Want to make money while you sleep? Residual income streams can help you do it!
Building residual income is a long-term play, but it can provide an enormous boost to your overall net worth. If you’re looking to build real wealth, creating these types of passive income streams is essential.
Our Top Picks
M1 Finance – Enjoy $0 commissions on trades and automatic rebalancing with an investment account from M1 Finance. They also offer high-yield checking accounts and low-interest loan options. Read the review | Get started here
Fundrise – You don’t need to be a millionaire to invest in real estate. With as little as $500, you can start investing in real estate through Fundrise! Plus, you’ll never have to deal with maintenance or tenants. Read the review | Get started here
Savings Builder – Earn up to 0.95% APY on your savings when you open a Savings Builder account from CIT Bank. Quite frankly, this is our favorite savings account on the market right now – perfect for things like a vacation fund, emergency fund, or other savings goals. Read the review | Get started here
What Is Residual Income?
Residual income is money that is earned on a recurring basis, typically as the result of a single original action.
Rather than earning an hourly wage, residual income is typically generated through an initial investment of time or money with the goal of earning continuous payments. Once the initial investment, product, or service is made, the ongoing income that is earned is generally passive in nature.
Building multiple residual income streams is one of the best investments you can make. Heck, I’ve built over a dozen of my own.
If this sounds like a good idea to you, check out this list of simple ways to make residual income and get started right away!
12 Residual Income Ideas to Try This Year
Without further ado, here are 12 of our favorite ways to build residual income this year.
1) Investments with Low (or $0) Minimums
Don’t let the term “investing” scare you. One of the best ways to make passive income is to start investing beyond your retirement accounts. If you’re a newbie, investing may seem complicated, but these days it’s easier than ever to get started.
There are dozens of companies that can help you start investing, and several of them practically do it all for you! In many cases, simply decide how much you want to invest each month and select the amount of risk you’re comfortable with. Then, the program picks the investment mix for you.
If you’d rather be more hands on, there are plenty of options for that too. Many online brokerage accounts allow you to purchase individual stocks, bonds, and ETFs. Some, like M1 Finance, offer a bit of both!
Here’s the best part: You can get started investing for practically nothing. From $0 commissions to $10 bonds, here are a few of our favorite spots to start investing right away:
Personal Capital – Personal Capital offers FREE financial tools to help you track of all of your cash and investments. From the dashboard, you can track your savings, investments, spending, and more. Additionally, we love the free retirement calculator and investment fee analyzer, both of which come in super handy. They also offer low-cost investment management services, but the tools are free regardless so there is no reason not to try them. Get started here.
M1 Finance – If you’re looking for relatively quick returns, investing in dividend stocks may do the trick. Currently, one of our favorite investing platforms is M1 Finance. This company is different from others, as they are effectively a hybrid between a DIY platform and a robo advisor. So, you can pick the individual stocks or ETFs you prefer, then the system automates the process for you. Plus, with $0 commissions, trading stocks there is ridiculously cheap! Get started here.
Worthy Bonds – With Worthy Bonds, you’ll earn a 5% return on bonds that cost just $10 apiece. (Yes, you read that right.) The company then uses that money to help fund small businesses. Invest as much or as little as you like and cash out at any time. It’s that easy! Get started here.
#2) Become a Landlord
I love investing in real estate. In fact, outside of our original work-sponsored retirement accounts, real estate was the very first investment Holly and I ever made.
As a young married couple, we probably couldn’t have afforded it at the time. However, in our second year of marriage we took out a mortgage to purchase a rental property and have been landlords ever since. It’s been one of the best decisions we’ve ever made.
Personally, I love our real estate investments for two main reasons. First, they provide a steady source of residual income that’s hard to beat. No matter what the markets do, there will always be renters needing a place to live.
By becoming landlords, we have a (relatively) reliable source of income that we can use to finance our lifestyle, pay for our kids’ college, and fund our retirement. That’s tough to beat.
Additionally, the thing I love about real estate investing is that the property is tangible. It isn’t just paper money or a number in some bank’s database. It is real, and – for me – buildings and land will always hold some sort of value.
At this time, we own two single-family units and have plans to buy one or two more. That’s how much we believe in real estate.
Roofstock is a platform that makes it easy to buy, sell, and manage single-family rental homes across the United States. If you’re looking to invest in more than one property, you’ll also find a number of property portfolios available. The properties are located in more than 70 U.S. markets, and the platform can also help match you to a property manager. Follow the link above to learn more.
>> Related: 15 Best Travel Rewards Credit Cards This Month
3) Invest in Real Estate Without Becoming a Landlord
Want to invest in real estate but don’t want to pony up for a down payment? Or, maybe you’d love to get into real estate but don’t want to deal with maintenance or tenants?
