Passive income is an excellent source of supplementary funds. It helps you boost your regular income and it is essential for funding during recessions and tough times. For instance, passive income can keep afloat when you lose a job or when your regular income fluctuates.
What is Passive Income?
Passive income is the money you get from other sources other than from your contract or employer. For passive income, you do not have to actively participate to earn it. It can be from rental properties or a business that you don’t take part directly to run it.
Sources of Passive Income
Getting passive income is not a walk in the park. You need to do a lot of work and commit your time and money before it can start generating revenue. The following are some excellent sources of passive income in Africa.
Affiliate marketing is a great way for website owners and social media influencers to make money. Affiliate marketing involves the promotion of third-party’s products or services through a website or social media. You need to place an affiliate link to a product and anyone who buys that product using that link, you get a commission.
You need to have significant traffic to your website before you can start generating passive income through affiliate marketing. If no one buys a product through your link, you won’t earn even a cent.
Dividends from Stock
Buying a stock or equities is simply buying a share in a listed company. You can buy shares in companies listed in a stock exchange in your country such as the Nairobi Securities Exchange in Kenya and the Johannesburg Stock Exchange in South Africa. You can also invest in foreign stocks.
Once you become a shareholder in a company, you will be getting some dividends from the company from time to time. Dividends are paid based on shares owned. Therefore, if you have more stock, your dividends will be higher.
However, buying stock poses some financial risks. You need to investigate companies you want to buy stock from. Look at their financial statements and their dividend payouts over a couple of past years. Make sure that the company is profitable enough since dividends are paid on profit shares.
A savings account is a source of passive income. You need to deposit your money in a savings account and watch while you earn interest. You need to find a bank offering high-interest rates. Also, to get significant interest, you need to deposit large amounts of money.
The only risk of savings account is when the economy is weak and interest rates reduce. Also, when the economy is weak, the amount of payouts is greatly affected by inflation. Virtual banks can offer higher interest rates than traditional banks. Some banks such as Zanaco Bank in Zambia allows you to open a savings in a stable currency such as USD.
Real Estate Investment Trust (REITs)
Real Estate Investment Trust is a name given to companies that own and manage real estate. The companies pay dividends to investors. The advantage is that they get to pay less corporate tax if they can give their shareholders significant dividends.
You get passive income from REITs the same way individuals get dividends from listed companies. As such, you will be getting funds based on what the REITs payout. You can invest in publicly traded REITs through a broker and non-traded REITs through a broker or financial adviser.
You need to find a good REIT, and that means you need to analyze various companies. You could lose a lot of money by selecting a bad REIT. Generally, REITs have higher returns and lower risks.
There are many ways to earn a passive income through blogging. You can generate a passive income from a website through affiliate marketing, sponsored content or displaying ads. You can use Google AdSense and Ezoic to display ads, while you can use ShareASale for affiliate marketing.
You need to invest your time to work on content for your website before you can start monetization. You need a lot of traffic to make a significant income. Also, you need to provide quality content to your audience.
Some of the richest Nigerian bloggers who made millions of dollars in 2020 include Jide Ogunsanya (net worth $3 million), Linda Ikeji (net worth 3.2 billion), Noble Igwe (net worth $2 million), and Uche Eze Pedro ($4 million).
Businesses are also sources of passive income. You can start a business while you work in your place of work. Alternatively, you can start a business before getting a long term or contractual job. Once the business is up and running, you do not need to be involved in it. You can hire people to run the business while you work.
The risk of it is that you can employ people who can run down your business. Hiring the right staff is critical for the success of your business.
Royalties from Music and Videos
One of the excellent ways of making money online is through royalties. If you are a musician, you can upload your music on YouTube and other monetization platforms such as TuneCore and CD Baby. When people play songs or download your music, you will get paid.
You need to research and find the best monetization website where you can sell your music and videos. For instance, if you are a musician in Kenya, you can get royalties from the Music Copyright Society of Kenya (MCSK).
If you have some rental buildings, you can let them and start earning passive income monthly. Investing in buildings is capital intensive; hence, you will need to invest a lot of money to buy land and build rentals before you can start getting some income. Rental income has proved successful, especially with the high demand for rental houses in urban areas.
To start investing in a rental building, you can get a mortgage to help you finance the project. However, you need to consider the risks involved, like getting tenants who pay rent late or damages property.
You can also enter into a contract with owners of unfinished buildings. You finish the building, then you put them on rental for a specific number of years until you recover your capital and profit. You can also build on land whose owner doesn’t have the financial capacity to develop it. Once you recover your investment, the land owner takes charge of the building. This method is becoming quite popular in countries like Zambia and Namibia.
Having a source of passive income is a great step. Among the benefits of passive income is that you get a boost to your income and it can help during a recession. However, you need to invest in time and capital to create a stable source of passive income. Once it is up and running, you do not need to work on it to get an income continuously.