Passive Income 2021 [The Best 6 Sources]
By: Jake Kaiser
Tags: Investing, Passive Income, Wealth, Millennials, Make Money Online

1: Stocks

This is an easy one I’m sure you are all familiar with, however, it needs to be included as stocks have made more millionaires than any other wealth building tool. Investing in stocks allows you to take the money you save from your job or the below methods and puts it to work generating income and overall wealth.

Stocks can give you passive income through two main methods: appreciation and dividends. Stock appreciation feels a bit different than normal income yet if you buy a stock at $100 and it grows to $1000 this $900 difference is essentially passive income you can realize any time you sell that asset.

The second way stocks can pay you is through dividends which is when a company/stock pays you a small percentage of their profits in regular installments. These dividends are cashed straight to your account and you can collect or re-invest this money. Dividends are generally between 1%–6% and are usually riskier the higher the yield (percentage amount the stock pays). Many of the most established and large companies often called “blue chips” are known for paying steady dividends that can bring you extra cash each month [EG: T, KO, WMT,JNJ, DIS, JPM….]

Stocks can be invested in individually or through mutual funds or exchange traded funds [ETFs] . As a general starting point I recommend investing in ETF’s with exposure to many companies and sectors to reduce risk and spread it across different companies. Some of my favorite ETF’s are: VOO, SPY, and VTSAX. There are also ETF’s that focus on dividends like VHDYX, VIG, DIV if focusing on income vs. growth it appealing to you.

2: Real Estate

Real Estate is an amazing passive income source and can be approached in different ways so don’t worry if you can’t currently afford a home or rental property. You can invest in real estate either directly or more indirectly through real estate investment trusts or REITs. REITs basically pool the money of investors together and invest in real estate and then pay a dividend back to their investors from the revenue they receive. The nice thing is that legally REITs HAVE to pay the shareholders a minimum of 90% of their taxable income . Some examples or REITS are O, VNQ, SPG and these are essentially stocks that give you exposure to the real estate market and can pay some high yield dividends.

Buying property directly can bring in passive income through both property appreciation and rental income and a property can bring you monthly cash from rent while also increasing in value. Having rental properties is not fully passive yet if you’re able to find good tenants or hire a property manager it can approach a totally passive state. The final note I want to add is buying real estate directly can have some great tax advantages which I will dive into more detail in a future article.

3: Business

Create a business with the goal of having it operate with minimal oversight and effort. This often is not passive during the building stage of the business but with the right business model and planning it’s 100% possible to create a business that generates steady income with little to no work. Online businesses are generally the best candidates here and where I have the most experience.

Here are some of the many online businesses that are great for generating passive income:

Social media: By monetizing the social media you already use you can generate income. This often takes work yet for many of us already using these platforms daily it can feel more like motorizing your life and what you would do anyway.

Website: By putting ads on a website you can sit back and collect ad revenue with very little effort once the site is built and hosted.

Online store / drop-shipping / FBA: I’m lumping these all together as they are all great ways of generating near passive income once setup. You can sell things online with all the fulfillment, orders, and customer service done by third parties while collecting a check at the end of the month. I personally have an Amazon store that is fulfilled by Amazon [FBA] and it just requires that I order new product every couple months and then that product is shipped directly to amazon and sold across the country.

I do want to emphasize setting up an online store or drop shipping store does take initial effort and will not feel passive at first yet when you have a business model that can scale independent of your time involvement you can build one of these businesses to be very nearly passive.

4: Royalties

Fourth we are talking about royalties which is money paid to artists for their work. This won’t apply to everyone but if you are into an art form like making music, digital art, photography, or videography you can easily sell the rights to this art. As an example I create music in my free time and between licensing it and streaming royalties from Spotify and other music platforms I bring in around $200 a month for something I would have been doing anyway. The moral here is that you can monetize your interests and hobbies and doing so can teach you a lot about business and help you grow as an individual.

5: Sign up bonuses

We are almost done but I wanted to give one passive income source anyone could do today with 10 minutes of time! I’m talking about credit card or bank bonus churning which takes advantage of sign up bonuses for credit cards or bank accounts. As long as you ALWAYS pay off your credit card balance you can collect free travel, cash, and other rewards just for spending the money you would spend anyway. This can also work for changing bank accounts where you can often get $100 to $600 for opening a new account and keeping it open for a few months. If you are interested in this idea search for “credit card churning” and there are a number of great resources out there.

6: PAY OFF DEBT

Ok this is not 100% a source of passive income …but hear me out. Before worrying about income, focus on paying down debt as with the high interest rates we see on things like credit cards the interest on loans is a higher yield than you can usually make with these passive income sources so paying down debt first will result in more cash to work for you or build a business with.

Summary

I hope you have some ideas to get out there in 2021 and make that hard earned money work for you and as a final reminder the more of your paycheck you can save the more money you have to put into these ideas and the faster you can be making large amounts of passive income monthly.