Now, you can still gain exposure to real estate investing without owning or managing properties directly. In some cases, you don’t even need to be a millionaire to do it. Here are two options:
Fundrise – With a minimum investment of just $500, investors of all types can make crowdfunded real estate investments through Fundrise. This means you get the benefits of being a landlord without actually having to deal with owning or managing the properties yourself. Even though we own 2 rental properties, we recently began investing in Fundrise ourselves. We love it because there is no “accredited investor” requirement, making it far more accessible for the average person than the other two options below. Follow the link above to get started, or read our full review here.
Peerstreet – This residual income option is slightly different, helping you earn money using real estate backed loans instead of the property itself. By helping fund the loan, you’ll earn a percentage of the interest rate charged to the borrower. Most loans are short-term, generally lasting between 6 and 24 months. You can build your own portfolio by choosing the exact loans you’d like to fund, or Peerstreet will choose the loans for you. Again, you need to be an accredited investor, although the minimum investment here is just $1,000.
4) Don’t Forget About Retirement Accounts
If retirement is a goal of yours (and who doesn’t want to retire someday?!?), it’s important to start investing now. In fact, funding your retirement accounts should be at the top of your list. While these accounts won’t help your immediate situation, by stashing cash now, the residual income they create should help propel you through your golden years.
To make the most of your retirement funds, be sure to invest at least enough to meet your company match. That is free money that can potentially have a big impact on your future nest egg. Additionally, experts generally suggest you save at least 10% to 15% of your annual income in tax-advantaged retirement accounts (like a 401(k), IRA, etc.).
Just because you have a 401(k) through work doesn’t mean that you can just shove money in and forget it, though. Even though your employer may offer the program, they may not be actively managing it. What’s worse, you may be stuck in a program with ridiculously high fees and not know it.
Remember, Personal Capital offers a free tool to analyze your investment fees. (Yep, the analysis is FREE.) They’ll comb through your investments, uncover any unnecessary fees, and show you how much those fees cost you over time. From there, you can decide whether to continue dumping all your retirement money into your 401(k) or whether you should open a low-cost IRA instead.
For those who prefer to open an IRA but still want their investments to be managed automatically, a robo advisor like Betterment may be a good fit. After completing an initial questionnaire, this program will automatically invest your money based on things like your risk tolerance and time horizon. They’ll even rebalance your portfolio when necessary – all automatically, of course!
5) High-Yield Savings Accounts
In my opinion, savings accounts get a bad rap. Sure, you don’t want to stick all of your money into a savings account and hope it grows. That’s a terrible investment strategy that’s practically akin to sticking your money under your mattress. With that said, shoving some money into a savings account still has its place.
Savings accounts are a great place to stash cash for short-term financial goals. I’m talking about things like saving for a new car, putting money away for vacation, or using it for an emergency fund. Keeping money in a savings account allows you to earmark money for specific goals. It keeps it separate from the money you use to pay bills, and you still have easy access to it when you need it.
While interest rates on savings accounts at traditional banks are still embarrassingly low, the best online savings accounts offer considerably higher rates. Plus, you’ll still get the FDIC protections you’d find at a brick and mortar bank.
Personally, we like to store some of our money in a CIT Bank Savings Builder account. This account currently earns up to 0.95% APY. All you have to do is add $100 in the account each month or keep a balance of $25,000 to earn that rate. Learn more here.
6) Vacation Rentals and RV Rentals
If you live in a large city or area that attracts tourists, renting out a room in your house or apartment is a great option for building residual income. It’s even better if you have an entire apartment or house you can make available. To top it off, it’s an almost completely passive income idea.
So, who is the type of person who would rent out your space? I’m glad you asked!
We love traveling and rent out spaces all the time. In fact, we travel about once a month to places all around the globe. And, as frequent travelers, we generally prefer staying in a comfortable house or apartment – especially if we’re traveling with the kids.
You may also be able to rent out your apartment, house, or room to travelers who are in town for an event. For instance, rather than staying in a stuffy hotel, business travelers may wish to rent an apartment for a few nights. Concert goers and sports fans may also look for places to stay near the venue. The options are almost endless.
Airbnb is the perfect spot to list your space. Here, you’ll find thousands of guests searching for places just like yours. (We’ve booked through here several times.) Of course, you’ll earn a fee for each completed stay. Bonuses and rewards are also available and can really build up over time.
VRBO is another potential income source. While there is certainly some overlap, you’ll find another whole group of guests searching for vacation rentals here. It never hurts to list your property on both!
If you own an RV, you can also make money renting it out. Outdoorsy is the largest peer-to-peer RV rental marketplace in the world. When you’re not using it, why not make some extra cash to help pay for that big beast?!?
7) Start a Blog
Blogging is a great way to work from home and build residual income. In fact, Holly and I have been able to make enough money from blogging that it’s now our full-time careers.
Starting a blog is super cheap and fairly easy. For less than $10 a month in expenses, you can easily get your blog up and running. I mean, how many hobbies do you have that cost that little AND give you the chance to make money on the side?
For help getting started, check out our simple 6-step guide to starting a blog!
