Looking for ways to make additional income while working as an attorney? Excellent move. It’s never been riskier to only have a single source of income.
Robert Kiyosaki, the author of Rich Dad Poor Dad, once said, “To achieve financial freedom, one must be a business owner, an investor, or both, generating passive income, particularly on a monthly basis.”
However, in all honesty, searching for passive income opportunities isn’t the norm, especially for attorneys. We are programmed to put our heads down, work hard, do a good job, bill hours, and try not to get laid off. The problem is that at the end of the day, you can only work so many hours and you can only spread yourself so thin.
The solution? Stop trading your precious time for money and start creating passive income streams.
As the billionaire investor Warren Buffett said, “If you don’t find a way to make money while you sleep, you will work until you die.”
So, the BIG question is, how can you make money while you sleep?
We've got you covered. First, we’ll answer the question, “What is passive income?” Then, we’ll take you through four BIG passive income ideas to get the wheels turning.
Let’s get the ball rolling!
What Is Passive Income?
Passive income is not “easy money.” Passive income is not for lazy people. Passive income is for the educated and the motivated. It takes discipline to save from your active income and then use those funds to invest passively to make your money work for you. People define passive income differently, but I define it as income generated disproportionately to the amount of time and effort required to generate it.
Put another way, passive income does not equal time and effort. Passive income is not trading time for money. This means that yes, it does take some work to get it started, but these efforts could eventually earn you money while you sleep or continue to be successful in your career. What you may fail to realize is that there are endless sources of passive income — you just need to figure out which ones are right for you. While some may need a large initial investment of time or dollars, there are others that you can start working toward today.
How to Make Passive Income: 4 BIG Ways to Start Building Passive Income Right Now
Now it’s time to unravel some of the major passive income opportunities you should consider pursuing. You should understand that each of these passive income ideas has its own risks and rewards, and pros and cons, so be sure to conduct your own thorough research before diving in.
Passive Income with Real Estate
Real estate is one of the most highly patronized passive income strategies, and my personal favorite. For many people, real estate is often glamorized on HGTV where you see wonderful couples flipping houses together or buying vacation rentals in the Mediterranean. I’ll be the first to tell you that it’s not quite like that. Below are just a handful of some ideas on how you can jump into passive income opportunities in real estate. For now, I’ve skipped over flipping, wholesaling, and many other more “active” approaches.
Residential rental properties (1–4 units) can be a great source of passive income once you get a rental up and running. However, since it requires some time and money input at the start (especially if you initially need to make some improvements to make the property rent-ready and build in some equity along the way), it isn’t “passive” by most people’s definition. However, it can provide you with a steady stream of monthly rental income without you having to perform many daily tasks.
The level of passiveness this type of investment offers you depends on your management approach. If you are going to self-manage, from finding tenants to handling maintenance issues, then it will be more active and may interfere with your work life. On the other hand, if you have a property manager, you may seldomly need to check in on the property and only occasionally manage the property manager.
REITs (Real Estate Investment Trusts)
A REIT is a real estate investment trust. It’s essentially a real estate company that owns income-producing real estate assets. Think of a REIT as a mutual fund for real estate investors. It allows you to invest in real estate assets the same way you can invest in any company, by simply buying stock. On the plus side, a REIT can provide stable cash flow through dividends similar to a dividend-producing stock, and shares in REITs can be bought and sold in the public market. It is one of the ways you can invest in real estate without the stress of being a property owner.
However, investing in a REIT comes with its own drawbacks. REITs are highly sensitive to interest rate fluctuations and do not offer the same tax benefits as investing in real estate directly. Additionally, much like stocks and mutual funds, REITs are subject to high management and transactions fees, and even though there are underlying real estate assets involved, REITs are traded on the open public market, so they ride the stock market roller coaster.
Want to invest in institutional-grade real estate properties without a massive down payment or the headaches of owning directly? Then crowdfunding could be a good bet. In the past, commercial real estate investments were reserved for direct operators, institutional investors, and people "in the know.” However, the rise of crowdfunding platforms like Fundrise, CrowdStreet, and RealtyMogul has made it possible for just about anyone to invest in properties that they could not afford on their own.
Today, you can invest as little as $500 on several institutional-grade properties via these platforms and receive returns based on your initial investment. Many of these types of investment platforms are sleek, sexy, easy to use, and sometimes pretty liquid. However, there is often a lack of transparency with underlying fees (which have to support that sleek, sexy platform), most of the time the properties are not known at the time of investment, and because of this, the return profiles are really just a guess. I’ve invested in some of these platforms myself, but just consider drawbacks as well.
