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Updated December 10, 2019 10:08 PM PT

Residual Income

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Make money and get paid even after the upfront work is done. Learn how residual (or passive) income works. Here are 10 good investment ideas to build it.

What is Residual Income?

Residual income is a stream of money made without ongoing work; it's sometimes called "passive income". The goal is to exceed your initial investment of time or money.

You can generate residual income in a variety of ways. Some people sell products and services, others lend or invest money. When looking for the best way to earn residual income, there are two main factors to consider:

  • How much of an initial investment you can make
  • How long you're willing to wait for returns

Read on to learn more about residual income and how to find the best residual income stream for you.

Residual vs. Passive Income

In the finance world, residual income isn't actually income at all. It's the net amount of money that's left over after paying debts and bills.

As online businesses have grown, people began to use "residual income" and "passive income" interchangeably.

For this article, we'll use both terms loosely to discuss income that is earned with little to no ongoing work.

Keep reading for more residual income ideas, plus recommendations for how to get started.

Less Work

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Here's a list of great residual income ideas to start your search. Be sure to do research to choose the best method for you.

High-Yield Savings Accounts

Many savings accounts at traditional banks offer less than 0.10% interest. But online savings accounts offer higher interest rates which can generate over 20 times more accumulated interest per year.

Although interest earned is a relatively small amount, it requires no effort to let your money sit in a savings account. Of all the ideas on our list, this is a true passive income.

Get Started
CIT Bank, HSBC, and Discover are just a few banks that offer online accounts with high interest rates:

  • CIT requires a $100 minimum deposit, plus a deposit of $100 per month.

  • HSBC only requires a $1 deposit to get started.

  • Discover has no minimum deposit.

Interested in making high-yield savings part of your personal finance plan? Read our full list of the best online savings accounts and their associated fees here.

Credit Card Rewards

Some credit card companies offer cash back and rewards for the shopping you do every day. You can earn money on each purchase and create a small residual income stream.

Check the perks included with your credit card to take full advantage of what the card offers.

Get Started
Here are three options without an annual fee to help you start earning cash back:

Check out our full list of credit rewards cards here.

Invest in Real Estate

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Real estate investing can be a great way to generate residual income and diversify your personal finance strategy.

Here's are some options:

Crowdfund
Crowdfunding allows investors to buy a percentage of real estate debt or equity. Like other investments, it can have varying levels of risk and returns.

With real estate crowdfunding, you can earn residual income in a variety of ways. Some companies pay automatic quarterly dividends, others disperse income as the property collects rent. Be sure to do ample research when choosing a real estate investing platform.

Some real estate crowdfunding programs only work with investors who are "accredited" by the Securities and Exchange Commission. This means they have a minimum net worth of $1 million or made at least $200,000/year for the last two years.

Get Started
Consider one of the following real estate crowdfunding platforms to start earning residual income:

  • RealtyMogul requires $1,000 minimum for most investments, which can be in debt or equity.

  • PeerStreet allows consumers to earn quicker returns by purchasing shares of loans. Only accredited investors with a minimum of $1,000 can use the program.

  • Fundrise lets users invest in electronic Real Estate Investment Trusts (eREITs). They require a minimum investment of $500 and shareholders are paid in quarterly dividends.

Invest in REITs
Real Estate Investment Trusts (REITs) offer a quick turnaround on real estate investments.

REITs are similar to exchange-traded funds (ETFs): they both contain a variety of investments within a set portfolio.

However, ETFs trade in stocks and bonds, whereas REITs invest in commercial real estate.

Get Started
If you're interested in earning residual income with REITs, check out the following brokerages:

  • Vanguard is great for beginners who are looking for a low-cost brokerage and want to invest in the U.S. market. There is no minimum to open an account.

  • Charles Schwab is a brokerage suited for any level of investor. Their REIT options are low-cost and offer access to advanced research tools with no account minimums.

Invest in Stocks

Investing in stocks can generate residual income for both long-term and immediate use, depending on when you choose to cash out your stocks.

Even with "low-risk" investments, stocks involve some level of risk. Never invest money you aren't prepared to lose.

