Passive income is a powerful way to build a financially independent lifestyle. It can be hard (but by no means impossible) to build self-perpetuating streams of income earlier in life. However, as you get older and your wealth grows, it becomes easier to invest in opportunities with the intention of building up a passive form of income.
If you’re in your 50s and you’re thinking about building up sources of passive income before you retire, here are a few ideas to get you started.
1. Establish Your Lifestyle and Ideals
Most of these suggestions provide specific passive income ideas. Before you start, though, it’s important to set the stage and orient yourself in the right direction. This doesn’t begin with assessing your assets or brainstorming business ideas. It should start with codifying your lifestyle and ideals.
LifestyleInvestor, Justin Donald highlights the importance of this, “You have to serve your values and priorities throughout your life because if you love what you are doing for work, you will be happier and healthier.”
This applies to passive income work just as much as a traditional 9 to 5 job. In either case, you’re investing your time and resources, and you want to direct that effort and cost toward something that is worth it for you over the long haul.
Kick off your passive income journey by defining your values and priorities. What kind of lifestyle do you want to live? Are you focused on simple living? Generosity? Travel? Do you want to stop working by a specific date? Answer these questions first, so that they can quietly inform your passive income strategy as you go along.
2. Don’t Wait for Retirement to Invest in Income Stocks
Income stocks are a common form of income for retirees. These are stocks that yield high dividends, providing a steady trickle of cash over time. Investor Place has a curated list of top income stocks for retirees including Western Union, Verizon Communications, and M.D.C. Holdings.
Don’t let the title fool you, though. These may be good for retirees, but there’s nothing stopping you from investing in income stocks as a form of residual income before you retire.
On the contrary, income stocks are a great way to get your first line of passive income up and running. You can use the dividends to start fueling your passive income spending, or you can invest it right back into more income stocks as you prepare to retire.
3. Utilize Robo-Investors
Another option to consider, while we’re on the topic of stocks, is using a robo-advisor. This is a great way to turn idle cash into a profitable portfolio even if you don’t have the market knowledge to do so.
Schwab explains that robo-advisors have grown in popularity in recent years due to their low barrier to entry and the fact that they don’t require a lot of insider knowledge. It’s also helpful that you don’t have to set them up like a 401(k) or IRA, which you can’t touch until you retire. Robo-advisors can be infinitely tailored to your short or long-term needs, and you can pull from them as needed.
If you have cash to invest and you want to create passive streams of income with minimal effort, consider setting up a robo-advisor. Tailor its preferences to your passive income-focused goals, add cash to your portfolio, and let the computer do the rest.
4. Try Peer-to-Peer Investing
If you’re looking for a more unique form of passive income than typical stock options, you may want to look into peer-to-peer lending. In essence, this is simply individuals loaning money to one another and getting paid back with interest.
Of course, putting that concept into execution is tricky. That is why entire peer-to-peer lending platforms exist to facilitate and automate these financial exchanges. These forms of sophisticated software enable individuals to pool their funds and lend them out to approved borrowers.
This may seem like a risky approach to investing — and it certainly has more inherent risk than many safer stock options. However, peer-to-peer lending platform Upstart points out that 80% of Americans have never defaulted on a credit product. In contrast, less than half of Americans have access to prime credit. By becoming a lender in a bankless, decentralized format like peer-to-peer lending, you enable many worthy borrowers to access quality credit — all while setting up a nice stream of passive income for yourself, as well.
5. Set up an Airbnb
The hospitality industry has traditionally only been accessible to those with significant capital. Hotels require tens of millions of dollars to build. Even bed and breakfasts, while easier to start, can be time-consuming and exhausting to run.
Fortunately, companies like Airbnb and Vrbo have rewritten the script when it comes to turning living space into streams of passive income. These platforms and others like them provide an easy-to-follow blueprint that you can follow to turn empty or unused spaces in your home into sources of passive income.
Now, to be fair, this is an approach that can require a lot of your time and effort depending on how you go about it. However, many hosts are able to provide a high-quality space with bare minimum effort. With many companies allowing employees to work on a flexible schedule or even operate remotely, the ability to oversee and rent out living space in your own home has become easier than ever.
6. Rent Other Things
If the idea of having a stranger living in your home doesn’t sound appealing — or you just don’t have the space to make that happen — you may have other assets that you can turn into passive income.
For instance, Turo is a car-sharing marketplace that can turn your vehicle (which is traditionally seen as a liability) into a bonafide asset. You can list your car, van, or truck on the rental platform, and others will pay you to use it when you aren’t.
Outdoorsy is another great app for those who own campers. A camper is an expensive investment that can offer isolated times of enjoyment but otherwise spends most weekends of the year parked in the driveway. By listing your camper on a camper-share site, you can turn it into a quiet-yet-profitable form of income. You can even charge extra to drive the camper to and from different locations for renters.
The list doesn’t stop here, either. Neighbor is yet another app that applies the Airbnb philosophy to turn unused assets into forms of passive income. In this case, it enables you to let others use your storage spaces when they need a place to park their belongings for a while.
From cars to campers to storage, there are a lot of ways to turn your possessions into streams of passive income. If you have a limited stream of cash, don’t be afraid to think outside of the box with the other items that you already possess.
7. Invest in Real Estate
You saw this coming, right? Real estate has been a rock-solid investment, and it remains high on the list of options.
If you’re looking for streams of passive income, there are a few ways you can approach real estate investing. There’s the obvious path of buying a property and then renting it out to others. It requires some work, but once you’ve cleared the initial hurdles and you’re comfortable as a landlord, renting can provide a substantial stream of passive income.
You can also consider flipping houses. The wild swings in the current market may be tough for normal home buyers. But for those looking to turn a profit, there are a lot of deals to be had — especially with many financial experts predicting a potential dip in housing prices in the not-too-distant future. Buying a home at the right time and then reselling it (potentially with some minor cosmetic upgrades) can lead to a sudden passive income windfall.
8. Try Creating Content
Finally, if you want to build up some income streams and you like to create, you may want to become a content creator. Content creation can be lucrative — although it’s worth pointing out that it’s a competitive field at the moment.
Nevertheless, if you enjoy creating written, visual, or audible content, you may want to try turning it into a passive income stream. It’s easy and cheap to launch a blog. Starting a podcast requires a few hundred dollars upfront. You can film quality footage on your smartphone.
Before you launch your new career as a content creator, though, ask yourself what it is about you that’s unique. What should you focus on that others will notice? How can you positively contribute to the conversation? Focus your content creation on addressing the needs and questions of others if you want it to eventually turn into something you can monetize.
It’s never too late to create streams of passive income. When you’re in the final run-up to your retirement, it can be particularly effective in setting the stage for an easy transition to a financial lifestyle dependent on retirement savings and Social Security checks. Use the ideas above to find the perfect areas where you can invest your efforts and assets in the name of creating streams of passive income.
