Looking for ways to build financial wealth long-term without adding more work to your daily life? Residual income allows you to increase your fortune passively — meaning you’re earning cash while you eat, sleep, and brush your teeth. With the substantial increase of online platforms and opportunities, residual income is easier to achieve than ever before.
If you’re like many others, you may be unsure what residual income means and how to achieve it. This guide breaks down the steps for building residual income and offers fourteen ideas for establishing passive income that will bring you lucrative returns for years to come.
What Is Residual Income?
While residual income can be used to describe the amount of net income after all costs are paid down, it also refers to the amount of money you continue to generate after your initial work is done. There are countless ways to make money, but some are much more time-intensive than others. Active income, for example, refers to when you directly act or perform a service for money, including salaries, wages, tips, commissions, and income from a business you’re actively involved with.
Working as a nurse or a computer engineer for a salary are two examples of active income. In contrast, residual income is income from an investment that earns over the minimum rate of return. You get paid for work you completed once or are periodically overseeing. With residual income, you don’t have to be present or intricately involved to get paid.
While some people believe that you don’t have to be involved at all to keep residual income alive, in reality, you’ll likely have to keep an eye on operations from time to time. Still, the amount of time involved with residual streams of income is significantly less than with active sources and the involvement is usually minimal.
In addition to an extra income stream, residual income allows you to diversify your revenue sources. Instead of relying on your standard paycheck, you’re earning money through the royalties of an eBook or the sales of an online course. Diversity of income gives your overall financial portfolio more security and depth. Similar to passive income, residual income gives you more financial stability, flexibility with your lifestyle, additional retirement savings, and a more robust financial standing.
How to Build Residual Income
Depending on your interests, skills, and business knowledge, you can create sources of residual income that align with your experience. If you don’t have experience in a certain area but wish to learn, there are plenty of resources to acquire the necessary skills.
The main idea behind residual income is leveraging other people’s time and resources to achieve consistent revenue. Whether it’s an online product that continues to be sold or a rental property that is continuously occupied, residual income requires hard work at the beginning but the work and time tapers off once the investment is up and running.
In fact, many people have built their fortunes from residual income, all while achieving a more flexible lifestyle and earlier retirement. Residual income isn’t a get-rich-quick scheme. It’s a sustainable way to build wealth and increase your personal revenue with little effort to no effort.
Residual Income Ideas
The options are nearly endless when it comes to residual income. The ideas below will give you inspiration for setting up your own passive income stream. Combine a few ideas at once, or start with one to keep things simple.
1. Rent Out a Room, Apartment, or House for a Weekend
Have a spare bedroom or a week when you’ll be on vacation? Consider renting out your space on a site like Airbnb or VBRO.com. The rise in popularity of these lodging options allows you to make money by providing a haven for travelers.
While there’s some work involved (i.e. booking renters, hiring house cleaners), the income is primarily passive in nature. Consider turning your guest bedroom into the next vacation getaway. Just be sure to check the guidelines for your city before proceeding.
2. Crowdfund Real Estate
If you want to invest in real estate, but don’t have enough assets to embark on your own, you’re in luck. Certain online platforms allow you to invest in commercial real estate with others. Popular sites like PeerStreet and Real Crowd allow investors to get involved at various financial tiers.
You’ll be able to work with real estate developers, have a voice in the process, and get to choose from a range of projects. Review the terms, conditions, and rates of each site before determining which is the right platform for you.
3. Consider Investing
When done correctly, investing can be a great way to generate residual income. There are many different types of investments you can choose from to earn income passively — whether you choose to purchase high dividend stocks, try peer to peer lending, or choose to invest in real estate. No matter what you choose to do, make sure you do your research first and talk to a tax advisor to ensure you understand your specific situation and what option is best for you.
4. Set Up a Website Selling a Product
Selling products online requires significantly lower overhead costs than a physical store location (think: no employees, rent or utilities to pay). Once you develop your product, you can sell it through your own web store or an online platform like Amazon or Shopify.
If you set up the product to ship directly to the customer from the manufacturer, you won’t need to be involved in the day-to-day operations of the sales process. Each time an item is sold, your income flows in.
5. Write a Book
Are you an expert in a niche topic? Have a knack for the written word? Share your knowledge and writing talent by drafting a book or eBook. Most drafting contracts include royalties, meaning you earn a certain amount per book sold. In other words, once the book is written and drafted, it continues generating income for years to come.
Ebooks, which can be drafted through sites like Amazon Kindle Direct drafting, are an increasingly popular option. Because these books are self-drafted, the process is quicker, allowing you to build residual income faster than the traditional drafting route. Whether it’s a romance novel or a how-to book on fly fishing, you can create a book and have it available for purchase in a matter of weeks.