There are three main ways to invest in the stock market:

Use a Robo Advisor
Robo advisors are perfect for inexperienced and hands-off investors.

First, they decide your risk tolerance level based on your age and long-term goals. The algorithm then creates a personal portfolio of investments and invests your money.

Once money is invested, the robo advisors automatically rebalance portfolios and reinvest profits.

Get Started
If you prefer the more hands-off approach of a robo-advisor, check these out:

  • M1 Finance is free to use but requires a $100 minimum deposit.

  • Wealthfront requires a $500 minimum deposit and charges fees equaling 0.25% of an account's balance every year.

  • Betterment has no minimum requirement but charges an annual 0.25% fee based on the account's total balance.

Invest on Your Own
Free trading apps allow users to choose their own individual investments and build a portfolio. This requires time and research. This option is slightly more involved than using a robo investor.

Most free services are basic, so the fees are low. The features may feel user-friendly to new investors. But experienced investors may find most apps too basic for their needs.

Get Started
Robinhood and Firstrade are both free and offer commission-free stock and ETF trades without using the service of a stockbroker.

  • Robinhood also offers premium account that costs between $6 and $200 per month.

  • Firstrade offers stock trades of $2.95 per trade, options for $0.50 per contract in addition to the $2.95 trading fee.

Some brokers also offer the opportunity to invest in dividend stocks, which pay out regular dividends to shareholders. Learn more about dividend stocks here.

Use a Broker
Experienced investors looking for independence and advanced tools usually use online brokerage services.

Brokers often charge a per-trade fee and sometimes a percentage of each trade. Those fees help the platforms offer market research so knowledgeable traders can make better decisions.

While these brokerages are hosted primarily online, some do offer the ability to trade through a human broker for an additional fee.

Get Started
Interested in going with a traditional broker? Check out these three options:

  • TD Ameritrade's flat $0 per-trade fee gives investors access to its advanced, yet user-friendly trading platform.

  • Ally Invest charges $0 per-trade for both stocks and ETFs. Their trading platform shows research data, customizable charts, and more tools at no additional cost.

  • Fidelity offers free trades for certain mutual funds and over 350 Fidelity-created ETFs. Users who make 36 or more trades within 12 months can access market insights and tools.

Lend Your Money

With peer-to-peer lending, investors buy shares of a loan. As borrowers pay those loans back, usually on a monthly basis, investors earn a passive income from the repayments.

Most peer-to-peer lending programs allow investors to choose the loans they finance based on the predicted risk of default. Loans with a higher risk level often provide higher returns.

Keep in mind that no matter the associated risk level of a loan, there is always a chance you'll lose your money.

Get Started
Two notable peer-to-peer lending services are Lending Club and Prosper. Review the fees below and check out a comparison of the two in our article here.

  • Lending Club offers the option to invest in 36- or 60-month loans and charges a 1% fee of every payment a borrower makes.

  • Prosper provides investment options for both 3- and 5-year loans and charges investors 1% of the outstanding principal of a loan before payment.

Get Paid for What You Already Do

Some companies will pay you in gift cards, credits or even plain cash just to do things you already do or can do while you perform other daily obligations, like surfing the web, taking surveys, or buying groceries.

While it is generally easy, this may not be the best source of significant residual income. The returns are typically low for the time you are committing.

Get Started
These are a few of the most popular platforms for survey-taking. Remember, the returns will be generally low, so consider other sources of residual income if you're looking for more cash.

  • InboxDollars rewards its customers in money they can cash out at $30.

  • SwagBucks pays in gift cards.

  • Ibotta allows users to take photos of their grocery receipts and delivers cash back based on that week's offers.

Some Work

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These methods involve more time commitment or monetary investment, but they can offer consistent residual income.

Host Vacation Rentals

Even if your home city isn't a huge tourist town, renting out a spare room or guesthouse to travelers is an easy way to create a steady stream of passive income.

Before you start hosting, you'll need to:

  1. Get permission from your landlord and your city.
    You may have to buy extra vacation rental insurance or pay more to your landlord.

