What is Passive Income?

Passive income is an active stream of money that requires minimal work and effort from the earner. Passive income is a great way to build up your wealth because it offers an alternative to the traditional paycheck-to-paycheck lifestyle. Engineers should consider starting to create passive streams of income in order to supplement or replace their current salary in preparation for retirement or how does early retirement sound?

Passive income frees you from the shackles of boring 9-5 jobs. If you are an engineer who wants better conditions and financial freedom, it’s about time that you start thinking about generating passive income.

If you are looking for ideas on generating passive income for engineers, read below!

Passive Income for Engineers| 13 Best Proven Ideas!

Here are the most common types of passive income for engineers:

1.     Cryptocurrency

Trading in cryptocurrency is a great way to earn passive income for engineers. A typical way of making your money work for you in the crypto world without investing anything is purchasing and holding crypto assets. This move is termed “HODLING” in the crypto industry. Buying digital assets means that you believe that the value of your crypto balance will rise and earn you returns in the future.

But the downside of this form of passive income can be the unpredictable nature of the crypto market. Cryptocurrency is a very volatile form of investment.

2.     Angel Investing

Angel investing does not yield you any immediate cash flow or liquidity. However, if you know how to invest in ventures and your funded company becomes successful, the payoff can be huge.

Angel investing comes with significant risk, and you as an investor must be ready to bear the consequences, and it may take more than five to seven years before you start earning any profit. So, it’s a long-term deal.

It is a profitable option to invest in venture capitalists, but always try to access the business on factors like product uniqueness, prior experience, and track records.

3.     Peer-to-peer Lending

Due to some unique characteristics, peer-to-peer lending is considered a great way of generating passive income for engineers. Peer-to-peer lending is a form of lending and borrowing money without including any third-party intermediary in the deal. Usually, peer-to-peer lending, aka P2P lending, is done online, where online platforms introduce lenders and potential loan-takers.

Compared to other types of investments, P2P lending yields investors higher and faster returns.

Statistics suggest increasing competition in the P2P industry, with the entire market currently valued at $67.93 billion.

4.     High-Yield Savings

Another great way to set yourself up for receiving passive income is by creating a high-yield savings account. This type of investment works at a lower level than bonds and stocks and presents you with a great way to raise emergency funds.

A high-yield savings account earns an unusually high interest that is often higher than an average national interest rate. And the amount made through interest is added to your balance.

There are a number of different high-yield savings account options available to you. Each company has their own benefits and drawbacks, so it’s important that you do your research to find the best option for you.

One of the most popular high-yield savings account options is offered by online bank Ally. Ally offers a 1.05% APY, which is one of the highest interest rates available. Ally also has no minimum balance requirements and no monthly fees.

Another popular option is offered by online bank Synchrony. Synchrony offers a 1.05% APY as well, and also has no minimum balance requirements or monthly fees.

If you’re looking for a high-yield savings account with more features, you may want to consider a bank like Capital One 360. Capital One 360 offers a 1.00% APY, but also has some additional features like the ability to open multiple accounts and to use your account as a checking account.

It’s important to weigh the pros and cons of each option before deciding which company offers the best high-yield savings account for you.

As you research on this type of investment, be wary of the high-yield investment programs that totally shows impressive returns on your investments. Remember, if it looks to good to be true then it’s likely a scam.

5.     Real estate investment trusts (REITs)

A REIT, or real estate investment trust, is a company that owns and manages income-producing real estate. REITs are required to distribute at least 90% of their taxable income to shareholders, making them a convenient way to invest in real estate.

There are two types of REITs: equity and mortgage. Equity REITs own and operate income-producing properties, while mortgage REITs invest in mortgages and mortgage-backed securities.

REITs are a popular investment choice because they offer high yields and are relatively low-risk. They can also be a good way to diversify your portfolio, as real estate is a relatively stable asset class.

There are many ways to earn income from REITS.
One way is to own units in a REIT. When the REIT earns income, it will distribute a portion of that income to its unit holders.

Another way to earn income from REITS is to sell call options on the REIT. This gives the option buyer the right to purchase units in the REIT at a set price. The option seller receives a premium for providing this right.

Another way to earn income from REITS is to sell put options on the REIT. This gives the option buyer the right to sell units in the REIT at a set price. The option seller receives a premium for providing this right.

A final way to earn income from REITS is to invest in a REIT ETF. This ETF will hold a number of different REITs and will distribute a portion of the income it earns to its investors.

6.     Bonds and CDs

Bonds and CDs are fixed-income investments that carry low risks and the fixed possibility of returns.

Bonds are loans that an investor lends to corporation organizations or government entities. In return, the bond issuer pays a fixed amount of interest to the lender at set intervals. At the end of the set period, the issuer returns the principal amount to the investor.

CDs (certificate of deposit) are deposit accounts with fixed terms and fixed interest rates. These accounts are created at a credit union or a bank. CDs work slightly differently than bonds. In CDs, the interest amount is reinvested to generate compounding returns.

