Let’s review the last few months shall we:

February: I complain that my annual Seasonal Affective Disorder (SAD) seems to be kicking in. I start to research some light devices and other home cures…

March: We have almost half a normal month, but the COVID-19 lockdown canceled our vacation and homeschooling starts…

April: Full month of COVID-19 lockdown, homeschooling two young kids, and it rained everyday…

May came and it got worse. The lockdowns are still on canceling the most important things like school and camp. Distance learning (still) doesn’t work. Almost the whole nation woke up to systemic racism and police brutality almost overnight. In my own little bubble of personal finance bloggers, a controversy blew up and the FinCon conference that has connected thousands of bloggers each year for nearly 10 years will never be the same.

Those are the broad strokes of May. However, when you look at through the prism of the pictures that I share below, it will look like it was a 1950’s family sitcom. I don’t know how to process the dichotomy of the pictures and the perceived reality. I want you to know that even when you see a bunch of happy pictures, that’s a thin slice that doesn’t necessarily represent reality. I think it’s important so that you don’t compare your life and say, “He has everything going awesome and doesn’t have a care in the world.” In my opinion, too many bloggers and social media people play up those slices and it can make others feel worse about their own lives.

[Kids showing off their Pokemon masks on a hike. They didn’t need them, but I had them put it on for the picture.]

That’s enough lead-in… let’s get to the Passive Income report. In the past, I called it the Alternative Income report, but it seems like that term didn’t catch on. Everyone loves passive income better. While I transition to the new terminology, there may be some “alternative income” mentions including the FAQ. If you are a new reader, you’re going to want to refer to my Alternative Income FAQ as you’ll likely have a lot of questions. They way I calculate these numbers does require some explanation.

Lazy Man’s Passive Income – May 2020

I categorize our passive income into 3 main sources that are largely represented in my passive income pyramid. For this report, I ignore the bottom section, “career/job” – that’s not passive at all. I combine dog sitting and blogging into one section of “somewhat active” income. I leave real estate and investment income as their own separate main sources of very passive income.

1. Blogging + Dog Sitting Income

Last month we did zero dog sitting. In May we did zero dog sitting. Thanks a ton, coronavirus. (It does look like we’ll do some dog sitting in June.)

Blogging income was about the same as it was the month before… almost scary how close it was. I can’t do much about it while we have coronavirus. Advertising is down, spending in general is down. Few people are searching for information about retiring early. I’m spending almost all my time with the kids until camps start. From 6AM to 8PM, I don’t even try to work. I’m setting up some educational activities, cooking food, doing laundry, washing so many dishes, doing the educational activities, walking the dog with the kids to get fresh air, and fighting through their bed time routine.

[One fun school project was to make something Mexican for Cinco de Mayo. This is a rare picture, because letting this kid run around with a knife without an adult closer isn’t a wise idea.]

On the topic of camps, we’ll get those back early next month. They are approved to open as we have had zero COVID-19 new cases in the community over the last 7 days. So there’s a chance of real work being done for a majority of July. There’s also a 98% chance that my wife and I take the time to enjoy the beach and some cocktails.

In March, dogs and blogs combined for a total of $2,067.93. In April, it was:

Total Blogging + Dog Sitting Income: $2,167.12

In the olden days of pre-COVID-19, I would say that dog sitting is great because my kids are old enough to pitch in and help. I could pay them a legitimate earned income (a small percentage of the overall income). This allows them to save money in their kid Roth IRAs, money that they’ll never pay tax on. I’m starting to rethink that. The kids may play a more meaningful role in the blog going forward.

(Note: The blue line is the monthly number. The red line is a 3-month average which helps smooth the curve.)

2. Rental Property Income

Zillow estimates seem to be finally factoring COVID-19. The value of our properties went down a bit. At least tenants continue to pay us. That’s a load off my mind, since we lose money on these properties every month. (We’re accidental landlords for the most part, making the best of the situation. However, we also have 15 year mortgages in hopes of turning them into an income stream in several years.) As with every month, we paid off a couple thousand dollars of mortgage debt and grow some equity.