Real Estate Syndications
Real estate syndicates over the years have become a go-to passive income strategy for several reasons. Once upon a time, you had to be “in the know” in order to get involved in these deals, but recently access is becoming more and more widespread. In the simplest term, a real estate syndication is a way for investors to pool their financial resources to purchase properties or real estate projects much larger than they could afford or manage on their own.
Investing in a real estate syndication allows you to invest passively into commercial, industrial grade, real estate investments without the hassle of tenants, toilets, or trash. Furthermore, because you are part of a company that directly owns real estate, you receive all the tax and income benefits that come along with it. Most real estate syndications have a somewhat high barrier of entry requiring a minimum investment of $50,000 (which can vary) and such investments are mostly illiquid. However, they offer lots of benefits, from passive rental income, tax advantages, professional management, and reliance on expertise to diversification of your investment portfolio.
Stocks and Mutual Funds
I won’t go too far into detail here because this is an asset that we are used to seeing and investing in through our 401(k)s and IRAs. Investing in stocks simply involves purchasing shares of a company in exchange for dividends or interest, whereas mutual funds are dependent on someone else picking the winners and paying them a fee regardless. With many stocks and mutual funds, you only make money when you sell them at an appreciated price. There are no guarantees of profits when you buy a stock, and you have no control over the company’s decision-making. Choose wisely.
Over recent years, online businesses have become a go-to passive income generator for millions of people around the world. Below are some online businesses that you can dive into and generate passive income.
Start a Blog
As attorneys, we are typically pretty damn good at writing, whether we like it or not. Are you well-grounded in a particular aspect of law? Creatively curating a blog around that can fetch you thousands of dollars monthly with the right approach. If your content is educative and generates enough online traffic, you could start selling ad spaces on your blog and produce premium content for raving fans. Additionally, once you get going you can even hire freelance writers to handle the content creation of your blog while you sit back and enjoy streams of passive income.
Create a Course or Coaching Program
If you’ve successfully discovered how to create content that attracts traffic to sell ad space, you could also make a digital course your current audience would love to buy. We’re all experts at something. We just need to discover creative ways to present it to others in a digestible, entertaining package. That could be anything from a simple eBook to a subscription-based course. Thanks to platforms like Udemy, Skillshare, and Thinkific, you can upload your course for free and earn money on each purchase or enrollment. From there, you can develop membership sites and one-on-one or group coaching.
If you are looking for a passive income strategy that allows you to earn money while you sleep, then affiliate marketing could be your go-to strategy. The idea is that you market other people’s products or services and earn a commission if people end up purchasing or signing up thanks to your marketing funnel.
You can simply advertise the various affiliate links on your blog or through the use of Facebook advertisements. Affiliate websites like Clickbank and Amazon Associates are some of the biggest affiliate platforms where you can find products to promote for commissions.
E-commerce is simply the act of buying or selling over the internet. It is an umbrella term for any form of transaction done online. E-commerce entails the sale of information, products, and services via a dedicated online platform.
These days, you can sell physical items you own or re-sell items you bought in the past via platforms like Shopify, eBay, and Amazon, or through your own online shop. With even a small startup budget, you can easily create an online shop that will go on to provide you with consistent passive income.
Brick-and-mortar businesses are businesses where customers come face-to-face with the business in a specific location. Your local grocery stores, gyms, coffee shops, and clothing outlets are all examples of brick-and-mortar businesses.
Investing in the right brick-and-mortar business can help you generate a continuous flow of passive income once they are up and running and you have the proper staff in place, but these investments typically require high overhead costs, dedicated management, and a hands-on startup period. Alternatively, you can invest in someone else’s brick-and-mortar business or startup as an angel investor or money partner.
Although each of the passive income strategies listed above tend to require a lot of work to get up and running, they can provide you with the passive income and eventually financial freedom you desire. According to popular entrepreneur and author, Todd M. Fleming, “The greater the number of passive income sources you build, the freer your life becomes.”
So, why don’t you start that blog, podcast show, or affiliate marketing program, or invest in that real estate syndication or crowdfunding platform? You’re already taking care of the first step: education. Then you must act. Start creating passive income sources today.
About the Author:
Seth Bradley is a real estate entrepreneur and an expert at creating passive income while still working as a highly paid professional. He’s closed billions of dollars in real estate transactions as a real estate attorney, investor, and broker. He’s the managing partner of Law Capital Partners, a private equity firm focused on multifamily and opportunistic acquisitions.