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For the past couple of months I have been researching, specifically on how to generate or build up a second source of passive income, I am obsessed with the fact of making another source of income at a young age, but I have found so much trouble in trying to execute my researching and readings by putting it into action.

It seems that a lot of my information that I have gained throughout time has either been, the stereotypical, "MAKE $100,000 A MONTH WITH ONLY ONE CLICK" YouTube guru, or reading articles, books, etc. which tells me to generate another source of income for example, by investing in real estate, or start up an e-commerce store, sell a product, etc. But I realize that this requires a lot of money to start up which I don't really know how to use to start up so is there any way I can generate a second source of passive income that may require a small startup with a small capital return?

I'm not looking to generate a LARGE amount of money, just something simple in which can help me understand and get a fundamental understanding of making streams of income, without a high startup/investment cost, with a small capital return as well as some advice on how to use money to start up or invest in something for a profitable return?

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  • You have already found a primary source of passive income. That's great! Can you use that as a starting point for developing a second source of passive income? Dec 4, 2020 at 5:39
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    Not an answer, and be cautious about wading into twitter communities as they may intersect with lots of things you don't agree with. But you could do a lot worse than hanging out in certain corners of "Money Twitter". twitter.com/blackhatwizardd, twitter.com/PaikCapital, twitter.com/hustlenconquer are all people I have no trouble recommending and put out a lot of valuable content for free.
    – Kaz
    Dec 4, 2020 at 15:31
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    @EllieKesselman, I'm reading the question as fbleb having a primary, non-passive source of income and seeking a secondary, passive one. I can see how it can be interpreted either way, though. Dec 4, 2020 at 15:54
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    You may find that the YouTube gurus' method to create passive income is to sell access to the next video on how to create passive income.
    – user662852
    Dec 4, 2020 at 16:02
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    There is generally no way to reliably make money without working. The lower the risk, the lower the reward. If you want to make lots of money on average then you can e.g. lend it to tech startups, but there's a good chance you'll never get it back at all. This is the thing to know: you can't get something for nothing, there is no free lunch Dec 4, 2020 at 16:13

4 Answers 4

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The advantage of passive income, and the reason people urge you to get some, is that it is unlimited. Unlike working for an hourly wage, or a yearly salary, with passive income you don't have a cap on how much you can make a year. It's important to know that this is the benefit. Passive income isn't free, easy, or guaranteed; it's just not tied to a limited resource like hours per day you can work.

Generally, passive income results from one of two things:

  • you put in a lot of work, for which you may or may not be compensated, and then you get money going forward even though you are no longer putting in that work, or not as much anyway, and the money isn't tied to how much work you're putting in now. Say, earning royalties on something you published. You may work at promoting it in the hopes of increasing your royalty income, but there's no 1-1 tie that if you put in 1 hour you will get $20. You might get TONS of money or you might get none.
  • you put in money and earn a return on it. This might be a guaranteed interest rate (2% on a million dollars will get you $20,000 a year, but alas most people to whom $1500 a month is a lot don't happen to have a million kicking around) or more fluctuating like seeing an investment go up in value. You again don't have to put in work for the income to arrive.

(Some things are both: for example if you want to own rental real estate you'll need some money to buy it and you'll have to put in time looking after it and dealing with tenants. But nobody gives you $30 because you spent two hours dealing with tenants today. You get the rent independent of the time you're spending being a landlord.)

Looking for passive income that doesn't require work or money upfront is believing the people whose real source of income is selling "lessons" to people who want to be rich. You can make a LOT of money some times, but not for nothing. Not for knowing a secret or finding the thing most people don't know about. The closest you can get to what you appear to be looking for is to take something you like doing (a hobby) and find a way to be paid for it that is not $x for a hour of work. Selling things on Etsy. (This does not require a lot of money, and you shouldn't consider "opportunities" that do.) Publishing a book or a course. Monetizing a Twitch stream or a YouTube channel of activities you would do anyway. Then once you have a steady amount of money coming in, you can consider using that money to try to set up other passive income streams, and so on.