[This is what homeschooling looks like in our house]

We now have 63.81% of the equity in our properties with a combined rent of $3,325 after insurance, property taxes, condo fees, and estimated maintenance. I use that number because it represents our net gain.

If you multiply $3,325 by 63.81% you get $2,212 in estimated monthly passive income. When I started tracking this (beginning of 2017), we only owned 36.4% of the properties and they had lower rents. The math worked out to $1,174 back then. So in 40 months, we’ve seen the number grow $1038/mo. That’s like giving ourselves an annual $12,456 raise until the end of time. It’s a very nice gain from 3+ years ago.

As the years march on, the ratio will grow to 100% of the $3,325 monthly, inflation-resistant rent. That’s what gets us to that annual $40,000 income I mentioned in the FAQ above. I may need to update that $40,000 number as well – it’s looking closer to $30,000. In either case, it should be enough money for us to live on with our own home paid off (plus our solar panels, frugal shopping, and military healthcare.)

In the previous report, the rental property income was $2,112. This number always moves slowly as it only changes if one of two things happen: 1) The properties go up in value. 2) We charge more for rent.

Total Rental Property Income: $2,212

3. Dividend Income

For this section, I assume we will earn a 2.5% dividend yield on our holdings. That could be from a high-dividend ETF or from simply holding strong companies that have a long history of dividend growth. For that we’ll look at making passive income with dividend kings. If I wanted to simply retire on this dividend income, I would get Sure Dividend’s newsletter to try to get closer to a 4% average dividend yield. That link to the newsletter has a special discount rate and in full disclosure I make a few dollars if you sign up for it.

[The kids camped out on the floor a couple of nights.]

The last snapshot on May 5 had the markets coming back. When I took these numbers on June 6, the market was doing great. Maybe the market loves the free money that the government is giving out. Maybe it’s looking forward to vaccines and opening up the country for business. I’m scared by all this, but I can’t deny the math. The market has done very well over the last month.

Last month, we continued to get a profit sharing check since I bought (a lot of) a company. The business is still doing well. It’s actually almost ideally positioned due to its virtual nature. The investment income from this is essentially the same as dividend income. It is taxed differently, but for the purposes of this report, it makes sense to group together all stock ownership in this bucket.

Total Dividend-ish Income: $2,798

Last month, it was $2,612. A couple of months ago, I wrote, “even in a bad-case scenario, we’d be north of $2500.” We weren’t obviously, but we are back there now, with some room to spare.

Hopefully we’ll beat COVID-19 and the economy gets fully back to normal. I expect that it will take at least 2 years and probably a lot longer. However, if that happens, this number will grow even stronger than before. I bought shares of companies at depressed prices throughout the drop.

[People say buying a new sports car isn’t smart. I tend to agree. However, 20 years later, we’re still making these memories.]

Annualized, this monthly $2,798 is $33,574. If our mortgage was paid off, we might be able to scrape by on this by itself. However, because most of our investments are in retirement accounts, we can’t use much of this income for now. (We can use the profit sharing check as it goes straight to our checking account.) We’ll let the rest of this income continue to compound for at least another 15 years, but hopefully a lot longer.

Very Close to Passive Income

Our “very close to passive income” is a combination of rental property income and dividend income. If there were some royalty income from books, movies, or music, I’d include that here. I’m too tone-deaf to have a rockstar music career, but maybe there’s room to have a book someday.

The stock market goes up and down fast, even more so nowadays. That makes the dividend calculation fluctuate a lot more than it normally would. We don’t even know if companies can reliably pay dividends anymore. Without customers, and profits, many companies have cut their dividends.

[This is the view from the first time we were able to go out to dinner. Yay outdoor dining is allowed!]

The rental property income typically keeps going up because the mortgages are always getting paid down every month. Unless there’s a housing market crash, this should continue to happen. That housing crash may be coming, but for this month it hasn’t happened.

For a few years, I’ve been saying:

I love having both types of income working together for us. I think everyone interested in FIRE should have stocks and real estate income streams. The diversification gives me great confidence that we’ll be better prepared than most people in the case of an unfortunate economic event. We’ll still likely get rent checks if the stock market crashes. We’ll still get dividend checks if a tenant is late paying for awhile. Of course a bad economy may impact both at the same time, but that’s what an emergency fund is for.

