Imagine a world where making money is not limited to the hours you spend at work, where you could make up to $150,000 a year without doing anything. This fantasy world can become a reality via passive income. Here are the three best passive income streams that might turn your world into that dream world, whether you pursue them alongside your day job or turn them into full-time businesses.
The Truth about Passive Income
It’s important to note that there is no true passive income or best passive income stream. In fact, the three investment passive income streams we have today all require some time and effort, at least early on, before they start generating income, and you’ll understand that more clearly as we go through them one by one. If you’re ready to put in the effort and then enjoy the results of your hard work, here are three passive income investment ideas.
ATM Machines
How to Get into the Business
You might not even know that anyone can set up their own ATM, but it’s actually a very simple process. You can get into the ATM business by googling ‘’ATM machines for sale’’ and either buy a machine for about $2500 to $3800 or lease it for between $75 and $150 per month. In the ATM business, you make money from ATM transaction fees. ATM fees hit an all-time high in 2023, reaching an average of $4.73 per transaction.
From the perspective of how lucrative the ATM business could be, if only ten people used your ATM every day, that’s $1,419 a month or $17,028 a year, and if you increase the number of your machines over time to ten machines, that’s $170,280 per year. Therefore, here’s the step-by-step guide for starting an ATM business.
First, you would need to decide where to put your ATM machine. You can’t just install it in any location and call it a day; in fact, you need a location where people actually use cash and would need an ATM machine to withdraw cash. Consider places like barber shops or bars, where people often pay or tip in cash. Gas stations and restaurants are also good locations, where most people also pay in cash.
While all of these locations are suitable, some are better than others. For example, you could have an ATM at a restaurant earning $400 a month and another at another restaurant earning $1,000 a month. To pick a good location, you could start by simply googling something like “barber shop near me.” This way, you could look through multiple locations. Some businesses on Google Maps (NASDAQ: GOOG) say that they’re cash only, so you could prioritize targeting them.
A good tip is to look at the amount of Google reviews and ratings, so you’d be able to get a good idea of how much foot traffic this place gets. Businesses with 100 reviews or more could make a good place to start. Then, you’d want to check pictures of the business online. Businesses often have pictures of their entire locations, so you’d be able to see if they have an ATM or not. If you can’t be sure, you can visit the business yourself, speak with the owners, and ask them if you can set up an ATM machine on their premises.
If you’re wondering where you can buy an ATM, you should know that many companies, including National ATM Systems and ATM Global, actually specialize in selling these ATM machines. Let’s say you entered into an agreement with one of these companies to buy a new ATM for $2,500 then the company would have to first do a background check on you to make sure that you don’t have a history of fraud or anything like that, which is a process that could take two or three days.
Once that’s done, they’ll deliver the machine to you, which could take a week or two, depending on where you’re located. Some companies offer to install the ATM machine for you for a fee, which differs from company to company. ATM Global, for example, installs an ATM for you for around $300 to $350, so make sure you ask about the fee before you buy anything. If you’re a beginner in the ATM business, you might want to have the company install the machine. You can watch them do it and learn how to do it yourself so you can save on that fee if you decide to invest in another ATM machine. You can also get your own technician to install it for less money, but stick with the company if you don’t want to risk it.
Aside from helping you install the machine, these companies also provide you with a notification system so you’d know when you need to fill up your ATM again if it runs out of cash or how many transactions are made using your ATM. This system also allows you to see your profits from the ATM machines in real-time. After installing your machine, you need to connect it to the internet to make it work. You can do that by asking the business you set up the ATM machine at for its WiFi password, and if you are a great salesman, you get it for free if you convince them of the benefits of having a machine in their location.
Suppose they don’t have WiFi or ask for a fee to use their internet. In that case, you can always ask the company that installed the machine for you to connect it to the internet, but keep in mind that they usually charge a fee of 25 cents or more for every transaction made on your ATM. Now, you should be good to go, and the only thing you really need to do is make sure your ATM machine doesn’t run out of money. Most average retail ATMs you would see in a convenience store or a gas station hold between $16,000 and $24,000 at a time, but you don’t actually have to put in this much money upfront. In fact, you can actually put in less. You can actually start by putting $1,000 or $2,000 in your machine. Just be sure to quickly fill up your ATM machine if it runs out of cash.
The Importance of an LLC
It’s important to note that the money that gets withdrawn from your ATM eventually gets back to you. For example, if a person uses your ATM to withdraw $50, and you set a surcharge of $4, that person pays $54, and this sends a notification to the bank, so the bank moves $54 to your business bank account, and you’d earn $4 on that transaction.
