant income. But now that the pieces are in place to earn an income, it arrives with very little additional work. In other words, if I completely stopped doing anything to this blog today, it would continue to generate passive income for years.
Don’t start a blog unless you 1) have something valuable to offer to readers, and 2) are in it for the long haul. If you’re interested in blogging, read my post How To Start An Online Business to learn how to get started.
RealtyShares is another top-tier real estate crowdfunding site for accredited investors. This platform enables investors to own pieces of large-scale commercial and residential properties for a minimum of $5,000. Both debt and equity deals are available.
Open an account to take a look at the types of deals available. There’s no obligation to invest your money unless you find a deal you love.
When you invest in a deal, you become part of an LLC created for each separate opportunity. Deals are underwritten in-house and heavily scrutinized for quality. Only 5% of deals proposed by developers are accepted on the platform. Accredited investors only.
Update: RealtyShares is no longer accepting new investors.
20. Royalties From Eminem’s Music Catalog
Update 04/09/18: This deal failed to complete. Come back soon for a new idea to replace this one!
You read that right. A company called Royalty Flow is scheduled to IPO this month. For a minimum investment of $2,250, you can participate in the Royalty Flow IPO. After the IPO, the stock will trade on the Nasdaq like any other stock.
The parent company who is organizing the IPO, Royalty Exchange, has already acquired a portion of Eminem’s music royalties and will spin them into the newly formed company, Royalty Flow, at the IPO. Eminem himself is not endorsing and has not commented on the deal.
The company intends to pay a dividend, thus, paying you a portion of the royalties every quarter going forward. No formal declaration of a dividend has been made yet. Expect to see the dividend declaration after the IPO. Any excess money raised will be used to purchase other music royalty assets.
Conclusion – Passive Income Ideas 2018
Thanks for reading through this entire post. For this year, I wanted to provide a mix of some of my favorite tried-and-true passive income ideas, plus some fresh ideas to keep this list helpful to everyone. Let me know what you think in the comments. Next year, I’ll aim to expand the list even further. If you have any additional ideas that readers could benefit from leave your idea in the comments section or contact me.
Note: Some of the links on this page are from our sponsors which may influence the list order but not the recommendation.
*All Lending Club loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.16% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at the time of application. The origination fee ranges from 1% to 6% and the average origination fee is 5.49% as of Q1 2017. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.
** Fundrise Disclaimer: The information contained herein neither constitutes an offer for nor a solicitation of interest in any securities offering; however, if an indication of interest is provided, it may be withdrawn or revoked, without obligation or commitment of any kind prior to being accepted following the qualification or effectiveness of the applicable offering document, and any offer, solicitation or sale of any securities will be made only by means of an offering circular, private placement memorandum, or prospectus. No money or other consideration is hereby being solicited, and will not be accepted without such potential investor having been provided the applicable offering document. Joining the Fundrise Platform neither constitutes an indication of interest in any offering nor involves any obligation or commitment of any kind. The publicly filed offering circulars of the issuers sponsored by Rise Companies Corp., not all of which may be currently qualified by the Securities and Exchange Commission, may be found at www.fundrise.com/oc.
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