Here we are in an unfortunate economic event. Our stocks went down a lot, but then went back up. Our real estate has held steady. We’re just lucky because many tenants can’t pay rent.

[Let’s end with picture of a very happy dog]

While the stock market is doing well, the real economy is terrible. No President wants to see long food lines, six figure homeland deaths, and an unemployment rate balloon to ~15%. The best answer is a bailout of nearly everyone and everything at a cost of several trillon dollars… and it may go up from there. If only the people in political power believed that an ounce of prevention is worth a pound of cure, we’d be in much better situation. It would have, figuratively, saved our bacon.

It seems like we don’t know which way things are going to go. Since we are easing up on social distancing, it might go poorly again. Some states are seeing increased problems.

Very Close to Passive Income: $4,919

Last month it was $4,724. We had lost $500 a couple months ago, but we are $100 away from being back to the highs. All things considered, that’s not bad at all.

This “very close to passive income” has grown from $2,354 in January 2017. It’s worth noting that, once again, these are fudged numbers that aren’t “real” yet (except for that profit sharing check). Add in stock market growth (of a conservative 4%) and this number could be real, non-fudged $100K/year. I’m especially looking forward to 7 years from now when the mortgages on the investment properties (and our primary residence) are paid off. That’s going to be a huge financial swing for us.

Final Passive Income

When you add up “dogs and blogs” to the “very close to passive income” you get:

Passive Income: $7,087.12

That’s reasonably good for another month of everything being shut down. We’re getting back to our frugal roots, so one could argue that this lower number overall could put us in a better long-term financial position. That all depends if we continue be frugal after coronavirus, which may not be likely.

This nearly $7000+/mo income is $85K+ a year. That largely hypothetical annual income for writing on a blog, taking care of dogs (not this month), and investing feels like a dream. In the long term, $85K would be a lot more income than we’d need. Here’s what our necessary expenses look like… for the next 45 years. Of course those necessary expenses isn’t everything, but it’s a large percentage of everything.

I always say that you never know what bad news is lurking around the corner, but this gives us the financial flexibility to fight it. With the coronavirus closing schools/camps and my wife on the coronavirus response team, we need this flexibility to continue to care and educate our two kids.

None of the numbers here include my wife’s bread-winning pharmacist income, her vested military pension (more passive income), or the freelance work I’ve been doing over the last 18 months (which isn’t passive at all). That’s the fuel that drives the passive income engine.

As always, I’m still hoping to write a book someday. That would add some more passive income. My wife will probably get her book out first. She had an incredibly interesting life until she met me – I am so boring. I may tip my toe into self-publishing sometime next year. I would love to talk to a real a publisher, but I don’t want to take on the “job” of writing. That’s probably a deal breaker. If you know someone who I could talk to contact me.

My favorite thing about the graph below is that it doesn’t dip down too far. It’s been above $6,000 for awhile now. I thought that it may be tested with the coronavirus, but maybe it won’t be after all.

(Once again, the blue line is the monthly number. The red line is a 3-month average which helps smooth the curve.)

Net Worth Update

My net worth updates aren’t very exciting as I don’t share the exact numbers. That’s why it’s just a footnote here.

I truly believe that net worth is one of the most important numbers in personal finance so it is worth sharing in some way. Showing relative growth can be useful, I think.

Like most investors in May, our net worth did very well. After losing more than 10% in March, we gained 8.84% in April… and another 5.26% in May. For the year, our net worth is UP 3.43%.

Our real estate value is going down just a little bit. The lesson here is that diversification helps a lot in bad times. Even when the stock market was way down, we were still grounded with our real estate. We can’t control the market, but we can be happy that the amazing river of compound interest has been working well for us over the years.

I feel it’s important to acknowledge that everyone is in a different place in their financial journey. I’ve been blogging about personal finance for 14 years. FIRE wasn’t a “thing” back then, but it’s in the news all the time now. We naturally are further along in that journey than some younger readers who may be beginning their journey. I hope you won’t be discouraged by some of the numbers above if you are just starting out. I didn’t start many of these graphs until year 11 of blogging (year 13 of early retirement planning). Please try to use it as motivation for what may be possible (depending on your circumstances).