This means that the money basically recycles, so you don’t need to borrow money and get into debt to start your ATM business. Just use the money you already have in your personal bank account. If you want to profit from your ATM business, you must set up a limited liability company or LLC. Depending on your state, this will cost you $500 or more, so it’s important to research your state’s regulations and requirements.
If you’re wondering why you need an LLC, you should know that answer lies within the definition of an LLC, which is basically a business structure that protects its owners from personal responsibility for the LLC’s debts or liabilities. This means that if your ATM machine goes haywire for any reason or you get sued for any other reason, your personal assets, like your car or your house, get legal protection. Of course, there are limitations to this protection, so you might want to talk to an attorney first.
If you feel like this is too much and you need some extra help, then you can check out companies like ZenBusiness and Bizee, which offer LLC filing services and can get you started in just minutes after answering any questions you have. Aside from the legal protections, connecting your ATM machine to an LLC business account could actually help you get tax benefits. The IRS considers ATM fees and other bank charges tax deductible for business accounts.
Having an LLC can give you more credibility, and businesses will likely trust you more if you’re backed with a business. If the business already has an old ATM, you could tell them you’d install brand new ATMs for free. This could actually work out better for you, since businesses that already have ATMs know how ATMs help them, and they have nothing to lose by replacing an old machine with a new one.
You could even try to undercut the commission the owner of the old ATM pays the business; this way, you’ll be guaranteed to get a deal and sign a contract with them. You can find examples of these contracts on atmmachines.com, but it’s wise to let an attorney review the contract beforehand. You should also make it clear to the business owner that you plan to trial the ATM machine for three months before you set it up permanently. This way, you can remove the machine and move it somewhere else if the location doesn’t do well.
However, if an LLC still sounds too expensive, you can get the backing of a merchant service company that will handle all of your ATM transactions. One good company for this is Payment Alliance International, which won’t take a huge portion of your surcharge fee, but you will have to do a lot of paperwork.
Things to Consider First
After walking you through the step-by-step process, it’s important that we walk you through some things that you should consider before buying an ATM. If you want to get into the ATM business, then make sure to buy or lease a new ATM rather than a used one. You might be tempted as used ATMs being sold on websites like Craigslist are much cheaper, but you should be careful because some people sell ATMs just to steal its users’ credit card information.
In fact, some used ATMs could have software installed that sends the card information of everyone using the ATM back to the person who sold you the ATM. So, if you don’t want to get dragged into a credit card fraud investigation, get a brand-new ATM. There’s also the danger of filling your machine with money. You should always be aware of your surroundings when you do this, and if you don’t feel safe, go away and come back later.
Another thing that’s worth considering is the extra costs that come with owning an ATM machine, such as the regular maintenance costs, the internet costs, or the costs of any documents like the documents needed to register an LLC, so it’s important to always account for costs and keep an extra amount of cash aside for any extra costs. With all of these costs in mind, you can get started in the ATM business for $5,000 to $6,000, accounting for the machine’s price, installation costs, LLC costs, and an extra $1,000 to put in the machine.
Vending Machines
The vending machine industry generates over $23 billion in annual revenue, and that’s enough reason to explore how to start a vending machine business of your own. The profits from the vending machine business vary. Some people make $300 a month from their vending machine, while others comfortably cross the $2,000 mark every month, here’s how to run a successful vending machine business.
How to Get into the Business
First of all, you should get an LLC. While some people online might argue that getting one for vending machines isn’t as necessary, we think legal protection is still necessary, because no one wants to lose their personal assets if their vending machine falls on someone and they get sued. Having an LLC will also allow you to reduce your taxes. For example, you can write off costs like the machine’s depreciation, inventory costs, and transportation costs. It’ll also make you look more reliable and trustworthy to the owners of the locations you want to do business with.
After that, you need to find a good location with a lot of foot traffic. Some good places for vending machines are malls, schools, or universities. Most of these locations could already have vending machines, so the trick is finding a location with old ones and offering to replace them with new ones or even offering a higher commission to the location owners to secure the deal. If this doesn’t work, you could look for locations that could use a vending machine but don’t usually have them. This includes warehouses with many workers, office buildings, or companies with a lot of employees. These two could be absolute winners since the owners of these places will find it more efficient to place a vending machine in the building rather than having their employees leave their work to get a snack, so they might not even charge you a commission.
The Types of Vending Machines
After securing a good location, you need to consider your options for vending machines. There are vending machines that are snacks only, drinks only, a blend of both, or even specialty machines like coffee vending machines or vending machines for fresh foods or healthy foods.
