How would you like to make money while you sleep?
Imagine, waking up in the morning and seeing that you’ve earned $500 overnight. How would it feel to make more money while you slept than you do in your 9-5 now?
With passive income you can quit your job, take a vacation, or save money for the future.
Luckily for you, I’m going to show you simple ways to start building passive income. When done right, these strategies can help you build enormous wealth!
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What does it mean to make money while you sleep?
Making money while you sleep involves setting up a series of passive income strategies.
Passive income sources require either a lot of effort or money up front. Once your systems are in place they require minimal effort to maintain. You can make money every day because these systems allow you to make money.
For most of you, generating passive income is going to take sweat equity. You’re going to have to work for it.
Once you’ve started to generate income you need to funnel your cash into real estate and dividend paying stocks. These methods will continue to generate more money without your attention.
Money invested will begin to compound, meaning your profits will make you more profits. Earning 10% on $100,000 leaves you with $110,000. Next year, another 10% earned leaves you with $121,000.
Eventually, your money will start making you more money than you know what to do with. That’s the beauty of compounding interest.
Dividend paying stocks
So what is a dividend paying stock? A company pays a dividend to shareholders out of their earnings when there is no better growth opportunity for the money.
Let’s take a look at AT&T:
The current price is $34.97 per share and a 5.83% yield. So over one year, AT&T will pay you a total of $2.04 in quarterly payments of $0.51. Not bad for simply owning a share with your unused money!
So how do you go about finding quality dividend stocks to purchase?
1. Find dividend stocks that appreciate
The first thing you should do is create a watchlist of dividend stocks that appreciate. A watch list is a list of stocks you have an interest in and most brokerages, like Robinhood, allow you to create a watch list.
Stocks will either appreciate, increase in price over time, or depreciate, decrease in price over time. Find stocks that have increased in price over the last 10 years that also pay dividends. Add them to your watchlist.
Remember, past performance does not guarantee future success. However, it’s generally a good indication.
2. Evaluate payout ratio
Payout ratio helps you to determine if choosing a specific stock is sustainable for dividend income.
If the annual dividend is greater than the companies earning per share (EPS) then the dividend isn’t sustainable. It’s because the company is paying shareholders more than they’re earning.
Let’s look at AT&T who had an EPS of $2.35 and pays $2.04 annually [=$0.51 dividend x 4 quarterly payments]. The payout ratio would be 0.87 or 87%.
So AT&T currently has a sustainable dividend. They earn enough money per share to cover the dividend payment. Anything with a payout ratio of 1 (or 100%) or greater is not advised.Click to Tweet! Please Share!Click To Tweet
3. Find a good price to earnings
Price to earnings is an indicator of a companies current value. It is the price divided by its EPS.
For AT&T, the price to earnings (PE) is 14.88 or $34.97/$2.35. If company B had a PE of 55, AT&T might be the better deal because it’s undervalued comparatively. You’re buying AT&T at a closer price to what it earns.
The S&P500 currently has a price to earnings around 25. So I might look for dividend paying stocks that are currently valued lower than the market. This leaves room for growth.
4. Read news
One of the best ways to reassure yourself of the stock is to read the news. Generally, doing a quick Google search is enough to find out if the company is a good buy.
You can even find websites like CNN Money which has stock analyst ratings for buy, sell, or hold. In addition, you can find the Stock price forecast which is what analysts expect the price of the stock to be within the next 12 months.
However, never invest in anything you don’t understand. Educating yourself in the stock market is the best thing you can do, especially if you’re choosing individual stocks. Eventually, you’ll start to make money with stocks with the right understanding and mentality.
5. Purchase stock
Once you’ve decided on a dividend stock you’ll need to purchase it. You’ll need a brokerage account through a company like Robinhood.
Creating a brokerage account is free, easy, and only takes a fee minutes. Robinhood makes purchasing a stock super simple.
Open up Robinhood and search for your stock, let’s say you want to buy “AMZN” or “Amazon.” You’ll see the current price for Amazon stock, which you should take note.
At the bottom right hand corner, select the “Buy button.” You’ll see in the upper right hand corner, there is an option to select order types. The most generic order type is Market Order, but other order types exist for advanced traders.
