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Imagine sitting on a beach somewhere warm making money — sipping on something delicious while you get sales notification after sales notification hitting your account.
This is the ultimate dream that passive income promises — but it’s not that easy. In most cases, building passive income takes time and effort to ramp up — and sometimes years of work to get to the point where you can start to see real returns.
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We chatted with a few financial experts to find out what type of passive income is worth it — and what it takes to create automated passive income streams.
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Passive Income Ideas That Are Worth It
Not all passive income ideas are worth it. And the ones that are–take a little work. But the payoff can be huge! Here are a few passive income ideas that may bring in huge returns in the future:
Build an Online Course
“Online courses are a simple way to earn passive income,” said Daniel Cabrera, real estate investor and owner of Sell My House Fast SA TX. “I created a course teaching real estate investing basics. After development, revenue comes in automatically.”
Building an online course takes time and expertise–but you’re probably already an expert in something. You just need to figure out how to monetize that skill. “Find a skill or expertise you can package into an online course,” said Cabrera. And let the money roll in!
Invest in Dividend Stocks
Dividend stocks are typically blue chip companies that pay out dividends to reward investors for buying their stock. Dividends are paid from excess profits and are one of the simplest ways to earn passive income.
“I put money in stable companies like utilities and REITs with a history of distributions,” Cabrera said. “Dividends provide income without needing to sell shares. Do research to find reputable companies with a track record of dividend payments.”
Create a Valuable Website
Websites make money through advertising revenue and affiliate partnerships. If you build a valuable website based on your expertise–over time that website can start to bring in serious money while you sleep.
“It takes time to gain traffic but ad revenue and sponsorships can provide passive income,” Cabrera said. “I have a real estate blog and podcast generating over $5K/month. Content creation upfront leads to income over the long run.”
Invest in Real Estate
Real estate is one of the oldest and most lucrative asset classes in history. Investing in real estate can feel intimidating–but putting in the work to find a great deal and build a portfolio of rental properties can set you up for life.
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“I focus on real estate investing,” Cabrera said. “My properties provide steady cash flow with little daily involvement. I use property managers to handle operations so I can scale up. Look for “hands-off” investments that generate income on their own.”
Invest in Index Funds
Index funds are a type of investment that tracks a stock market index–holding hundreds (or thousands) of investments within a single fund. They offer instant diversification and typically come with very low fees.
Index funds don’t generate a lot of income via dividends or interest–but grow in value along with the underlying stocks that they hold. Funds that track the S&P 500 average about 8% to 10% per year in growth — which helps provide income for you in retirement.
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What It Takes To Actually Make Passive Income
While generating income while you sleep sounds like an amazing goal, it usually takes a lot more work than most people want to admit.
Here are a few tips on the effort and sacrifice it takes to build passive income in your life:
Set Aside Time
If you want to build passive income that lasts–you’ll need to set aside time to learn how it works and implement what you’ve learned. This may mean reading a few books on investing if you want to get into dividend stocks or index funds–or learning about real estate and how to buy your first rental property.
And if you plan on building a website, online course, YouTube channel, or other passive income business–it will take time. Set a schedule to work on your passive income idea so that you can see it to fruition.
Set Goals
Passive income doesn’t just happen — you need to set goals to make it happen. Whether it’s putting together business revenue goals or simply setting investment goals to hit, it’s a good idea to write down your goals.
One framework to use is the S.M.A.R.T. goals approach. You need to create goals that are Specific, Measurable, Achievable, Relevant, and Time-Bound. This forces you to move away from general goals and into very specific goals with timelines and real numbers attached.
Automate
Automation is the key to making your passive income–well–passive. Especially if you’re building a business that you want to run by itself–automation can help. Online courses that automate things like advertising, sign-ups, access and emails can make money and deliver value while you sleep.
Automate works well in almost any type of business, too. “Use software and systems to minimize the time spent on routine tasks,” said Garrett Ham, real estate investor and CEO of Weekender Management. “Things like online rent payments, maintenance request systems, and digital locks reduce the amount of time I spend managing properties.”
Diversify
Having multiple passive income streams can help you keep your income steady and lower the overall volatility of your passive income. Creating these may take time–but when one passive income source drops down — others can make up for it.
“Don’t rely on a single source of passive income,” Ham said. “I own rental properties, operate a property management company, and run a law firm. If one area struggles, the others can pick up the slack.”
And Cabrera agrees.
“I spread money across various passive income sources–if one struggles, the others continue generating,” said Cabrera. “I also reinvest a portion of earnings to buy more dividend stocks, fund new loans, or create additional online courses. Building passive income is an ongoing process.”
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This article originally appeared on GOBankingRates.com: Wealth Without Work: The Secrets To Earning on Autopilot