  2. Choose a website to host your space.
    Thoroughly research each website and its fees before listing your space online.

  3. List your space online.
    Take clear, honest photos; title and describe your space in a way that entices travelers.

Be sure to maintain your property as guests come and go and consider buying items like toiletries and kitchen basics.

Get Started
Airbnb, VRBO, HomeAway, and Booking.com are vacation rental sites that charge an owner fee:

  • Airbnb's owner fee is the lowest, charging 3% of each booking

  • HomeAway and VRBO offer a per-booking fee of 5% or a yearly subscription for $499

  • Booking.com charges a 15% booking fee for each stay.

Open an Online Store

Any design you create can be printed on merchandise and purchased by shoppers online. If your designs or products are popular, you can generate a fairly steady stream of passive income.

Here are two ways to begin:

Sell Through an Online Marketplace
A platform with its own traffic can be good for new sellers who have no online following.

Keep in mind that sales can be competitive because there are a lot of merchants in any given marketplace.

Plus, there could be more costs involved. New sellers may have to pay to list individual products and monthly fees equal to percentages of their total sales.

Get Started
More online marketplaces pop up every day. Here are two of the most popular:

  • Etsy allows people to sell their handmade goods directly to buyers. Keep in mind that the service comes at a price: $0.20 fee to list a product, a 5% transaction fee, a 3% plus $0.25 payment processing fee.

  • CafePress allows artists to sell their uploaded artwork on shirts, mugs, or other items. There are no monthly fees, but your per-item profit may be less than if you made, sold, and shipped it on your own.

Remember to only sell your own work. A lawsuit can cost much more than any residual income you may earn.

Sell Through Your Own Website
If you have a large online following, you have a built-in buyer base.

Keep in mind that the amount of residual income you earn will be directly related to how much work you're willing to put into maintaining your brand and website.

Services that charge a percentage of total profits may seem cheaper than those with a flat monthly rate, but the fees can add up. Take stock of your costs every month so you'll know when it's time to switch platforms.

Get Started
Sites like Shopify use drop shipping, which outsources the production of your products to a separate manufacturer—meaning you don't have to worry about managing your own inventory.

The service lets sellers start with their site and domain name for a flat monthly fee ranging from $29 to $299 based on the chosen tier level.

Most Work

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Putting a decent amount of work into establishing a residual income is one of the most common ways to have a steady stream of money.

These ideas are both achievable and profitable with the right amount of effort.

Become a Landlord

Owning property can create one of the most secure streams of residual income, but keeping reliable tenants can be difficult.

As a landlord, you are responsible for purchasing and renting out a property, maintenance, and any other issues.

Routine property management requires time and resources, in addition to the money spent on owning the actual property. Weigh these factors against potential returns to decide if this is the best way for you to earn residual income.

Get Started
  1. Hire a real estate attorney to assist with drafting documents and learn rental laws in your city
  2. List the property when it is ready to rent- online sites may charge listing fees
  3. Show the property to potential tenants and vet the ones you choose
  4. Collect rent and manage repairs while you have tenants
  5. Keep meticulous records for your own taxes
  6. Refer to this list of rental property tax deductions from Spark Rental to maximize your residual income earned.


Create Content

All online content has the potential to earn passive income, even when an audience can access it for free.

You'll need a following to turn a consistent profit so marketing is essential. Here are some of ways to create content that can make you money:

Publish an E-book
E-book topics can range from cookbooks to "how-to's," depending on your area of expertise. Just make sure that you have something compelling enough to say to make people sit down and read.

Once your book is written and a cover designed, getting it online is as simple as one upload.

However, selling a successful e-book comes down to making it known. You can use your personal or brand social media channels, a business partnership, or other means.

Get Started
Amazon Kindle Direct is one of the simplest self-publishing services. A writer can choose to earn 35% or 70% of royalties from the book.

If a writer chooses the 70% option, Amazon will also charge digital delivery fees for each book sold, which are typically $0.06.

Podcasting can also be profitable if you do it right. One way to get sponsors for your podcast is having a professional-quality sound. This article from Produce Like A Pro outlines how to make your cheap home recording studio, which is perfect for podcasting.

