Making Money On The Road: Top 5 Passive Income Ideas For Travelers
Picture this. Maybe you’re walking on a peaceful, warm beach, or sipping a beer outside your tent in a majestic forest. You’ve been on the road for a week or two, and you’ve got no plans to head home anytime soon. That is, if “home” is still a place for you! Suddenly, your phone pings. It’s a deposit into your bank account, a fresh infusion of cash to keep your trip going. But how? You haven’t sat at a desk or clocked in for weeks! It’s the magic of passive income, liberating you from your day-to-day job and expenses. But how can you make money like this when traveling? Join us as we take a closer look at the best passive income ideas for travelers.
What Is Passive Income?
First, let’s get one thing out of the way. There’s no such thing as completely passive income. At some point in the process, you’ll either need to trade your time, money, or expertise in order to buy or create an asset that produces income in a mostly passive way. For example, you can certainly earn quite a bit of passive income from stock dividends. But you’ll still need to work at a job to earn the money to buy those stocks. Alternatively, you can also make a good deal of money passively by writing a book. However, you’ll need to put in the time and energy to create that book before it ever pays you a cent.
But for our purposes, passive income will mean any income that continues to accrue to you with little to no ongoing, daily work on your part. Put another way, passive income breaks the direct link between the time you spend working and the money you receive from that work.
How Passive Is It?
There are varying levels of “passivity” when it comes to income.
As we’ve noted, stock and bond investing is a popular passive income stream for many people. This is at the very passive end of the spectrum, as a sound investment strategy doesn’t need much more attention than a quarterly review to make sure things are on track.
On the opposite end, you have something like running a dropshipping store. This “passive” income idea is actually running a small business. While you can eventually automate nearly every aspect of an e-commerce store with personal assistants and other freelancers, it can be difficult and time-consuming to build a business worth scaling up in this way. In the meantime, you’ll need to mind the store on a day-to-day basis. Still, this can still be considered relatively passive income, as your potential earnings aren’t limited by the number of hours you work in a day, only by the success of your business.
How Can Passive Income Help Me Travel More?
Once again, it all comes back to breaking the link between the time you spend working and the money that shows up in your bank account. For most people, your income is directly tied to you showing up to work, or completing a certain project or task. You’re trading time for money, on a linear basis. You make X dollars an hour or year or project, and can work Y hours a day, meaning your earnings can only be Z, unless you find a way to make more or work longer hours.
The beauty of passive income is that you continue to earn it, without necessarily even having to pay attention to it. Whether you’re sleeping, flying, or lounging on a beach, your stocks dividends are still accruing and you’re still earning rent on a rental property. Even better, you may only need to spend a few minutes or hours per week monitoring or working on your passive income, which allows you to scale. Scaling is another key concept for passive income travelers to understand. If your time investment is minimal or non-existent, you can set up two, three, or more various passive income streams, all of which will work simultaneously and diversify your income away from one source.
In the simplest terms, passive income unchains you from the desk or takes you away from the job site, while still providing the financial support you rely on.
5 Best Passive Income Ideas For Travelers
Travelers live a different lifestyle than normal people, especially those who hit the road for long periods of time or are permanently nomadic. And when it comes to passive income, frequent travelers also have their own needs and requirements as well. Here’s our list of the top passive income ideas for travelers.
#1 Passive Income Ideas For Travelers – Real Estate
Real estate is one of the top passive income ideas for travelers and non-travelers alike, and for very good reason. Depending on your financial and living situation, there are numerous ways to use real estate to generate passive income for traveling. If you’re a current homeowner looking to travel for an extended period, explore whether it would be possible and financially worthwhile to rent out your home while you’re gone. In many cases, you can cover your mortgage and expenses and still end up with a few hundred extra dollars in your pocket at the end of every month.
For homeowners (or even some renters) who are only looking for money for occasional trips, try renting out your space with Airbnb, VRBO, or other short-term rental services while you’re gone, if your living situation allows it. These can be extremely lucrative options, depending on your home and location. Imagine taking a weeklong trip where your accommodations are entirely paid for by someone else staying in what would have been your empty house or apartment!
Real estate investing is also an excellent passive income option, albeit one that can require significant amounts of money to get started. Buying a pure investment/rental property will require at least a 20-25% down payment, plus closing costs and any repairs or upgrades necessary to rent it. This can easily reach or exceed $50,000-100,000 in many parts of the country. However, those who don’t currently own property or have a rentable space can still take advantage of real estate investing with lower up-front costs.
House Hacking
The lowest cost way to get started in real estate investing is through what’s known as “house hacking.” The term can refer to several different strategies, all of which leverage the benefits given to owner-occupied properties and mortgages.
1. Buy a single-family home, live in it yourself, and then rent it at rates that exceed your mortgage and associated costs. This technique takes advantage of the lower down payment advantages given to homes you’ll live in. Because you’ll be occupying the home (at least to start), you’ll be able to put down as little as 3.5% (or potentially less, in some circumstances)! While you’ll have to pay more on a monthly basis, it can lower your initial costs by tens of thousands of dollars.
In this strategy, you’ll live in the home for a set period of time, usually a year. During that time, you’ll be able to enjoy the privacy of your own home, and spread out any costs for upgrades or repairs, rather than taking care of them all at once. Afterward, you’ll move somewhere else, and convert the original property into a rental. In most cases, you’ll be able to continue paying your current mortgage without any additional financing or down payments.
2. Buy a single-family home, and rent out individual bedrooms at rates that, in total, meet or exceed your mortgage and other housing costs. In many markets, it’s possible to buy a 3 or 4 bedroom house, rent 2-3 of the rooms you’re not living in, and live for free or make a small amount. This can be an especially attractive strategy to younger people who might be living with roommates anyway.
However, you’ll also need to consider that you’ll be sacrificing privacy in exchange for the financial benefits. In even in the best-designed group houses, you’ll generally share a kitchen and living area, and in many cases a bathroom as well. Still, you’ll eliminate or heavily reduce your largest expense (creating a de facto income bump), or hopefully generate money each month.
3. Buy a small multi-unit property, live in one unit, and rent the rest at rates that meet or exceed your mortgage and other housing costs. This option is among the rarest to find, but can also be very rewarding if done right. You’ll need to find a 2-4 unit building (any larger makes financing complicated) and purchase it with a low down payment, owner-occupied mortgage. You’ll live in one unit, and rent out the others to reduce/eliminate your housing payment, or create cash flow. Even better, if you’re not satisfied with the living conditions long-term, you can move out after a year or so and rent your former unit, increasing your property’s income even further.
This option offers the benefits of your own private space, plus the upside of immediate income or reductions in your housing expenses. The downside is that, in many parts of the country, there’s simply not that many of these buildings to go around, and they frequently sell at inflated prices. But if you can find one, it’s an excellent strategy to use leverage to quickly create passive income.
Beyond the income benefits of real estate investing or house hacking, buying real estate also helps generate long-term wealth through monthly loan paydown and the many tax advantages given to property owners.