Now, don’t get me wrong. Blogging may be a good way to make residual income, but that doesn’t mean it’s easy. It’s not particularly passive either.
To create a successful blog, one that actually makes money, it takes time and a lot of hard work. However, once you learn how to make real money, blogging can provide some significant side income.
So, how do blogs make money?
Bloggers generally make money either through products/services that they sell or through advertising revenue. When it comes to advertising, bloggers typically get paid through direct ads they place on their website (think banner ads) or through affiliate marketing.
Affiliate marketing is a form of advertising in which a blogger promotes a product or service. The blogger then gets paid when a reader clicks on a link or banner and completes an action. (For instance, the reader purchases a product.) So, once you’ve written a piece, you can continue to earn residual income from that piece over and over again.
>> Related: 5 Reasons Blogging Is a Great Business Idea
8) Create an Online Course
Are you an expert in a field or have a specialized knowledge that others might want? Do you have certain skills you could teach that would benefit others? Consider creating an online course.
Online courses are all the rage right now, and they are a fantastic way to make residual income. Simply create the course once, put it online, and sell it for years to come!
Speaking from experience, I know this works.
My wife Holly is an incredible freelance writer who makes over $200K a year from writing alone. After years of answering questions individually, she decided to create a course called Earn More Writing.
In the course, she offers over 6 hours of writing tips and tricks. This provides value to students, helps keep her from answering the same questions repeatedly, and provides our family with an excellent stream of residual income.
Now, creating an online course might sound overwhelming, but it doesn’t have to be. First, decide if you’d like to use written materials, video, or both. Outline a few modules, and get started!
To build your course, consider using an online platform like Teachable. It provides everything you need to get started, and it’s super simple to use. (We use it for our own course!) Pricing is relatively cheap, and there is even an option to host your course for free. Learn more about Teachable here.
9) Write a Book
Writing a book (or e-book) is a classic example of how to make residual income. Simply write the book, find somewhere to publish it, and sell it for eternity!
While getting your book published used to be a major obstacle, these days, would-be authors have several options.
If you’ve got a book you’re itching to write, you can still go with the traditional publishing route. (We published our first book using a traditional publisher.) Whether your book is fiction or non-fiction, a publisher can help get your book into print and onto shelves in both online and traditional book stores. This is still a good route, although it may take more work and be more expensive than some other options.
Amazon is a good option if you choose to self-publish. They can help format your book so it is ready to sell. Plus, you can always list your book on their site once it is ready.
10) Try Peer-to-Peer Lending
I’ve always wanted to own a bank, and that is what makes peer-to-peer lending one of my favorite residual income ideas.
Banks are money-making machines. It’s what they do. But, I obviously don’t have enough money to start a bank on my own.
With peer-to-peer lending, I can get exposure to the loan market by providing cash for personal and business loans. Better yet, I can spread my cash around, funding dozens of loans at the same time.
Lending Club is a popular P2P lending website that is a great place to start. Take your interest income as cash on the side, or invest your money into an IRA account. With only $1,000 needed to get started, the choice is yours!
11) Open an Online Store
Selling your own products through an online store is a wonderful way to make extra income. If your products are digital or only need to be created once, all the better.
Shopify makes it easy to open your online shop and start making some residual income. They have hundreds of design themes for you to choose from, plus you can even use your own custom domain name. Their intuitive process allows you to focus on creating your products, not designing a storefront.
12) Build an App
From laptop computers to mobile phones, apps are everywhere these days. Why not cash in and earn some residual income by making your own?
If you’ve got the skills, building an app that could potentially make you a boatload in passive income. Simply build the app, list it in either the Google Play or Apple App Store (or both), and let the residual income start rolling in.
Have an idea for an app but don’t have the tech skills to do it yourself? Hire an app developer to make it for you. Sure, it may cost you money on the front end, but you could be pulling in residual income for years to come.
Why Should You Build Residual Income?
If you need a quick financial fix, finding ways to save money will get you the fastest results. Starting a budget, tracking your spending, and cutting your expenses are also important. And if you’re looking for ways to make money fast, there are plenty of things that can help you do that, too.
With that said, developing streams of residual income is an important part of building long-term wealth. In fact, it’s practically impossible to do without it.
Think about this: If your only source of income came from your job, you’d have a hard time making enough money to retire. Even if you saved enough to give retirement a shot, you’d be taking a huge gamble. Without residual income, the only thing you’d have to live on is the money you have saved. Once it is gone, it’s gone.
But, by sticking your money into a 401(k) or other retirement account, your stash doesn’t just sit there; hopefully, it will grow – and continue growing – for years to come.
The more residual income you can build, the better off you’ll be. In fact, it’s said that the average millionaire has 7 different streams of income. By creating passive income streams that generate money while you sleep, you’ll build wealth faster and diversify the ways you’re able to make money – which helps protect you from the loss of any one individual income stream.
Have you tried any of these residual income ideas? What are your favorites? Let us know in the comments below!