9 tips for developing passive income to help buy a home
Dreaming of home ownership or purchasing a different home, but having a hard time saving money from your paycheck every month? People that are more successful with meeting financial goals, like saving for a down payment, invest time into making their money work for them. Passive income– earnings derived from an enterprise where you are not actively involved– is one way to do this. You may already be receiving passive income from an investment. But there are also ideas that don’t require a big pile of upfront money. Some do require time to build. If you would like to ramp up your wealth to achieve a goal like purchasing a new or different home, one or more of these 9 ideas may be right for you.
1. Let Your Money Work for You
If you have a chunk of money in a regular savings account, think about moving it over to a higher interest account. Interest rates on money market accounts have been on the rise in the US for the past three years. Rates fluctuate, but the top offers have been between 1.85% – 2.15%, according to Bankrate.com.
Look for an account that is FDIC-insured, meaning your funds will be 100% secure, up to $250,000. Some accounts have a minimum balance requirement, fees and restrictions on how many withdrawals can be made, so read the fine print carefully.
CD (certificate of deposit) rates are even higher, but you must leave your money invested for a specific length of time.
If you invest $25,000 at 2.15%, you will earn $538 in one year. Not bad for no-effort. One top bank had a recent incentive of $500 to move deposits of $50,000 or more to their bank and keep it there for at least 6 months. A cool $500 just for changing banks!
2. Sell Your Designs
Crafty types have a variety of places to set up an online storefront and sell products they have created, such as Etsy and Pinterest. Designers can also sell their services. Check out 99designs for websites, Fotolia or Shutterstock for photos and Graphic River for graphic design.
For those with designs rather than actual products, it has gotten super simple to put your artwork on a range of merchandise from cell phone cases to t-shirts. On sites like Café Press or Design by Humans, just create and upload a design. The platform sells your designs on clothing, mugs and a variety of other products. You get a cut every time someone picks one of your designs. It does pay to check a few pages out to see what is popular. Humor sells!
3. Earn money from credit cards
Paying off a credit card debt quickly will result in huge savings. For example, if you owe $10,000 on a credit card at 21.9% interest and pay $200 each month, you will end up paying more that the original debt- $11,616 in interest. However, if you pay $400 each month, that total interest drops to $3,033. Boom! You just saved $8,583 towards your goal!
If you are able, pay off credit cards entirely. When you pay off a credit card balance, it reduces a fixed expense, which is the equivalent of creating passive income. Paying off credit cards improves your income to debt ratio too- something critical when qualifying for a loan to purchase a home. Then, set up automatic payments and keep a zero balance on your account .You will never be charged interest again! In addition, numerous credit cards offer cash back rewards ranging from 1% to 5%. Some even offer cash for signing up.and you will earn cash on everything you would have purchased anyway. Check out this review from Nerd Wallet to explore cash back credit card offers.
One word of caution- it can negatively affect your credit rating to close a credit card. Pay off your cards but keep the account open. As long as they are on autopay, you can use them periodically to keep them active.
4. Sell a Download of Your Intellectual Property
Use your knowledge and talents to create a guide, how to video, craft pattern or other helpful information that people may want to pay for. The main reason digital downloads are popular is convenience- customers can immediately get the information they need. Security is also important. Use secure payment processing through recognizable names like PayPal and Google Wallet, along with instant download access. If you already have a website or blog, adding an app like Gumroad makes it easy to sell a download product. The app also handles all of the financial processing.
Don’t have a site yet? Wix is a popular template site where it is easy to create a website for free. To add an online store, custom domain and other features, you will pay $14 per month.
5. Create an Online Course
An expanded way to sell what you know is to develop knowledge into an online course. It all starts with an idea- one that generally solves a problem for people. According to Ankur Nagpal, founder of online course site Teachable, your course should help students make a transformation. A successful online course will deliver the exact outcome your audience is looking for, whether that is to learn Mandarin, how to do magic tricks or master advanced Excel spreadsheets.
There is a correlation between how much time you spend developing your course and how unique it is to how much money you can make from it. Generally, you can charge more for a well-researched course that you spend months putting together over a simple course that is relatively easy to write.
The popularity of online courses has exploded in recent years, and vendors that help publish and sell courses has also grown. There are a variety of options, from hosting the course on your own website, to companies that provide a template for your course and a website to sell it. Check out this review of the nine most popular sites for online course development.
6. Create a YouTube Channel
As the number two search engine behind Google, YouTube has a powerful reach. We’ve all heard stories of YouTube stars making big bucks, like DanTMD, who earned nearly $17M last year. The 26-year-old started off making videos of himself playing Minecraft and Pokemon.
You don’t need to be a superstar to earn money. You can use YouTube to explain something like DIY home repairs- we figured out how to fix our washing machine via a video. If you have spent any time on the platform, there is a wide variety of topics to teach and entertain the public. The top five video types are:
- Product videos
- How to videos
- Vlogs (every day thoughts of a YouTube influencer)
- Comedy and skit videos
You make money by ads displayed before, during, and after each video. You can also send viewers to your online store or blog to further increase your sales. There are a plethora of videos on how to get started, located on YouTube of course. The cost is low, and there are plenty of ways to make money as your channel grows in popularity.
7. Start a Blog
Blogging can be lucrative, but it takes a while to create significant income. The great thing is, once all the pieces are in place you can have a nice passive income stream with a minimal time investment.
When building a blog, you need consistent, high quality content. It helps if you are knowledgeable and passionate about the subject matter and offer something valuable to readers. When a blog entry is posted to your website, there is an opportunity to deliver an ad, product for purchase, or affiliate link every time the post is read.
It takes time to build up audience- three years is a conservative estimate for the average monetized blog. However, once the structure is in place and you have an established audience, passive income is easy to earn.
8. Rent out a room on Airbnb
Airbnb markets accommodations all around the world that are a lot less expensive than traditional hotels. You can rent out your apartment while you are on vacation, or rent a guest room in your home for extra income. Before you use your residence- or part of it- to accommodate paying guests, make sure to check local ordinances (or your rental agreement if you don’t own the home) to see if these types of short-term rentals are allowed.
9. Use the equity in your existing home
You may not need to save for a down payment at all if the equity in your current home will be enough for a down payment. This also retains your other liquid assets like cash in a savings account, for life emergencies. While you can put very little down on certain types of loans, investing 20% of the purchase price will mean avoiding purchasing mortgage insurance, which results in (you guessed it), creating passive income. A higher down payment also helps you qualify of for a loan because you are requesting only 80% of the purchase price rather than a higher amount.
It all ads up!
Some of these ideas pay small dividends, some have more potential. If you employ two or three, over time the benefits really add up. So, get started today earning passive income to save for your next home purchase!