Passive income is a highly sought after revenue stream, people attracted by the idea of doing nothing to earn money. Well, I’ve got good news and bad news.
The bad news is that the word “passive” is a little bit misleading. Long-term, you are unlikely to have to put much work in when it comes to passive income, but whatever road you choose you will be required to put in some time/money/effort to begin with.
The good news, however, is that you can often set up multiple sources of passive income. That means the effort you put in at the start will more than pay for itself, and your passive income will be supplementing your main income before you know it.
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What is Passive Income?
Passive Income is any income that you aren’t actively working for. You might have done the work in the past, such as writing a book, and your passive income is the royalties you continue to receive from publication. It can also take the form of investments, where you don’t have to be present to earn money. Essentially, you continue to earn money even after your work is complete.
It is important to remember that passive incomes often require a lot of work or investment upfront. Further down the line, they will become easy sources of income which you can take a step back from, but setting everything up right in the first place is the real key to making money through passive incomes.
Here’s a list of things you can do to start earning passive income.
- Invest in Dividend Stocks
Stocks are a common option that comes to mind when people think about passive income, and that’s because it’s so easy to do. A dividend is a regularly paid portion of a company’s profits which is paid to the company’s shareholders. Granted, you have to do plenty of research into what stocks you want to invest in and have to invest a significant of money in the first place to make it worthwhile, but it can provide you with a significant return too.
- Invest in the Stock Market
The other way to invest in stocks is to play the stock market. Although this could take up a lot of time, using something called a “robo-advisor” means you can automatically invest in stocks, rather than doing it manually. A robo-advisor will ask you some questions as you set up your account, but the system will take care of everything or you after that. There’s a lot of different robo-advisors out there, and our investing for beginner’s guide can help you figure out which one will work for you. You don’t have to invest much at a time as investing in the stock market is a long term game, but the more you can invest, the greater your return will be. M1 Finance is an excellent robo-advising service, a great way to start investing.
- Rental Properties
One of the most common passive incomes out there, owning rental properties is an incredible way to supplement your main income – especially if you outsource any of the running and management responsibilities. There are a lot of ways you can invest in rental properties, from becoming a limited partner in commercial properties to buying homes and becoming a landlord. Of course, some will end up being more hands-on than others, no matter how much you outsource, but it does mean you can find the method that works for you. DiversyFund makes it easy to buy shares in a portfolio of fully vetted, multifamily real estate — a low-risk type of real estate.
- Storage Rentals
An alternative type of rental property is storage rentals. People always need more space, so all you have to do is get your name out there, marketing your storage space to people who need it. This works best if the units are self-serve, allowing people to let themselves in and out without you needing to be present. Rent out your unused space to store your neighbors’ belongings at Neighbor.com
- Invest in a Real Estate Investment Trust (REIT)
If you’re concerned about investing directly in real estate – and when the market isn’t the most reliable, I can understand your hesitation – you can still earn a passive income from real estate through REITs. A REIT is a company that owns (and usually operates) commercial real estate, including offices, apartments, and shopping centers. By investing in a REIT, you can earn income as they do, from rent charged to tenants or sales made on the property. DiversyFund is a great way to get started with REITs.
- Invest in a Business
Another way to invest your money is in a business; you don’t even have to do work if you invest, becoming a silent partner and investing only your money, not your time. This can be a risky option as you need to have a solid understanding of whether the business you want to invest in can make you money in the long term and for that, you need an understanding of the business itself. As you might expect, there are tools that allow you to anonymously loan money to a business, without needing to be involved in the decision of which business to invest in. If this is a route you’re interested in, take the time to investigate your options before investing and putting your money at risk.
- Peer to Peer Lending
Peer to Peer lending, also known as P2P, is the practice of loaning money to borrowers who typically don’t qualify for traditional loans. There are certain platforms through which you can do this safely, and, as the lender, you have the ability to choose which borrowers your money goes to, as well as spreading your investment. All of this helps to mitigate the risk you face in lending out money. Your income comes from the interest borrowers pay on their loans. LendingClub is the leading peer-to-peer lending platform that has been around for more than 10 years.
- High Yield Savings Accounts
You may already have a passive income without even realizing it. Savings accounts are constantly making you money through interest. You don’t have to think about your money when it’s in a savings account, and unlike a lot of investment options, it’s always within reach should you need it. Whilst it might not create the biggest return on investment, finding the highest yield rate on the market will improve your return. Plus, it can’t be denied that it’s an incredibly safe way to create passive income. CIT Bank’s Certificates of Deposits secure high-interest rates when you agree to leave your money untouched until the CD matures.