There’s a big wild card in calculating our net worth. Now that my wife’s pension is vested, it’s reasonable to ask whether to include a pension in your net worth. I decided that it does make sense to include it. She could have earned more direct monetary compensation if she didn’t work for the government. That would have boosted all the numbers across the board. Calculating pension value is not easy, but here’s the best way to know what a pension is worth. In the end, it seems my wife’s pension may be worth $2.3 million. However, like most of the money mentioned in this article, this isn’t money we can spend right now.

Because the pension would ridiculously dominate our net worth, I’ll note two separate numbers in my personal spreadsheet. I don’t share the numbers anyway, aside from these hints, so I don’t think it should matter much to you. It’s not like I’m suggesting that you might want to make a financial based decision on a pension.

I always end this article by asking how your last month went. That doesn’t make much sense after the March that everyone had. Feel free to use the comments to vent – it doesn’t even have to be about personal finance.

Last month, on March 11th, I published the previous passive income leading off with, “It seems like I start off every report by writing ‘[x] month was a difficult month.’ February was (unfortunately) no exception. My Seasonal Affective Disorder (SAD) kicked in like it usually does.”

So… ummm… March… Well, we all know how that went.

Every month I share some highlights. Some may say that’s inappropriate right now. Sharing some pictures of good family moments (especially my young kids) DOES seem appropriate because life is beautiful and we should celebrate that. We’re all hurting now and these pictures represent the very best of times. The overall reality is that homeschooling with the school’s curriculum has been a nightmare.

That’s enough lead-in… let’s get to the Passive Income report. In the past, I called it the Alternative Income report, but it seems like that term didn’t catch on. Everyone likes “passive income” better. While I transition to the new terminology, there may be some “alternative income” mentions including the FAQ. If you are a new reader, you’re going to want to refer to my Alternative Income FAQ as you’ll likely have a lot of questions. They way I calculate these numbers does require some explanation.

Lazy Man’s Passive Income – March 2020

I categorize our passive income into 3 main sources that are largely represented in my passive income pyramid. I ignore the bottom section of career/job – that’s not passive at all. I combine dog sitting and blogging into one section of “slightly active” income. I leave real estate and investment income as their own separate main sources of very passive income.

1. Blogging + Dog Sitting Income

The last month I reported, February, was a very good month. The blog income was going very well. There weren’t many dogs to sit, but we had some. In March, blog income was above average. Consider that the kids were home on their spring break for two weeks before they closed down all the schools, I’ll take any kind of win I can get. We had our last dog go home on March 14 – a full month of no dog sitting as I’m writing this. We started March off well when it came to dog sitting, so it we did okay there. However, no one books dog sitting services any more.

Before they closed the beaches, I could walk my dog and it was a great, physically distant, mental health break

In February, dogs and blogs combined for a total of $2,945.40. In March, it was:

Total Blogging + Dog Sitting Income: $3,004.18

This may be the last time I break 3K for some time. I can only do work after 9PM when the kids are in bed, and by that time, I’m a shell of a person.

Happy Birthday to me :-/ Wife got me some good steaks and we supported one of our favorite local restaurants.

In the olden days of pre-COVID-19, I would say that dog sitting is great because my kids are old enough to pitch in and help. I could pay them a legitimate earned income (a small percentage of the overall income). This allows them to save money in their kid Roth IRAs, money that they’ll never pay tax on. Now, I have to rethink that. They may play a more meaningful role in the blog going forward.

——

2. Rental Property Income

Zillow estimated our rental properties were worth a little more than last month. I think Zillow hasn’t done a good job in factoring COVID-19, but I will use the numbers as I always do. So far, tenants are in a position to continue paying us. That’s a load off my mind, since we lose money on these properties every month. (We’re accidental landlords for the most part, making the best of the situation.) As with every month, we paid off a few thousand dollars of mortgage debt.

We now have 63.79% of the equity in our properties with a combined rent of $3,325 after insurance, property taxes, condo fees, and estimated maintenance. I use that number because it represents our net gain.

