How To Start Making Passive Income From Scratch

Middle aged woman working from home office.
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You may have heard about passive income and are interested in the idea of earning money in your sleep.

The biggest barrier to earning passive income is that you often need money to make money. And while it’s easy to feel discouraged, the good news is that you don’t need a lot to get started.

Check out how you can start building passive income from scratch right now, even if you’re new to the topic.

Research Different Passive Income Streams

The first step of the journey involves researching the different passive income opportunities so that you can decide which is the best option for your situation. There are multiple different directions that you can take when deciding on passive income streams to pursue. 

What are popular passive income sources to look into?

  • Rental properties. Real estate investing allows you multiple options for building passive income, from short-term rentals like Airbnb to finding tenants that pay your mortgage while you enjoy the appreciation. 
  • Dividend-paying stocks. One of the simplest forms of passive income involves investing in stocks that pay dividends since you don’t have to do anything on your end. 
  • Alternative investments. Investment options like REITs and crowdfunded real estate projects are becoming more common because they allow you to invest in real estate without becoming a landlord. You can start earning passive income with a platform like Groundfloor that allows you to start with $1,000. 
  • Digital products. You can start creating digital products like eBooks that you sell on Amazon or printables for Etsy. Once you build up a following or a catalog of products, you can earn money in your sleep.
  • Building an online business. This will involve you starting some sort of business that can range from affiliate marketing to building up a YouTube channel that collects ad revenue when you’re sleeping. 
Make Your Money Work Better for You

It’s important that you conduct as much research as possible at this stage so that you know what you’re getting into.

Build Up Your Savings

While you need money to make money, you have to start somewhere. As you’re researching passive income streams, it’s essential that you start building up the funds.

Some passive income streams, like real estate or dividend-paying stocks, will require some capital to get started, so the sooner you start saving up, the better. 

If you don’t have the savings yet, you can save up the earnings from another passive income stream, like selling digital products or building an online business with time and effort. 

Decide Which Passive Income Stream To Start With

The good news is that you can funnel income from one stream into another. For example, you could take the time to build up a YouTube channel or create digital products for Etsy that you’ll use the profits from to invest in dividend-paying stocks.

The reality is that some passive income streams will require extensive capital, so you’re going to want to start off with the most realistic stream first. 

Invest in Your Passive Income Stream

Once you’ve decided what you’re going to invest in, it’s essential that you get into the habit of investing time and money into this stream until it’s substantial.

Make Your Money Work Better for You

The first few product sales or dividend payments won’t be that significant, but with time and additional funds, you could turn these passive income streams into something considerable.

If you have time, then you can devote hours and resources to working on your passive income. If you have money, you can invest funds to grow a new income stream.

The goal is to keep on devoting resources to your passive income until it can possibly replace your 9-5 income. 

What To Remember About Passive Income

As you’re researching different passive income streams, we must stress that you have to be alert for potential scams. The concept of making money in your sleep has a certain allure to it, and it’s easy to get caught up in the hype. 

Here are a few general rules to keep in mind when building passive income from scratch:

  • You can start with just a few dollars. You can invest in crowdfunded real estate or sell your own digital products on Etsy with limited funds. 
  • If you don’t have much money, you will have to rely on effort and time. Putting in the time upfront will allow you to bring in more money in the future passively. 
  • If it sounds too good to be true, it always is. We must remind you that if a passive income stream you read about seems unrealistic, it usually is.
  • It takes time to build up a decent stream of passive income. The first few dividend payments may not be all that exciting, but as you keep investing more, you’ll see your payments increasing. 
Make Your Money Work Better for You

Closing Thoughts

You can start today with limited funds if you haven’t built up any passive income yet. The key is researching different passive income streams to determine which would suit your lifestyle and goals.

Some investors prefer real estate, while others swear by dividend-paying stocks. You could enjoy creating content and building up an affiliate marketing stream.

The sooner you’re able to start your passive income stream, the sooner you can start building wealth in your sleep. 

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