Specialty vending machines can earn you higher profits, especially if you put a coffee vending machine in an office building or a healthy snacks machine at a gym. However, these specialty machines also tend to be more expensive, and when you are just starting out, you don’t want to spend a lot of money on a fancy vending machine when you’re not certain if it’ll sell. You could get a combo vending machine that can carry snacks and drinks. Having variety could attract more customers. This type of vending machine accounts for a third of all vending machine sales in the U.S., so it’s a good place to start.
After you decide which vending machine to buy, you can go to websites like Vending.com and Samsclub.com, or even buy used or refurbished ones at a discount on websites like eBay. There, you could get a new vending machine for $3,000 to $10,000, or a used one for $1,200 to $3,000, depending on the machine’s size and features. Don’t just buy the cheapest option if you want to make good money using a vending machine. Try to invest in a machine that supports card payments and cash payments; it’d make a significant difference in your profits since many people don’t carry around cash. Also, try to buy vending machines that send you notifications about restocks, since that’d save you a lot of time.
Stocking Up
Now that you have your location and vending machine, you have to stock it up. You can go to a Costco and get snacks and drinks, but you need to do a lot of market research first. For example, you might want to stock up on Snickers bars, which are the number one snack preference for vending machines in the U.S.. As for drinks, the best-selling drinks in vending machines are Coca-Cola (NYSE: KO) and Pepsi cans (NASDAQ: PEP).
You can also check out websites like Alliedvending.com, where experts in the vending business talk about which snacks are more popular. Another trick that can greatly improve your vending machine business’ profitability is stocking only a few items initially. That way, you can find out which items sell the most and restock based on demand.
You also need to price your items correctly. In general, vending machine items are sold at double or triple their price in retail chains, but don’t try to set extremely high prices, or you’ll risk losing customers. For example, if you buy one 7.5 fluid ounce can of Pepsi from Sam’s Club’s website for $0.47, the general rule would make its vending machine price $0.94, and you can round that up to the nearest nickel and make it $0.95.
After doing this with all your items, consider them individually and consider if you could see them selling at this price. Ask yourself if you would buy an item from a vending machine at the price or for less or more. You can then adjust your prices up and down according to this, then adjust them again once you actually test your market demand. You can even make up for the low price of one item by upping the price of a more popular item. If candy bars don’t sell well in your vending machine and you can’t increase their price by $0.05 for people to keep buying them, bump up the price of your popular items by the same amount to offset that.
A good tip for stocking your vending machine is to go to the websites of the major drinks companies, like PepsiCo, Coca-Cola, or Snapple, and sign up for an account to become a partner. This would give you a lot of benefits you can’t get from buying from stores, such as scheduling big orders in advance and getting updates about promotions. Some of these companies even let you access their own vending machines if you buy enough of their products constantly, so becoming a partner is a good way to increase the number of vending machines you own over time.
Reduce Your Risks
Another really important tip is to get a toll-free phone number and put it on your vending machine. This would allow people using the machine to contact you if it experiences any problems, like an item getting stuck. This is definitely worth the hassle, since if your machine malfunctions while someone is using it, You might risk losing that person forever, and funnily enough, sometimes customers might get angry and attempt to get the machine to work by punching it or kicking it, which could wreck your machine. Avoid all of this by writing down a number they can call on the machine.
The Costs
Just like ATMs, vending machines come with a lot of costs. The average combo vending machine needs to be restocked from $200 to $800. This depends on the size of your machine, with a 152-slot machine needing $106 to be 70% stocked, and a machine with 315 slots would need $220 for the same percentage. Vending machines would also require you to pay electricity costs to stay running; an average vending machine needs around $25.95 per month, which changes depending on the size of your machine and the state you live in. For example, the price of electricity in California is 33 cents per kWh, while in Utah, it’s around 13 cents. Accounting for all these costs, as well as the cost of the machine, you’d need $4,000 to $6,000 to start your vending machine business.
Additionally, having one or multiple vending machines can be time-consuming, as you’d have to make multiple trips to stores to buy items and then to the vending machine to restock and collect the money. Meaning, this isn’t a true passive income, and you need to do a lot of work first before you reach the point where you can call it passive income.
The Endgame
If you manage to buy multiple vending machines and you want to keep them forever for passive income, that’s definitely a way to go. But, another route some vending machine operators take is building a successful vending machine business and then selling it on websites like BizBuySell.com. This is a website that business owners use to put their businesses up for sale, and owners of multiple vending machines are using it to sell their entire business for hundreds of thousands. In fact, there are people selling their business of 13 machines that make $150,000 a year for over $300,000.