We were lucky enough to get one snow in Rhode Island this year. For about 90 minutes the kids went crazy on about an inch that frozen over with a little late rain. Turned out to be perfect sledding conditions.

If you multiply $3,325 by 63.79% you get $2,121 in estimated monthly alternative income. When I started tracking this (beginning of 2017), we only owned 36.4% of the properties and they had lower rents. The math worked out to $1,174 back then. So in 38 months, we’ve seen the number grow $947/mo. That’s like giving ourselves an annual $11,364 raise until the end of time. It’s a very nice gain from around 3 years ago.

As the years march on, the ratio will grow to 100% of the $3,325 monthly inflation-resistant rent. That’s what gets us to that annual $40,000 income I mentioned in the FAQ above. I may need to update that $40,000 number as well – it’s looking closer to $30,000. In either case, it should be enough money for us to live on in any kind of emergency.

In the previous report, the rental property income was $2,045. This number always moves slowly as it only changes if one of two things happen: 1) The properties go up in value. 2) We charge more for rent.

Total Rental Property Income: $2,121

——

3. Dividend Income

For this section, I assume we will earn a 2.5% dividend yield on our holdings. That could be from a high-dividend ETF or from simply holding strong companies that have a long history of dividend growth. For that we’ll look at making passive income with dividend kings. If I wanted to simply retire on this dividend income, I would get Sure Dividend’s newsletter to try to get closer to a 4% average dividend yield. That link to the newsletter has a special discount rate and in full disclosure I make a few dollars if you sign up for it.

Before I had to stick to the school’s home schooling curriculum, we had our own homeschooling which included a daily game of chess

The last snapshot on March 5 had a fairly significant loss. This snapshot, on April 5th, was also a big loss. At least the market, inexplicably, has gone up a lot since then.

Last month, we continued to get a profit sharing check since I bought (a lot of) a company. The business is still doing well. It’s actually almost ideally positioned due to its virtual nature. The investment income from this is essentially the same as dividend income. It is taxed differently, but for the purposes of this report, it makes sense to group together all stock ownership in this bucket.

Total Dividend-ish Income: $2,403

Last month, it was $2,991. Back then I wrote, “even in a bad-case scenario, we’d be north of $2500.” Well, we weren’t obviously. It’s still very good number. Hopefully we’ll beat COVID-19 and the economy gets back to normal. If that happens, this number will grow even stronger than before, because we continue to buy shares at depressed prices.

Here’s a couple of pictures of the kids being active. The second one is a yoga class on YouTube.

Annualized, this is $28,836. If our mortgage was paid off, we might be able to scrape by on this by itself. However, because most of our investments are in retirement accounts, we can’t use much of this income for now. (We can use the profit sharing check as it goes straight to our checking account.) We’ll let the rest of this income continue to compound for at least another 15 years, but hopefully a lot longer.

— —

Very Close to Passive Income

Our “very close to passive income” is a combination of rental property income and dividend income. If there were some royalty income from books, movies, or music, I’d include that here. I’m too tone-deaf to have a rockstar music career, but maybe there’s room to have a book someday.

The stock market goes up and down fast, even more so nowadays. That makes the dividends calculation fluctuate a bit. The rental property income typically keeps going up because the mortgages are always getting paid down every month. Unless there’s a housing market crash, this should continue to happen.

For a few years, I’ve been saying:

I love having both types of income working together for us. I think everyone interested in FIRE should have stocks and real estate income streams. The diversification gives me great confidence that we’ll be better prepared than most people in the case of an unfortunate economic event. We’ll still likely get rent checks if the stock market crashes. We’ll still get dividend checks if a tenant is late paying for awhile. Of course a bad economy may impact both at the same time, but that’s what an emergency fund is for.

Before everything was shut down, the kids got to practice a little tennis. One kid wasn’t into it much that day. I bet he’d feel differently about it now.

Here we are in an unfortunate economic event. Our stocks went down a lot, but our real estate has held steady. We’re just lucky because many tenants can’t pay. Zillow’s algorithm seems outdated. In any case, the real estate number is good this month. We’ll see what next month brings.

