in our free newsletter.

Thousands benefit from our email every week.

  • Discounts and special offers
  • Subscriber-only articles and interviews
  • Breaking news and trending topics

Already a subscriber?

By signing up, you accept Moneywise's Terms of Use, Subscription Agreement, and Privacy Policy.

Not interested ?

The short version:

  • Income from a business venture or investment in which you are not actively involved is referred to as passive income.
  • Setting up multiple streams of steady passive income increases your wealth and provides an extra layer of financial security if you should be laid off from your full-time job.
  • In addition to my full-time job, I receive passive income from rentals, seller financing, third-party private lending, and dividend stock payouts each year.
  • Generally, the more lucrative passive income streams are also the most hands-off.

Meet Your Retirement Goals Effortlessly

The road to retirement may seem long, but with WiserAdvisor, you can find a trusted partner to guide you every step of the way

WiserAdvisor matches you with vetted financial advisors that offer personalized advice to help you to make the right choices, invest wisely, and secure the retirement you've always dreamed of. Start planning early, and get your retirement mapped out today.

Get Started

Rental income

I currently own five rental properties with ample cash flow. My total monthly cash flow is $2,254 from all five properties.

While being a landlord is not as passive as some other sources of monthly income, a lot of the actual work took place in the set-up of these properties. Now I don’t spend much time at all to earn cash flow — in the form of regular rental payments — on the properties in my rental portfolio.

More: How to invest in real estate with little money

How I earn passive income from rental income

From the beginning, I was very careful with tenant selection – they pay in full and on time for the most part. I also updated the appliances and rehabbed each unit prior to move-in. Now, aside from regular maintenance, like changing the air filters (which my lease stipulates the tenant must do every three months), there’s little I need to do each year except cash the rent payments.

For one of the properties I own, the gross Rental income is $1,425 monthly, less a management fee of 10%. The net rental income is $1,283.

Total expenses include:

  • Annual taxes which come to $272 per month
  • Insurance of $45/month
  • HOA fees of $205/month

That means that the cash flow from just one property is usually $761 per month.

Dividend paying stocks

You may be familiar with “Dividend Aristocrats.” This official list currently comprises 65 companies in the S&P 500 Index that not only pay stock dividends, but have raised their payouts for at least 25 consecutive years.

While these companies may not be considered the most exciting stocks to own, many are household names including Target, Walmart, AT&T, Pepsi, Walgreens and McDonald’s. They all make it a priority to reward shareholders with reliable dividend income and long-term dividend growth.

More: Dividend aristocrats list

How I earn passive income from dividend paying stocks

I own a portfolio of dividend paying stocks from the Dividend Aristocrats list that I purchased directly from the companies. Initially, I bought 5,000 shares of each and set up automatic monthly contributions which means I’m constantly adding new shares (or fractions of shares each month) and taking advantage of dollar cost averaging.

Each of the stocks in my portfolio pays quarterly dividends of between 2 percent and 5 percent annually. Take Stanley Black and Decker, for example. The current dividend per share is $3.16 and it has risen every year for the past 54 years. Shares are currently selling for $126. With a $10,000 investment, you’d own about 80 shares. At a dividend payout of $3.16, you’d receive a dividend of $253.

Dividend payouts are not going to single-handedly support your retirement. However, depending on the dividend paying stocks in your portfolio, you could still be looking at a nice chunk of annual income. With seven dividend-paying stocks in my portfolio right now, my holdings are set to deliver $2,724.00 this year or $227 per month. It doesn’t get any more passive than that!

Stop overpaying for home insurance

Home insurance is an essential expense – one that can often be pricey. You can lower your monthly recurring expenses by finding a more economical alternative for home insurance.

SmartFinancial can help you do just that. SmartFinancial’s online marketplace of vetted home insurance providers allows you to quickly shop around for rates from the country’s top insurance companies, and ensure you’re paying the lowest price possible for your home insurance.

Explore better rates

Seller financing

If you’ve ever looked at a mortgage loan amortization schedule, you know that it’s better to be the lender (i.e., the person who receives interest) than the borrower who pays it. That realization led me to my third avenue of passive income: Being a private lender.

I fell into my first private lending experience by chance. In 2019, one of my long-term tenants received a lump sum insurance payout of $150,000. She wished to purchase the home she’d been renting from me for nearly seven years. The home’s fair market value at the time was $180,000.