6. Reinvest the profits
Reinvesting your profits is what’s really going to amplify your ability to make money while you sleep. Building wealth breaks down into three easy steps:
- Make money.
- Use that money to make more money.
The more money invested the faster you’ll see more significant investment returns. Compounding interest is a wonderful thing!
Consider someone who earns 10% on $100,000 each year. In one year they would have $110,000. In total, it would take that person just over 7 years to reach $200,000 with no additional investment.
Now someone who has $1,000,000 invested would earn $100,000 in one year at a 10% return.
As you can see from the chart above, the more money invested the faster your money builds! Reinvesting your profits will help you build wealth faster.
Real estate is another good way to earn money while you sleep. Imagine owning property and receiving a monthly paycheck for owning such an asset.
Not all real estate has to be expensive. Lets take a look at how you can use some of your extra money to invest in real estate.
Real Estate Investment Trusts
A REIT is a Real Estate Investment Trust which is a company that owns, operates, and invests in real estate. REITs are purchased just like a stock, through a stock broker. Owning a REIT exchange trade fund (ETF) gives you a diversified real estate portfolio that you don’t have to manage.
REITs are required to pay shareholders in the form of dividends. Vanguard Real Estate ETF (VNQ) is my favorite REIT ETF, which is currently paying a 4 percent annual yield.Click to Tweet! Please Share!Click To Tweet
Real estate and AirBnB
AirBnB makes it easier to rent property and you don’t have to worry as much about finding tenants, tenant rights, property management companies, etc. Surprisingly, AirBnB has the potential to earn you more money that the traditional landlord renting.
You still need to change and wash bed sheets, clean up after each rental, and a few other tasks you’re good to go! Unfortunately, you will have to supply the furniture, dishes, etc.
AirBnB only charges a 3 percent booking fee which is way lower than property management fees of 10%!
I have known AirBnB hosts who have gotten twice what they could charge in rent some months. A little more effort but has the potential for more reward.
Crowdfunded Real Estate
Crowdfunding is another way to purchase real estate with as little as $100. Companies like FundRise allow you to invest your money into real world real estate projects.
Maybe you only have $1,000 to invest and that’s ok! FundRise takes your money and the money of others until they have enough to purchase property. Income from the properties is then distributed to the investors according to how much they invested.
Peer to Peer lending
You invest money in a families looking to buy their first house or to pay down debt. This family may have bad credit due and may have been denied by a bank. Either way, we both win as the family can purchase their home while I earn interest on my unused money.
Peer to Peer lending generally works on a note system. A note is a portion of a loan that you can purchase. So if a family needed a $1,000 loan, you could purchase or “fund” a portion of that loan by purchasing a note.
Most notes are sold in $25 increments. So for a $1,000 loan there would be 40 notes available ($1,000 / $25). So technically, you only need $25 to get started investing!
Peer to Peer lending returns are expected to be anywhere from 4-7 percent. According to Lending Club, investors who owned over 100 notes see a positive return. Therefore, I recommend investing with a minimum of $2,500 in multiple notes.
Sell on Amazon
Let me tell you. As someone who has sold things on Amazon, things can sell crazy fast! There’s no greater feeling than waking up and checking your Amazon seller’s app to see how many sales you did overnight.
However, there are a few downsides. You need to be able to find product suppliers and most of them don’t want to work with you.
Even if you do manage to find products to sell, say through retail arbitrage, some companies might file I.P. complaints and your listing might be removed.
Amazon also charges some crazy fees which might make it difficult for newcomers to get started. Some products are profitable if you ship them yourself, but to be eligible for prime and the buy box you need to sell through Fulfillment by Amazon (FBA).
So, if you can find some place that will provide you products to sell then you can make a lot of money. However, this is easier said than done.
Candy and Vending machines
Candy and Vending machines take time to build up, but can be a huge source of passive income. Caleb from Dividend Kings says he makes $30-$70 per candy machine.
As you can see, each machine costs him $150 and makes him $30-$70 depending on location. So owning 10 machines could generate you an extra $300 to $700 per month!