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  • Ok, and yes for example (WARNING: it might be cliché but it's simple), I enjoy dealing with money, so let's say I end up spending $5 for lemonade powder and it makes 20 cups of lemonade, so I end up buying water for $2 and I sell each cup of lemonade for $1, (I sell all of my lemonade) making my total 'investment' $7 and a capital return of $13? (Something along the lines that will teach me fundamentals of business and expansion of business for example me hiring people to sell that lemonade for me (<-- Very unrealistic but simple terms to explain what I'm looking for))
    – fbleb
    Dec 4, 2020 at 15:05
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    there are literally hundreds of books on that. It can't be answered in this format. And on top of that most of the books are wrong and you have to learn by doing, and by watching others. Dec 4, 2020 at 15:27
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    @fbleb You are describing starting and running a small business, with a plan to (h/t to Prop Joe, from The Wire) "buy for a dollar, and sell for 2". There is absolutely nothing 'passive' about 99% of small businesses. Have you ever noticed that most convenience stores have the same smiling, tired faces when you get a coffee at 7AM or cigs at 8pm? That's because you're seeing the owners, who often work from open to close, often every single day. Long before you have a chance to sell your business a la Dragon's Den, or afford to hire a manager to operate it, YOU are the one who needs to run it. Dec 4, 2020 at 15:39
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    @fbleb Not passive. You have to make the lemonade! And sell it! And buy the ingredients! It's not like drop-shipping where you just tell the ingredient companies to send the water and lemons to the customer's doorstep. Dec 4, 2020 at 16:15
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    Passive income requires you to invest either a lot of time or a lot of money, and the expected returns scale with the amount of risk you're willing to take. It's all explained in my book, "How I Made $50,000 Selling Books". It sells for $50,000. Let me know if you want a copy. Dec 5, 2020 at 0:12
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The easiest way is to buy stocks that pay a dividend. If you want to focus on real estate try a REIT ETF. You can get started with a small amount of money and build your investment and income stream as you go.

If you want to buy physical real estate. One way to do it without a huge pile of money is to buy a duplex, live in one side and rent out the other side. Once you have built up enough equity buy another one and repeat the process. I know a guy who did this and wound up with about 8 four-plexes by the time he was 35 without spending much more that he would have spent on his own housing expenses.

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  • Ok, thanks for the insight. I do invest in stocks at the moment, and I don't own any dividends. I was thinking of getting some dividend stocks to add that extra little in my pocket. Would you happen to know of any sort of way of maybe making a small side business like selling small products for low startup to no costs with low profitable gains? (I just ask for multiple sources of insight so I can get as much info as I can since I want to understand the business industry and take advantage of money)
    – fbleb
    Dec 4, 2020 at 2:20
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    @fbleb a small business is not what I would consider passive income. It is very active. Even being a landlord is only borderline passive.
    – JohnFx
    Dec 4, 2020 at 14:24
  • Comments are not for extended discussion; this conversation has been moved to chat. Dec 4, 2020 at 18:08
  • Being a landlord can become very passive if you hire a property management company to take care of all the everyday landlord responsibilities for you. But those of course want a hefty commission for their services.
    – Philipp
    Dec 7, 2020 at 14:01
  • That's why I said borderline. There is a whole spectrum of passive, and landlording can cover a wide swath of that spectrum based on a number of factors.
    – JohnFx
    Dec 7, 2020 at 19:02
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Some sources of passive income are:

  • Owning a part of a company which generates profit (which hopefully will keep generating profit and not go bankrupt)
  • Owning something you can rent to someone (which hopefully will stay in the shape that someone would want to rent it without requiring more money from you to maintain it than you get in rent)
  • Owning an intellectual property others would (hopefully) pay to use.