- Annuities
Annuities are an insurance product that can provide passive income for life if you’re able to pay the high fees to begin with. They really are an investment, and the terms vary depending on where you purchase them from. If this is an option you’re interested in, make sure you do your research, or even talk to a trusted financial advisor about what the best path is for you. It’s certainly a passive option, and you’ll get the money in the form of reliable monthly payments, but it’s also a high-risk option due to the high cost of purchasing annuities in the first place.
- Sell an eBook
Self-publishing is bigger than it’s ever been. In fact, Amazon has made it easy to self-publish and sell on their website, without needing a whole team behind you. Of course, in order to earn a passive income off a published book, you first have to write and edit it. You’ll probably have to market it too. So this one does require a fair amount of work upfront, but if you can write a quality book and find the right market, then it can stay on Amazon’s system and earn you money without you having to hold onto the stock or pay to print new editions.
- Sell an audiobook
If you’ve already put the work into creating an eBook, why not get it out there in a new format? Audiobooks are a really accessible way for people to read your book, and with platforms like Audible, audiobooks are becoming more and more popular. Whilst recording an audiobook can require just as much work as writing the book, you could outsource the recording of the book itself – which would be an onetime cost – and then sell the audiobook. Audiobook Creation Exchange is a great place to start if this is something you’re interested in.
- Design T-Shirts
As with books, so too with t-shirts. There are sites out there that allow you to upload your custom designs and apply them to T-shirts (and more!) for people to purchase. If your design sells well, you can earn royalties every time someone buys it. There are specific websites for this, such as Café Press or Teespring, but it’s another one of the many services Amazon offers. Amazon Merch will take care of production, packing, and shipping on your behalf.
- Sell Stock Photos
Whilst you might think of stock photos as things that just seem to exist, born in the aether, and appearing when you need them, the truth is that somebody has taken those photos and uploaded them to the internet for others to use. Stock photos are normally bought from (shockingly) stock photo websites. If you enjoy photography and have the ability to take quality photographs, you could submit photos to these sites and receive a commission when somebody purchases one of them. Shutterstock is a platform where you can easily sell your stock photos.
- Create an Online Course
Sites such as Udemy have an incredible offering for somebody wanting to learn a new skill. Whilst this could lead you to a method of passive income, it is in itself a source of income for many. On Udemy, you can create your own video course and set the price for users to purchase it and learn from you. If you’re knowledgeable about a particular subject – especially something niche – this is a great way to earn passive income. All you have to do is produce the videos and upload them to Udemy!
- Make an Online Guide
If you don’t want to get involved with another platform or already have an audience you can market to, an alternative is to create your own online guide. Essentially you take all your knowledge on a topic and put it into one big guide that people can purchase from you. It’s partway between writing your own eBook and creating an online course! This can also lead to passive income through affiliate links (check number 25) or website memberships if you have an online following.
- Sell Digital Files on Etsy
Similar to selling t-shirts, if you’re into designing your own artwork you should check out Etsy. Etsy is full of creative designers looking to sell handmade objects – but you can also sell digital designs. Whether you create full printable artwork, monthly planner pages, or sewing patterns, all you have to do is create the designs and upload them onto Etsy. You could go further than this and market them on your own social media, but this step isn’t necessary unless you think people you’re connected with would be interested in buying from you. As an artist, this could be an amazing source of passive income.
- License Music
On the other hand, if you’re a musician you could earn passive income on the back of music licensing. Similar to sites full of stock photos, there are sites where you can upload your music, allowing people to browse through it and purchase it as and when they need it. Music is often licensed for adverts, but YouTube videos and podcasts are always in need of original music too. If you like creating your own music, you may as well see what money you could earn off the back of it.
- Buy Royalties
An alternative if you’re not musically minded is to buy royalties. Whether you wrote the music or not, your ownership of it means that you will earn money any time it is used. The website Royalty Exchange is an American platform that facilitates the buying and selling of royalties. The effort on your part if finding and buying the music you think other people will want in the future; after you’re initial purchases, it’s as passive as can be.
- Create an App
Although this definitely requires some serious coding knowledge (or the ability to hire someone who knows what they’re doing), creating your own app is a great way to earn passive income. Think about how many apps you’ve downloaded – and how many ideas you’ve had for improving existing or creating new apps. Well here’s your opportunity!
- Download an App
If you don’t feel like you could create your own app, you can always download apps in order to get paid. Whilst these apps often track what you’re doing and record and sell this data, it could be the most passive option on this list. If you’re okay with that, all you have to do is download the apps and leave them to run in the background. Swagbucks is a platform where you get paid to download apps.