Very Close to Passive Income: $4,524

Last month it was $5,035, so it’s down nearlly $500! Ouch!

That’s really not bad though. After all, this “very close to passive income” has grown from $2,354 in January 2017. It’s worth noting that, once again, these are fudged numbers that aren’t “real” yet (except for that profit sharing check). Add in stock market growth (of a conservative 4%) and this number could be real, non-fudged $100K/year. I’m especially looking forward to 7 years from now when the mortgages on the investment properties (and our primary residence) are paid off. That’s going to be a huge financial swing for us.

— —

Final Passive Income

When you add up “dogs and blogs” to the “very close to passive income” you get:

Passive Income: $7,528.18

That’s great for everything being shut down for half a month. I’ve been stuck around the $7000 mark for quite a few months now. While I’d love to see good growth, it’s worth taking a minute to acknowlege that money isn’t everything. That’s never been more true than it is now.

This nearly $7500/mo income is $90K a year. That largely hypothetical annual income for writing on a blog, taking care of dogs, and investing feels like a dream. In the long term, $90K would be a lot more income than we’d need. Here’s what our necessary expenses look like… for the next 45 years.

I always say that you never know what bad news is lurking around the corner, but this gives us the financial flexibility to fight it. With the coronavirus closing schools and my wife on the coronavirus response team, I need this flexibility to provide some semblance of education to my two kids.

None of the numbers here include my wife’s bread-winning pharmacist income, her vested military pension (more passive income), or the freelance work I’ve been doing over the last 18 months (which isn’t passive at all). That’s the fuel that drives the passive income engine.

As always, I’m still hoping to write a book someday. That would add some more passive income. My wife will probably get her book out first. She had an incredibly interesting life until she met me – I am so boring. I may tip my toe into self-publishing sometime next year. I would love to talk to a real a publisher, but I don’t want to take on the “job” of writing. That’s probably a deal breaker. If you know someone who I could talk to contact me.

My favorite thing about the graph below is that it doesn’t dip down too far. It’s been above $6,000 for awhile now. It seems that will be tested over the next year, maybe longer.

——

Net Worth Update

My net worth updates aren’t very exciting as I don’t share the exact numbers. That’s why it’s just a footnote here.

I truly believe that net worth is one of the most important numbers in personal finance so it is worth sharing in some way. Showing relative growth can be useful, I think.

Like almost all investors in March, our net worth took a hit. We lost 9.79% for the month. We had been mostly even before that. Losing around 10% of our net worth for the year isn’t great, but things could be a lot worse. The market recorved a lot after April 5th when I took the numbers. Also, our real estate seems to be staying steady. Diversification, so far, has been a savior. We can’t control the market (especially now!), but we can be happy that the amazing river of compound interest has been working well for us over the years.

I feel it’s important to acknowledge that everyone is in a different place in their financial journey. I’ve been blogging about personal finance for 14 years. FIRE wasn’t a “thing” back then, but it’s in the news all the time now. We naturally are further along in that journey than some younger readers who may be beginning their journey. I hope you won’t be discouraged by some of the numbers above if you are just starting out. I didn’t start many of these graphs until year 11 of blogging and year 13 of early retirement planning. Please try to use it as motivation for what may be possible (depending on your circumstances). I had a number of years where I was ecstatic simply to save ANY money for retirement.

There’s a big wild card in calculating our net worth. Now that my wife’s pension is vested, it’s reasonable to ask whether to include a pension in your net worth. I decided that it does make sense to include it. She could have earned more direct monetary compensation if she didn’t work for the government. That would have boosted all the numbers across the board. Calculating pension value is not easy, but here’s the best way to know what a pension is worth. In the end, it seems my wife’s pension may be worth $2.3 million. However, like most of the money mentioned in this article, this isn’t money we can spend right now.

Because the pension would ridiculously dominate our net worth, I’ll note two separate numbers in my personal spreadsheet. I don’t share the numbers anyway, aside from these hints, so I don’t think it should matter much to you. It’s not like I’m suggesting that you might want to make a financial based decision on a pension.

I always end this article by asking how your last month went. That doesn’t make much sense after the March that everyone had. Feel free to use the comments to vent – it doesn’t even have to be about personal finance.

