There is a vast world of passive income, and now we are traveling deeper into the abyss. If you haven’t already, please read the first articles in the How to Create Passive Income series here (101, 102). Let’s jump right into the mix.
Advanced Investing. Building wealth over time in the stock market doesn’t take a lot of action on your part. By now, you should have a Roth IRA, a dividend growth, and an income portfolio. There is no need to tinker with your assets continuously.
However, if we want to make additional income from our stocks, we can start selling covered calls on top of our stocks. Covered calls are a form of stock options that provide insurance for the buyer.
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We will sell the insurance in the form of a covered call. The term “covered” means that we own all the underlying stocks. In a nutshell, say we own 100 shares of AT&T (T), and the price is currently $25.
We will sell a covered call for the strike price of $27. We collect a premium for the contract, say $0.15 a share for a total of $15. The option is for 30 days. If AT&T’s price never reaches $27, the contract expires worthless—but we keep the $15. Amazing.
Covered calls are a way to receive “synthetic dividends” and make additional income over our dividend growth portfolio. In the worst case, the price of AT&T rises to $27, and the buyer exercises our contract. We take profits and keep the premium. Not a bad worst-case scenario.
Options can be hazardous because you can buy and sell “calls and puts” without owning the underlying securities. There are ways in the options market to have unlimited risk, and you need to avoid those scenarios at all costs. A great introduction to options is the book “The Options Playbook.” To dive deeper into covered calls, I recommend “Covered Calls for Beginners.”
Advanced Real Estate. As an advanced investor, it’s time to own physical real estate. One of the first things we need to do for real estate is buying land. Raw land has many uses, and holding a piece of land (2-5 acres) will future-proof our investing habits. The book “Dirt Rich” goes into ways to find land where the owner owes back taxes. You can then make low offers and grab the land for cheap—once you are competent at the process.
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I believe the next great frontier in the housing market will be in affordable houses. These houses include tiny homes, mobile homes, and RVs. Luckily, owning land will allow you to place all of these types of affordable houses on your property.
Owning land will also allow you to build multi-family homes on your property. You may not want to build an apartment complex, but maybe a three-unit townhouse is more accessible. You can leverage more wealth by building small multi-family residences that you can manage yourself.
Other advanced techniques include using the “Buy, Renovate, Rent, Refinance, Repeat” model, but doing it by house hacking. You can live in the property for 2-3 years as you renovate it, and once complete, you can rent the home.
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I would also consider other bigger-picture real estate ideas like becoming a real estate agent, a lender, or a property manager. Going into these fields will put you closer to the action of real estate deals. The closer “inside” you are, the better the deals. The better the deals, the more profit.
Advanced cryptocurrencies. After learning and studying the crypto space, we can now dive into the world of Decentralized Finance or DeFi. Luckily, I have a short series called Passive Income in DeFi (101, 102, 103, 104, 105) that can get you started in this universe.
However, once you start a decentralized wallet and move into this space, all bets are off. The playing field is not level if you do not know what they are doing. Scams are prevalent in the DeFi space, so ensure you read everything. Join groups of people, but also keep your guard up.
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You can make a lot of money in the DeFi space, but you must not get greedy. Take profits when investing in new coins, and move that cash back into your centralized account for safe-keeping. Ensure you have an excellent long-term strategy in the crypto-verse.
Creating Non-Fungible Tokens is also a great way to build a passive income if you have an audience or group who will buy your NFTs. NFTs are unique items where their individual characteristics are written to the blockchain.
The blockchain gives NFT creators the ability to prevent the reproduction of their unique items. For example, I can create a book where there is only one copy. I can write the properties of the book to the blockchain and sell the book as an NFT.
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Each time someone sells the book, I can receive a royalty payment. I can potentially have a long-term passive income stream just from that one NFT. Read more about NFTs in the book “The NFT Revolution.”
Advanced Business. Probably the most significant way to build a substantial passive income stream is by creating an automated business. There are so many businesses that you can create; it is truly amazing.
However, we do not want to create ourselves a job. We want to build a passive business. Here are 21 Passive Income Ideas that can help you get started on your journey. Before starting your business journey, read my articles “Become an Entrepreneur BEFORE You Start a Business” and “Read These 10 Books BEFORE You Buy a Home.”
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Once you understand that an entrepreneur only makes money by adding value, you are well on your way to building a passive business. Don’t get me wrong; your business won’t be passive from the start. It’ll take time to learn the ropes.
Once everything is running smoothly, like having advertising, a sales funnel, and customers, you can automate the process. You can automate things like running Facebook Ads, a Facebook group or sending emails.
Have your passive income goal set before you start your business. I set the goal of $1,000/month in passive income from my books. That way, I know where I am heading from the start and when I can slow my roll.
For example, if you start a food truck, you will learn about the business. Once you are profitable, you can hire a manager to run your first truck. You may only take home 10% of the profits, but now you are free to pursue other sources of passive income.
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You can buy and start three to four more food trucks; you can also franchise your food truck and sell the licenses. You can create a YouTube channel or blog about the food truck or franchising business. There are limitless ways to build passive income from a business, but you need to become savvy in the ways of entrepreneurship.
Conclusion. I expect all advanced passive income seekers to spend 4-5 hours a day reading and building income streams. That is actually on the low side of the expected hours. It takes 10,000 hours to build an income stream, which equals five hours a day for five years. So, yes, it takes time.
Are you ready to have multiple different passive income streams? One person can have
- DGI portfolio
- income portfolio
- sell covered calls
- interest from cryptocurrencies
- passive income from DeFi
- book royalties
- YouTube Royalties
- sell T-Shirts online
- passive Airbnb business
- two rental properties.
That is the magic of passive income; you will have the time to pursue as much income as you want and need. Take the time to learn as much as possible about passive income, and you will never worry about money again. Good Luck!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
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