Ownership in a company can be in form of stocks (which either increase in value or pay dividend) or in form of an inactive partnership (you gave money to someone else so they can start their business, but you do not actively take part in its daily affairs besides getting a part of the profit). If you decide to play the stock market game, then I would recommend you to not invest in individual stock but rather invest in an index fund. Yes, there are people who actually make money with day trading. But if you want to do that in a way which actually makes you money and isn't just gambling, then you need to spend so much time monitoring stock prices and business news that it's not really a passive income anymore. And index fund, on the other hand, is an asset you can just buy and then not think about until you need to turn it back into money. At which point it should hopefully be worth more than you paid for it (it might be less because the stock market is currently in a temporary crisis, but it usually doesn't take long to recover). If you want to use an index fund as a source of passive income, then you would invest $x in it, check on its value occasionally, and when it happens to be much more than $x, you sell so much of it that its value is back to $x.

Owning something you can rent usually means real-estate (but you might find other things you could rent out if you are creative). If you do not want to invest the capital to buy a whole apartment, then there are real estate funds. You basically buy a share in a real estate property (or a portfolio of many) which entitles you to a part of the rent it generates. This allows you to generate passive income through real estate with a lot smaller initial investment.

An intellectual property could be either something you created yourself or something you bought the rights to and which people would pay to use in the future. Examples could be:

  • A song
  • A book
  • A stock photo
  • A video
  • An app or video game

There are websites for each of these which allow you to just upload them and then receive a part of the revenue they generate (in form of sales or advertisement).

The good thing about these kinds of passive income generators is that they are the only ones I could think of which allow you to generate a passive income without actually investing any money. You would invest your own time and special skills to create these assets.

But the disadvantage is that it usually requires quite a lot of skills and creativity to create intellectual property which is good and appealing enough to generate any passive income at all. And even when you happen to have those skills, then it is very difficult to predict how much income these assets will generate. They might for some reason become amazingly popular or (statistically far more likely) get just a handful of sales. It's also hard to tell if they will keep generating much revenue in the future. They could become timeless classics which generate money for the rest of your life or (again, far more likely) be completely forgotten a couple months after release.

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  • Only thing I think worth adding to this list is ownership of bonds or savings account or CDs that give you interest because you allow someone else to use your money for a time. They also can be more stable, that is less risky, but they also don't generate as much passive income. Dec 7, 2020 at 14:20
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I'll try to make it short...

  • Become an escort.

  • Make porn and charge a subscription for it (i.e. by opening an accoun with OnlyFans or JustFans for example).

  • Become a Vlogger (i.e. YouTube videos) and blog about niches with high RPMs (revenue per thousand impressions).

  • Become a Blogger, and monetize your website through ads and/or affiliate marketing.

  • Sub-let property, paying landlords a low long-term rent, and renting it out for more (avoid having to buy property and requires very little capital).

  • Build an app that people love to use and will pay a subscription for (easier said than done).

  • Buy a property and rent it out (long term or on AirBnb), however, you'll need some capital upfront.

  • Invest in the stock market (but you'll need a lot of money to generate an income with dividend yields so low) or inflation-linked bonds.

  • Opening a savings account (but you'll need even more money with interest rates near zero!). Clearly, this isn't an option any more.

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    How do you generate a passive income as an escort? Film yourself with your clients and then blackmail them for the rest of their lives?
    – Philipp
    Dec 7, 2020 at 13:50
  • And as far as I know, OnlyFans is a subscription-based service. That means content creators need to create new content regularly in order to maintain their revenue. That's not passive income either. It might be possible to generate a passive income through pornography when you monetize it on a pay-per-view system. But that's not how that website works.
    – Philipp
    Dec 7, 2020 at 14:39
  • If you are going to pleasure yourself or have sexual encounters Philipp, why not film them and broadcast them? I added these suggestions for laughs, don’t over think it Philipp, but that’s also a form of passive income. Dec 8, 2020 at 16:05
  • Sex work is also work.
    – Philipp
    Dec 8, 2020 at 21:13

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