The following is a guest post from my friend Jim at Wallethacks. Today Jim is going to talk about some ideas that you might want to add to your own passive income pyramid. I hope to be back on Friday with a good set of Black Friday/Cyber Monday deals that you don’t have to run around to get.

When I was a kid, my parents rarely talked about money in front of me and my sister.

It was a “parent” thing and I was supposed to focus on my school work and getting good grades. When you get good grades, you get into a good school. Once you graduate that school with good grades, you can get a good job. You work that good job with its good paycheck and ride off into the sunset.

That was the path.

It wasn’t until I was in college that I learned your job was really just one source of income. It was the most labor-intensive one because you needed to work to get paid, but once you started saving up money, your money could make money. Your money could make money while you slept, played video games, or went on vacation.

Many people call this “passive income” because you don’t have to do anything to earn it. You still have to spend less than you earn, so you have funds to invest, but once it’s going, you don’t have to intervene daily to have it generate income.

So how do you create sources of passive income? Are some passive income investments better than others? Yes – here are the ones I think offer the best opportunity given the risk.

1. Crowdfunded Real Estate

One of the very best passive investments you can make – and one previously available only to wealthy investors – is commercial real estate. That includes office buildings, retail shopping centers, large apartment complexes, and many other different types of non-residential real estate. It’s such a successful investment class because it offers a combination of regular income from rents and capital appreciation from increases in property values.

But with the many real estate crowdfunding platforms now available, small investors can invest in commercial real estate, often with just $1,000 or less. It’s a perfect passive income source, since the investments are professionally managed, and you’ll receive your income and appreciation gains without any effort on your part.

Here are some examples of real estate crowdfunding platforms you need to check out:

• Fundrise is considered one of the top real estate crowdfunding platforms in the industry. It enables you to invest in their private eREIT, which means you can spread an investment of just $1,000 across several different properties. And one of the biggest advantages is that you don’t need to be an accredited investor. Those are investors who are required to be either high income, high net worth, or both.
• stREITwise is also a REIT, as the name implies. And just as is the case with Fundrise, you can invest with as little as $1,000. The platform claims a return of 10% on your money!
• RealtyMogul is open to both accredited and non-accredited investors. You can invest in one of their REITs for as little as $1,000, but you can also invest in individual projects for just $5,000.

These are just a few of the companies that are in this space.

2. Dividend Growth Stocks

Interest-bearing investments are safe, solid sources of passive income. But interest income will be the only source. You can also consider investing in high dividend stocks, that offer a combination of regular dividend income, plus growth potential.

One of the best ways to do this is by investing in what are known as Dividend Aristocrats. These are large companies, components of the S&P 500, that have a history of increasing their dividends for at least the past 25 years. The list of dividend aristocrats typically includes more than 50 stocks. But they’re some of the most well-known companies in the world, including Johnson & Johnson, Coca-Cola, and McDonald’s.

They’re also among the best performers when it comes to price growth. That’s because stocks that have a long history of increasing dividends similarly have excellent track records of increasing revenues and profits. They’re a natural attraction for any investor looking for sources of passive income.

There’s even an exchange-traded fund (ETF) based on Dividend Aristocrats. The ProShares S&P 500® Dividend Aristocrats® ETF (NOBL) will allow you to invest in the entire group of more than 50 stocks through a single fund.

But if you prefer to invest in individual stocks – perhaps to cherry-pick the highest paying companies in the group – several websites put out updated lists of the dividend aristocrats. Those lists also include the current dividend yield.

Steady dividend income, plus capital appreciation, is a tough combination to beat. Dividend aristocrats are one of the very best sources of passive income.

3. Writing an E-book

Writing an e-book qualifies as a semi-passive source of income. That’s because you will need to invest time and effort to create an e-book. But once you do, and you begin selling it, it becomes a legitimate passive income source.

Once you have an e-book written, the next step is to market it. It’s fairly easy to do if you already have a successful blog or website. But even if you don’t, you can sell the e-book under affiliate arrangements.