Create an Online Course
Take your e-book one step further and create an online course to build residual income.

Online courses are typically available on sites with an established user base. You can create a number of written materials and videos to help students learn the subject that you're teaching.

You may be able to create a full course once and then leave it online indefinitely. You'll build a passive income as students purchase it.

But if you create a course in a constantly changing subject, you'll need to add new information to keep it current.

Get Started
Websites like Teachable and Udemy host online courses on a variety of subjects:

  • Teachable lets you customize a domain to host and promote your course. The service charges a monthly fee ranging from $29 to $399 per month, depending on the chosen tier level.

  • Udemy is a learning marketplace that hosts over 190 million courses. While they don't allow as much customization, Udemy does handle marketing and promotion of the course. Udemy's fees can range from 3% to 50% of the total price.

Become a Blogger or YouTuber
Uploading to a site is free, but videos or blog posts can only build residual income after they reach a certain amount of views. In other words, you'll need to hustle to find and build an audience.

To create a successful blog, you'll need to first find an underserved niche. Look for a topic you're comfortable with that has a high demand for more content.

Then, if you're opting for the blog route, choose the platform on which you'll host your site. Finally, work on building your brand and watch the residual income come in.

Get Started
Whether you decide to use a drag-and-drop-type website or build your own from scratch, there is an option out there that will suit your needs.

  • SquareSpace offers quality customer service and easy-to-navigate templates starting at $12/month.

  • WordPress is a website design tool and content management platform. It's ideal for beginners and offers a plan for free.

  • HostGator is best if you're looking to host and build a customized website by yourself. Its least expensive plan starts at $2.75/month.

Ready to take the first step toward making your own website to earn a residual income? Read our article here for everything you need to know to get started.

Monetizing your blog can be a confusing process if you don't already know about affiliate marketing. This article from Young Retiree explains each step you'll need to take to start making money off of your online presence.

Be an Independent Sales Rep

Network marketing, also called multi-level marketing, allows you to independently sell products or services for an established business. The company pays you a commission based on your sales.

This will require a small upfront investment to buy a sample kit or starter pack of whatever products you'll be selling.

Then, it's up to you to get out, market the products or services, and sell your way to residual income.

When choosing a company to work with, do your research and thoroughly vet them out.

Get Started
Monat, Mary Kay, and Rodan and Fields offer network opportunities for beauty products. Pampered Chef and Scentsy offer home products. Or you can sell health and fitness products through Jeunesse, Purium, or Omnilife.

Companies will vary in how often you can cash out your earnings, though many allow you to earn a monthly income.

Build an App

Apps offer unique solutions to life's everyday problems. If you can think of a way to enhance people's lives or make everyday tasks easier, you can put it in an app and generate some income.

The most important part of app creation is marketing the product. To generate a residual income, you'll need to have a significant number of app subscriptions.

Get Started
Here are the steps to build an app:
  1. Settle on an idea.
  2. Research the market, your competition and the needs of consumers.
  3. Hire a developer to build the app or do it yourself.
  4. Market your app using social media presence and paid ads.

Bottom Line

Whether you're hoping for a stream of income that grows untouched or plan to develop a project in your free time, residual income can boost your income.

Start by deciding how much time—and money—you want to invest. There's no time better than the present to start building a stream of steady residual income.

Disclaimer: Opinions expressed here are author's alone. Please support CreditDonkey on our mission to help you make savvy decisions. Our free online service is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved or otherwise endorsed by any card issuer. This site may be compensated through the Advertiser's affiliate programs.

Disclaimer: The information for the Chase Freedom and Citi® Double Cash Card has been collected independently by CreditDonkey. The card details on this page have not been reviewed or provided by the card issuer.

TD Ameritrade has not influenced the content of CreditDonkey. CreditDonkey may earn compensation for accounts opened at TD Ameritrade.

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About CreditDonkey®
CreditDonkey is a stock broker comparison website. We publish data-driven analysis to help you save money & make savvy decisions.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed on this page are those of the author's alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.

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