We discussed a private loan for the balance and I sold it to her for $150,000 cash, plus a loan note to me for the outstanding $30,000 financed over five years. So, each month I get a check for $458.20.

When she was a tenant, she had always paid rent on time and in full and that’s still the case: I get my check in the mail before the first of every month.

While it’s not strictly new income — after all, she’s technically repaying a loan — it’s still income that’s paid out to me passively. She owns the home and all the responsibilities that go with it so I have no liability or expense. Plus, by deferring my payout at closing, I saved capital gains tax on the sale and I will get a steady stream of payments for another three years.

More: What is P2P lending?

How to earn passive income from seller financing

I think the future holds many opportunities for private lending for savvy home sellers. That’s because it’s not likely that interest rates will return to the 2-3% range we’ve seen over the last few years. If you are selling a property you’ve mortgaged at that low rate, your mortgage loan may be assumable — meaning that the new buyer could assume the loan payments you owe rather than taking out a new mortgage loan. That opens up opportunities for you to seller finance the difference.

Let’s say, for example, that you bought a home for $300,000 in 2019. You put 20% down and financed the remaining $240,000. The payments you’ve made since purchase have brought your mortgage balance to $220,000.

Fast forward to 2022. Your home is now worth $350,000 and you have an interested buyer. If the new buyer is able to assume your loan at $220,000 and make a 20% down payment of $70,000, you can choose to seller-finance the remaining due of $60,000 over 10 years. At 6% interest, you would get a monthly check for $666 (or some similar, less ominous figure if you’re superstitious).

Seller financing tip:

Be sure to get an attorney to draw up the paperwork and do your due diligence on the buyers to make sure they are financially qualified and can afford the additional payment. And don’t shortchange yourself when setting up seller financing! Traditional lenders charge a lot of upfront fees in addition to monthly interest on the loan. There are origination fees (typically 1-2% of the loan amount), document preparation fees and attorney fees, just to name a few.

Third-party private lending company

Similarly, I get passive income from an investment with a private lending company. The company allows accredited investors the opportunity to loan money to their LLC, which they then loan out to property rehabbers. By providing a large sum of cash for the purchase of a property and the rehab for resale purposes, these hard money lenders fill a niche that traditional banks don’t serve.

How I earn income from private lending companies

The LLC provides short term loans at high interest rates for specific construction projects and returns some of the profits to their investors. I know the partners personally and feel comfortable with their vetting process.

And if there is a default, the loans are backed by the real estate asset which significantly reduces the risk.

The benefit to borrowers is access to large sums of cash without a long underwriting period. That allows them to purchase below market deals with quick cash. Short-term borrowers are willing to pay higher rates for the flexibility and speed of funding. My investment of $75,000 earns me $500 a month as a shareholder with the hard money lender.


Here’s a quick recap of how much I earn in passive income each month.

  • Rental property income: $2,254
  • Seller Financing: $458.20
  • Private Lending: $500
  • Dividend payouts: $227

Total: $3,439

That's a whopping $41,268 a year!

Everyone will face different opportunities when it comes to setting up passive income streams. While it took a lot of work to set up my rental property portfolio, the other passive income opportunities were relatively easy and often fell into my lap — either through my business or simply through my interest in investing.

The least lucrative are the most passive investments, as you might expect. It doesn’t take much know-how to buy dividend paying stocks. If you want to start earning passive income, all it takes is a bit of creativity and a discerning eye to find options that fit your skill set, financial savvy and comfort level.

Make the most out of your money:


Follow These Steps if you Want to Retire Early

Secure your financial future with a tailored plan to maximize investments, navigate taxes, and retire comfortably.

Zoe Financial is an online platform that can match you with a network of vetted fiduciary advisors who are evaluated based on their credentials, education, experience, and pricing. The best part? - there is no fee to find an advisor.

About the Author

Ruth Lyons

Ruth Lyons

Freelance Contributor

Ruth Lyon is a freelance contributor for Moneywise.

What to Read Next

10 best investment apps

See the best investment apps by category as picked by the experts at Moneywise. From beginner investors to real estate and crypto investing, here's the best investing app for you.


The content provided on Moneywise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.