Both provide an excellent, less-risky way to create passive income for engineers.

7.     Dividends

Dividend stocks are the most profitable way to create passive income. As public companies generate revenue, a part of the profit directly goes to the investors. Investors can either choose to reinvest the money to gain more returns, or they can choose to pocket the profit.

The amount of dividends you earn per investment can vary from business to business. However, if you are unsure which dividend stock to invest in, look for a dividend aristocrat label in a company you are looking to invest in. This label means that the company has a solid track record of providing dividends to investors.

Additional Passive Income Ideas for Engineers

The ideas below are to help increase passive income for engineers, but anyone can use these tips. These passive income ideas don’t require a lot of active work, which means you earn money in your sleep.

You’ll do work upfront to get the investment going, but once the passiveness takes over, you earn money while doing nothing. Of course, there are pros and cons to each passive income idea.

8.    Royalties

It’s true you can earn royalties even if you aren’t a published author or talented music artist. You can buy royalties, which is an investment, but it’s not tied to the stock market, so you don’t have to worry about fluctuations.

Why would someone sell their royalties?

It’s more common than you think. Many published authors or musicians find that they need money now but don’t have the royalties yet. Rather than waiting for royalties to come in so they can save for their financial goal, they sell them now, giving you rights to the future royalties.

To buy royalties, you must find a royalty marketplace, but there are plenty. Make sure to do your research and keep in mind that royalties aren’t guaranteed, but their yields are often much higher than other investments, such as dividend stocks.

9.    Rental Income

If you own investment homes or have the capability of buying them, you can rent them out and create passive income for yourself.

Being a landlord can be completely passive if you hire a property management company to handle the property and collect payments for you. But if you prefer to be more hands-on, you could manage the property yourself, but then you’re on call 24/7 if something goes wrong with the property.

You can buy homes locally and manage them yourself or even invest in homes out of state if there are less expensive areas to invest in. Just make sure any area you invest in has a great rental demand, so you earn the profits you want.

10. Create a Course

If you’d rather put your engineering expertise to good use, consider creating a course. Sites like Teachable or Udemy are great platforms for course creation. They are easy to use, and each has 10+ million students.

When you create a course, you create it once and then collect passive income each time it sells. You choose the course structure, pricing, and level of support you’ll provide during and after the course. Some engineers even offer groups or paid subscriptions for students to join after the class to keep the income going.

Even if you aren’t the type to get in front of a camera, you can create PowerPoint slides, infographics, or do screen recordings to do your teaching.

11. Create an App

If you have knowledge about apps and how to create one, it’s a great form of passive income for an engineer. This is another example of something you put work into upfront but then collect the income moving forward.

You’ll likely have to support and possibly update the app down the road, so keep that in mind as you figure out your capability of making money creating an app.

You decide if you want it to be a free app and you make money from the ads supporting it or if you want to charge for it, making money that way.

Keep in mind when you create an app, it could take a lot of work, have its fair share of failures, and require extensive marketing to get it in front of your target audience.

12. Collect High-Value Items

If you have an eye for valuable items and know when they are in high demand in the market, consider being a collector. You buy the items and then sell them for a higher value.

There’s no right or wrong way to make a passive income this way. It depends on the market you’re in and what you like. Some people collect any high-value items they can get their hands on, and others have a specific niche, such as art, jewelry, or even whiskey.

The downside of selling high-value items, however, is the demand can come and go. You might find yourself with a significant amount of inventory and no money at some points.

13. Digital/Internet Business

If you prefer to work online, there are plenty of digital opportunities. For example, you could buy items you know are higher value than they retail for and sell them on eBay or Amazon. You could start an Etsy store for homemade items or unique works of art you find.

You can even be a drop shipper. When you dropship, you don’t carry inventory, but you sell items that the supplier carries. You create the website and do the marketing, and the drop shipping company handles the order fulfillment.

FAQs

Is passive income real or a scam?

Passive income is very much real, and people are making millions out of it. Do you know that Jeff Bezos generates $230,000 per second without lifting a pen? You need to find the right source of passive income for engineers. It may require extensive research and planning before you start earning anything.

What are the most popular passive income ideas for engineers?

Investing in bonds, dividend stocks, cryptocurrencies, and REITs are some good profitable ways to start your passive income journey as an engineer. In addition, you can also do affiliate marketing or sell digital downloads online.

How can engineers generate passive income from home?

You don’t necessarily need to say goodbye to your engineering career to receive passive income. Passive income is usually taken as a side hustle that can earn you an extra amount of cash to regain financial freedom. You can start small by creating a high-yield savings account or purchasing bonds. Both are great ways to generate passive income for engineers.

Takeaways

If you’re racking your brain on ways to make passive income as an engineer, these ideas will get you started! Think outside the box and focus on what you love.

You don’t have to do something engineer-related. If you want something to take your mind off work, enhance your portfolio with real estate investments or buy royalties. If you’re looking for something fun, be a high-value collector or sell items on eBay or Etsy.

The sky is the limit when it comes to making passive income today!

Further Reading