6. Work with Affiliates
Many bloggers and social media influencers build significant residual income through affiliate partnerships. If a blogger promotes or mentions a product on their site, and readers purchase the product through the link provided, the blogger earns a percentage of the revenue. The same goes for social media influencers. If someone promotes a product on Instagram and their followers purchase it through their link, the Instagrammer would receive a portion of that revenue.
Affiliate marketing can also involve placing ads on your website or blog. Based on the number of clicks and purchases, the blogger receives a kickback from the retailer. The larger your email list or blog following, the greater the opportunity for affiliate income.
7. Build an Online Course
Whether you know how to flawlessly apply eye makeup or build a wooden shelving unit, you can create an online course or video for others to follow. Websites like Udemy and Teachable allow you to build a course, such as how to learn a new language or write a cover letter. Once you build your course and set the price, there’s little work to be done. You’ll receive residual income from each person who signs up to take your course.
8. Sell Your Designs Online
Listing your handcrafted items online is one way to establish additional revenue. Creating each piece and shipping it, however, is often labor-intensive. For true residual income, build a design or product that doesn’t require much involvement.
For example, you can design digital products, like animal clipart or a downloadable wedding poem that could be printed by the customer. Your design could be resold thousands of times without needing to create each item or ship it. Once you create your digital product and list it on a site like Etsy or Ebay, the revenue flows in with little oversight.
9. Start a YouTube Channel
Creating a following, whether it’s on social media, a blog, or YouTube, is a rapidly growing way to make residual income online. With a YouTube channel, for example, advertisements can generate a few dollars for every one thousand views.
Successful YouTubers choose a theme for their channel—ranging from humorous commentary to gardening. As you acquire subscribers to your channel, your number of views becomes more consistent, which in turn grows your residual income. While you’ll need to produce regular videos to maintain your following, a couple hours of filming and editing pales in comparison to the revenue you can generate with minimum effort.
10. Create an App
You don’t necessarily need coding skills to build an app. That’s right—if you have a vision for the next best app, you can hire the proper designers and coders. Or, of course, if you already know how to code, you do it yourself for cheaper.
By creating an successful app, you can generate residual income through app downloads and advertisements. Leverage your past experiences to build an app that you know will be successful, whether it’s a way to connect people together or help someone track important health metrics.
11. Put Your Photography Online for People to Use
If you own a quality camera, making money with your photography skills is attainable through sites like Shutterstock and iStockPhoto. These websites allow you to create an account and upload your inventory of photos in a matter of minutes.
Individual customers and businesses can purchase your stock images for their websites and marketing materials. Simple stock photos, like businessmen shaking hands or a woman riding in a car, are sought after by many companies. To be most successful, you’ll want to upload photos monthly to consistently grow your portfolio. You’ll generate a commission each time one of your photos is downloaded.
12. Place an Advertisement on Your Car
With sites like Wrapify and StickerRide, you can earn hundreds of dollars each month by simply driving around town. You’ll need to place an advertisement on your car and drive a certain number of miles every month. If you’re already on the road for work, travel, or school, advertising allows you to make extra cash without any extra time commitment.
13. Invest in Real Estate
Owning property can earn you passive income for decades to come. Once you purchase a duplex, home, or apartment building as a rental property, you’ll earn a consistent monthly income with little work. Rent should cover your mortgage, taxes, repairs, and other expenses. You’ll continue to earn income by paying off your mortgage with the rent money and saving excess rental income.
You can manage the property yourself, which includes tasks like finding tenants, scheduling repairs, and maintaining the home, or youcan hire a property manager to take care of these responsibilities for you. If you the manage the property yourself, you’ll see more income, but you’ll also have to invest more of your time.
14. Launch a Podcast
Turn your burning passions and daily musings into an entertaining audio show. Whether you want to talk about history, food, finance, or music, you can record and edit episodes from the comfort of your home. Once you have a large group of listeners, you can earn money from podcast sponsorships, affiliate marketing, selling products or eBooks, or crowdfunding. While you’ll have to produce episodes consistently, the time involvement is minimal and you can record several shows in advance.
Establishing residual income allows you to accumulate wealth faster, have a more flexible lifestyle and maintain a diverse financial portfolio. As with any successful investment, hard work is required. With residual income, however, that work tends to be upfront. Once your revenue stream is established, the work and time involved is significantly lower than active income sources. With residual income, you’ll secure funds for your future, have a better idea of where you stand financially and enjoy peace of mind knowing you’re maintaining lucrative, long-term investments.