This shows how there’s a lot of money in the vending machine business, but if you want an even more passive and less costly business, another type of vending machine requires much less work.
Bulk Vending
This one of the best passive income streams but not many people actually know about it. We all know the gumball vending machines that are usually found in supermarkets or malls. They are called bulk vending machines. You can buy these machines for as little as $100 on Candymachines.com. Place them in locations with high foot traffic, especially children’s, such as convenience stores or amusement parks. You can get a reliable passive income source for a relatively low cost.
These would require less work since you won’t have to research the types of popular snacks and drinks, meaning that you won’t have to worry about variety. All you have to do is buy gumballs in bulk, and fill up your machine when they are close to running out.
Rental Units
The final best passive income stream is rental units. For many people, rental units are the best passive income stream. Properties appreciate in value over time, require almost no upkeep once rented, and have been around since the beginning of time. In fact, the average month-over-month real estate appreciation rate in the U.S. is 2%, while the average year-over-year appreciation rate is 14%. In addition to that, having a rental property allows you to get tax deductions for costs like depreciation and improvements. They’re also a very profitable source of income, with landlords making an average of $10,000 annually per rental property.
However, buying a real estate property isn’t easy and is usually very expensive. If you’ve ever been fortunate enough to buy a property, then you know that finding the right property takes a lot of time, research, and multiple visits to evaluate it. Real estate transactions also take a long time to close, and the fees you pay your real estate agent can be copious. To mitigate the high costs, if you want to own a property, you can get a housing loan from your bank and only pay 20% of the cost upfront. To give you an idea of how much that is, the median home price in the U.S. is $387,600, and 20% of that is $77,400, so it’s still a lot of money. Therefore, you must study the market conditions well to buy at a low price.
You can pay that much and get the property, then rent it and use the rental money to help pay off your mortgage each month. This way, you’d end up with your own property, which you can decide to rent or live in yourself. But, even if you own a rental property, the income you’d get from it isn’t really passive, since you’d have to deal with property management and tenant issues. Still, if you’re fortunate enough to be a landlord, you could hire a property management company to help reduce the workload.
Making Real Estate Passive
If you can’t afford to buy a property but still want to receive passive income from real estate for a much lower cost, while doing zero of the landlord work, Here are two tips.
Real Estate Crowdfunding
The first one is investing in REITs. Real estate crowdfunding allows you to buy shares in a property and receive returns from the sale of the property based on the amount you invest. It works just like buying shares in a company in the stock market.
Additionally, the property doesn’t have to be sold for you to receive profits since real estate crowdfunding also offers profits through property rentals, which guarantees passive income. You can get started on any real estate crowdfunding platform, such as RealtyMogul, Yieldstreet, Fundraise, and others, that set a minimum investment of $1,000 to $5,000, so it’s much cheaper than buying a property.
Tokenized Real Estate
If you’re more techy, our tip is to get into tokenized real estate. It works by linking real-life properties to blockchain tokens, making buying, selling, and owning real estate easier since it all becomes digital. It also works in the same way as stocks, meaning that owning a token of a property is equivalent to owning a share in it, and you can sell your token if its value increases as the value of the property appreciates to make money, or receive automatic payments from the rent tenants pay.
A platform that offers these services is RealT, and it works by taking 2% of the property’s gross rental income, and the remaining 98% is distributed to holders of the RealT token in the form of USDC, a digital coin pegged to the U.S. dollar.
Things to Consider First
Both real estate crowdfunding and tokenized real estate are sometimes open to only accredited investors, who are individuals who make $200,000 or more per year. While some platforms allow non-accredited investors, they would give you a lower return than you could get if you invested directly in real estate through ownership.
Also, real estate crowdfunding is an illiquid investment since many platforms have minimum terms, often a number of years, during which you’re required to keep your money in the investment. In other words, you can’t easily resell your investment as you might with a stock. On the other hand, tokenized real estate is more liquid since it’s basically digital ownership of a property.
The Bottom Line
In the end, we can say that all investments require some time and effort to yield fruitful results, even if many of them are marketed as investments that bring passive income and don’t require that much work. Both ATMs and vending machines require an early investment of time and money to work and be profitable. Still, it’s fine if you don’t want to scale them and just have them as side hustles, and if you can afford it, then owning a rental property could be the best choice for you, and if you can’t, then real estate crowdfunding and tokenized real estate both offer opportunities to invest in real estate without paying a lot of money upfront.
The most important thing to know is that all investments present a type of risk, and you can easily overcome that by doing your own due diligence and studying your target market well. You’d have to exert a lot of effort at first, but then you’ll be able to sit back, relax, and enjoy your money.
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