That’s where you offer the book for sale on established blogs and websites, then split the proceeds of each sale with the site owner. For example, if you price your e-book at $20, you pay $10 to the site owner, and $10 goes to you.

If you can set up affiliate arrangements with several popular blogs and websites, those seemingly small $10 profits can turn into hundreds or even thousands of dollars in passive income each month.

And if you can write and successfully sell one e-book, you can add another, and then still others. With income coming from affiliate programs for multiple e-books, you might just earn enough revenue to quit your job.

4. Start a Blog

Some people start blogs because they have a passion for a specific topic. But many others do it to earn money. Often, that starts as just a side income. But as the blog grows, along with the income it generates, it turns into a full-time occupation.

Though much like writing an e-book, running a blog is a semi-passive income source. That’s because you will need to invest time, effort, and even some money in setting up a blog. You’ll also need to create content regularly. The content generates visitor traffic, which can then be monetized through advertising and affiliate sales. It’s similar to what we discussed above with the e-book concept, except you’re the advertiser, not the creator of the product.

Eventually, when the blog is generating sufficient cash flow, you can subcontract out content creation to freelance writers. At that point, you’ll essentially be managing your blog and collecting income.

Some people have become Internet millionaires using this method. If you have a good idea for a blog, this is one of the best ways to generate a very large income, that will eventually become mostly passive.

5. Peer-to-Peer Lending

Savings accounts don’t pay much these days, a product of low interest rates, and so if you want a real source of passive interest income, the best strategy by far is to bypass the banks and become a direct lender.

You can do that through peer-to-peer (P2P) lending platforms. These are online websites where consumers come to borrow money for a variety of purposes, and investors come to fund those loans at much higher rates of interest than they can get at banks.

The loans offered are primarily personal, that charge double-digit interest rates. In the most typical case, the borrower is consolidating high-interest credit cards into a single personal loan through the P2P website. That has the effect of making the borrower less risky as a result of the consolidation.

But it’s a real opportunity for investors, who often earn as high as 10% on their money. And you can usually invest with as little as $1,000. You don’t have to purchase individual loans either. Instead, you invest in slivers of loans, referred to as “notes”. Each note is around $25, which means you can spread a $1,000 investment across 40 different loans.

If you’re interested in this source of passive income, you can check out the following platforms:

• Lending Club
• Prosper
• Peerform

There are many others in the space, but these are three of the most popular.

6. Renting Out Space in Your House

There are several different ways you can do this. The most obvious is to purchase a property with more than one unit, then live in one while you rent out the other(s).

Still another way – and one that doesn’t require buying a multiunit home – is to simply rent out space in your house. That can mean taking in a boarder, who will pay you either a weekly or monthly rent. If you have extra space in your home, the space is fairly private, and taking in boarders is legal in your community, it’s a completely passive way of earning extra income from your home.

But if neither of those ideas appeals to you, or they’re unworkable, you can also look into Airbnb. By participating in Airbnb, you can earn income from your home while you’re on vacation or away on business. It works especially well if your home is in a prime location, either in a large city or near a resort area.

And if you choose to go the Airbnb route, and want to supercharge your income, check out our post, How To Maximize Your Earnings as an Airbnb Superhost

7. Invest in Royalty Income

Do you know all those songs you listen to and love on the radio, TV, the Internet, and your smartphone? The artists behind the music are making money every time their songs are played. This is what is referred to as royalty income. And you can get a piece of it, even though you have nothing to do with the creation of the music.

Musicians often sell the royalties to their music as a way of raising immediate cash, sometimes because they just want to move on to something else. When they do, you can get a part of those royalties by making a relatively small investment.

There’s even an online exchange where you can invest in royalty income, called the Royalty Exchange. It won’t make you rich, but if you have the cash to invest, it can provide you with an ongoing source of passive income.

Final Thoughts

If you’re getting tired of the 9-to-5 grind, but you don’t have time to build alternative income streams, look into sources of passive income. With just an investment upfront, of either money or effort, you can often build a completely passive source of income that will benefit you for years to come. And if you get good at it, you’ll enjoy it for the rest of your life.

And I think Warren Buffett put it best – “If you don’t find a way to make money while you sleep, you will work until you die.”

Amen to that.