The dream of financial freedom - that's what everyone dreams of
For some, it seems like a figment of the imagination: earning money without having to work actively. However, every financial advisor and investment guru on Instagram will praise passive income sources as the best tool for financial independence. With enough time and a little effort, you can tap into numerous reliable sources of income. In the following blog post, you will find many ways to generate passive income and you can develop a personal strategy that will help you achieve financial independence.
What exactly is passive income?
In a traditional career model, you earn money by investing your time and the skills you have learned to add value to your business. Accordingly, you won't earn any money if you decide to go to the movies instead of going to work. Passive income is first and foremost an “extra income” to your main income, which means that you no longer have to invest any work after the initial effort, but which, thanks to scalable business models, can become a substitute for your active income after a long period of time and with the right strategy. Passive income can not only be part of your financial security, but also gives you independence in the medium term and the freedom to do what you want to do with your time instead of having to dance to your boss's tune at work — financial freedom on your own.
However, it is worth mentioning that passive income streams, in contrast to conventional work, do not provide a watertight guarantee of earning a significant amount of money in the end. Passive income is usually achieved when a lot of preparatory work is done and time is invested.
Classic ways of passive income
One of the most well-known processes for passive income is that Dropshipping, where you run an online shop with items from various manufacturers. The shipping of the products falls back to the manufacturer. In particular, their work consists primarily of building up your shop and a customer base, which should not be underestimated. Ideally, the shop runs automatically and gives you valuable time that you can invest elsewhere.
If you attract a certain audience on social media or on your blog, you can also generate income from that. In addition to videos and posts on YouTube and Instagram (including product placement) sponsored by advertisers or companies, you can on your own blog Affiliate marketing where you receive commissions when your audience reaches your affiliate partners' stores through your posts and orders products there.
If you are away from your home for a certain period of time (such as semester break, vacation, Christmas time) or even own a second apartment, you can do it via Airbnb rent out to tourists who can live there during this time — this is how you get value out of your absence.
Of course, there are also opportunities in the financial world to tap into passive income streams. Dividends are particularly attractive. Depending on the stock corporation, you can increase your investment by up to ten percent over the year. Many companies are pouring their dividends also monthly — so you can cover monthly expenses with your dividends. You can also collect interest payments regularly if you own corporate bonds or subscribe to Crowdinvesting involving private lenders and recipients. However, when investing in this type of investment, you should always be aware of the associated risk. The risk with real estate is completely different. In addition to the inherent tangible value of real estate, a condominium or rental house offers immense opportunities for passive income through regular rental income. However, anyone who does not own real estate cannot rent out.
Challenges when renting out real estate
Of course, generating income with real estate is associated with numerous hurdles. First and foremost, the purchase of real estate involves enormous capital expenditure — after all, apartments and houses are not cheap and are among the most expensive purchases imaginable. In addition, real estate is not flexible and subject to fluctuations in the housing market and circumstance risks (such as floods or the like) and is in any case associated with work costs for you as an investor in the form of maintenance and renovation costs. In this way, real estate management can quickly become a full-time job.
Crowdinvesting on the real estate market
Real estate funds and real estate crowdinvesting offer an alternative way of gaining potential access to passive income through real estate even without large start-up capital or enormous operating expenses. In crowd investing, numerous small investors come together to collect large amounts of capital and thus invest in large real estate projects even with little resources and to divide the profits from rental income and the appreciation of the projects over time. The higher returns and the processes, some of which are automated by blockchain, are of particular interest to investors. Even with minimal investments, you can already participate in crowd investments and thus receive returns that are far higher than the mini-interest rates offered by banks. Investment models based on blockchain technology then also allow you to flexibly trade your investment shares. If you want to exit the investment earlier, you can hand over your shares directly to investors who want to buy.