The key is finding a good location to place your machines. Caleb shoots for local businesses like Salon’s, banks, waiting rooms, etc. Talk to the owner about the value a candy machine will bring to their customers and have a machine on hand to install.
Vending machines are another way to make a lot of money. They are more costly than a candy machine, but can generate a fair chunk of revenue.
A YouTube channel is one of the easiest ways to reach an audience and build a brand. You can start with as little as an iPhone, shooting videos on something you’re passionate about.
I’ve read a few interesting articles on people making money from YouTube. One person made over $150k per month with their Real Estate content and courses. Another teenager was making over $10k per month making videos about his vending machine business.
To be successful, you need to continually crank out videos on a regular basis. You’ll start to build a following who may end up purchasing your recommendations for products or your own courses.
Ricky Gutierrez shows people how to trade stocks on YouTube. In the video descriptions he links to a course he made that sells for $300.
Ricky could earn can $2.1 million if he can convert even just 1% of his 705,000 subscribers to purchase his course. That’s some crazy money!
Purchase or Create a website
Websites earn money through a variety of sources. You can earn money through advertisements, affiliate products, courses, sponsored content and more. The best part is that you can literally make money while you sleep because your website is live 24/7.
Creating a website takes a lot of time and effort to start being profitable. You will need to learn how to drive traffic to the website and how to monetize your website.
A faster way to profit is to purchase an existing website that is already making money. You might find a cooking related website that generates $700 per month for sale for $7,000. Flippa is a website marketplace where you can buy or sell websites.Click to Tweet! Please Share!Click To Tweet
Create and sell a product
You can already see the power of selling your own product when you look at what Ricky Gutierrez is capable of. If you have an audience like his 705,000 subscribers then selling a product is easy.
However, if you’re new and don’t have an audience it can be more challenging. The first thing you want to do is market research to know if your product is going to sell. Create the product and use a program like Teachable to sell it. Get that product in front of people through advertising or offering an affiliate program.
Offering an affiliate program can be very profitable. Imagine having an army of affiliates working to sell your product in exchange for a commission. It’s one of the best ways to generate passive income.
Drop shipping is another great strategy to make money while you sleep. Imagine waking up, checking your overnight sales and only doing a couple hours worth of work.
With drop shipping, you find products for a low price and sell them somewhere else for profit. When someone purchases the product, you place the order wherever you found it for a lower price. You never even see the item!
Here’s an example of an item you could flip for profit, Fiskar trowels. On Amazon they are selling for $5.89, but sell for $9.95 on Walmart. As a drop shipper, you find price discrepancies and buy low and sell high.
There are many ways to start a drop shipping business. Some people sell on Amazon or Ebay by listing products they can find online stores like Home Depot, Lowes, Walmart, and Target.
Other people create a niche store, say “Best Backpacks” where you focus on one theme or item. You can create an online Shopify store and find a product supplier. Again, you can use product suppliers like REI or go through a drop ship supplier network like Spocket.
Summary: Make money while you sleep
As you can see there are many ways to make money while you sleep. Most strategies involve you taking action and putting in the work to set up an automated system so that money can be made in your sleep.
So what are the best ways to make money while you sleep?
- Dividend Stocks – Dividend stocks pay you time and time again, just for owning the stock!
- Real Estate – You can purchase physical real estate, Real Estate Investment Trusts, and crowdfunded real estate are all options.
- Peer to Peer lending – Another form of investing which you should use to diversify your portfolio.
- Sell on Amazon – Find products, send to Amazon, and let Amazon send products out when they sell. Things can sell crazy fast!
- Candy and Vending machines – Generate a monthly income by selling candy. Stock your machines with popular candy and collect your cash.
- YouTube Channel – Build a following around a niche. Monetize with YouTube advertisements, custom merchandise, affiliate products, and your own courses.
- Websites – Buy or create a website. Monetize through a variety of options including advertisements, products, sponsorships, etc. I love websites for making money advertising online!
- Products – Create and sell digital products. Find a way to get your product in front of people.
- Drop shipping – Buy low and sell high. Look for price discrepancies at different online marketplaces.
So what’s your favorite way to make money while you sleep?