- Advertise on Your Car
Advertising on your car is passive in so much as you’re going to be driving around anyway, so why not earn money from it? There are a couple of options when it comes to car advertising, such as Carvertise or Vugo and all you have to do is apply the wraps to your car and drive around as usual.
- Become a Rideshare Driver
Okay, so it’s not the most passive income if you’re going to be a driver for a company like Lyft or Uber, but you can make it work for you! You can set your own schedule, choosing when you’re available to drive people or if you want to set your availability only along a certain route. This means you can only pick up passengers on journeys you’re already making, meaning it just about qualifies as passive income.
- Rent your car
As we talked about in our post about side hustles, the average car sits idle for 22 hours a day. If you know that your car is one of those that could be used more than it currently is, you can list your car and earn money from it when you’re not using it. Sites like Turo allow you to safely advertise your car to people, meaning it could be providing you with a passive income even as you work for your regular income.
- Rent your Parking Space
On the flip side of an idle car is an unused parking space. Whether you simply don’t own a car or want to rent out your parking space for all the time you’re not using it, there are websites that can connect you with drivers looking for parking spaces. CurbFlip and Spot Hero are both websites that help you rent out your unused parking spaces.
- Rent your Stuff
You know those objects that you keep all year but only use once or twice? The camping gear or ski equipment? It’s the kind of thing that you don’t want to get rid of, but it could definitely be more useful to you. With Peer Renters you can rent out all that expensive equipment to other people who want to test out your hobby or are going on holiday and need a tent to sleep in. And don’t worry – there’s a security deposit option to ensure your equipment is returned to you in perfect condition!
- Rent your Spare Room or Space
If you have a spare room, it could be worth listing it on Airbnb or VRBO (formerly HomeAway) in order to start earning money on it. This is one of the most passive incomes out there as you already own the space, all you have to do it list it and clean up after you’ve had guests.
- Affiliate Marketing
We explored affiliate marketing in our post about side hustles, but the truth is that after you put up your affiliate links – whether on your blog or YouTube channel – they become a source of passive income. You earn commission on each sale from your affiliate link, so once the link is up, you can sit back and relax.
- Network Marketing
Network marketing is a business model that requires tiers of salespeople, each recruiting their own network of salespeople. Whilst this method will require upfront work from you in creating the tier beneath you, once you have enough people (who each create more salespeople on a tier beneath them) you will earn a commission from each sale they make. Anyone beneath you (“downline”) actually contributes to your income.
- Start a Blog
Blogging can be a long-term commitment, but plenty of people make money from it. Essentially you make engaging content for people, driving traffic to your website, and monetizing that traffic through ads and affiliate links. The more niche your website focus is, the better. Essentially, you want to pick a subject that not many people online talk about to ensure that anyone searching for that topic will find your site rather than somebody else’s. The best way to make this passive is by writing a lot of blog posts before/when you first launch your blog so that you have content to post for a long time after launch. If you’re looking to launch a blog, try LiquidWeb’s managed WordPress hosting – they’re offering a free trial.
- Buy a Blog
A much shorter process is to buy an already successful blog. Rather than having to build up your own blog and gather an audience over time, it’s all done for you. The more passive option of the two, it will require money upfront instead of time but saves you the effort of having to market the blog and gather traffic. Check out GoDaddy’s Auctions to see for available blogs and URLs.
- Online Arbitrage
The official definition of arbitrage is: the simultaneous purchase and sale of an asset to profit from a difference in the price. This can be summarized by the phrase: by low, sell high. That’s the general aim of arbitrage. Of course, it’s much easier to say that than to follow through and manage it. Online arbitrage definitely requires a little patience, but it’s also a great passive income when it works. Whether you sell on Amazon or eBay, or any other selling site really, you need to be aware of the trends and best sellers on that site, and then buy and sell accordingly.
- eCommerce
eCommerce can be about as involved as you want it to be, meaning it can be as passive as anything else on this list. To make it passive, focus on re-selling items rather than selling anything you have to invest time in making or designing. You can use sites like Shopify to create your own platform, but eBay, Facebook Marketplace, and others of the same caliber work just as well as a selling platform.
- Vending Machines
Vending machines are located all over the place and used regularly by all sorts of people. Whilst refilling them makes this a little less passive than other options, you simply have to schedule this in every couple of weeks. For you, refilling your vending machines is a one day job every two weeks, but those two weeks will be filled with people buying from your vending machine, earning you a lot of money for a day’s work.
- Become an ATM Vendor
Becoming an ATM Vendor sounds like it would be a lot harder than it is in reality. Granted, it could be a bit of legwork at the beginning as you need to locate a company that will allow you to place their ATMs at various locations. If you keep your eyes open, you’ll probably spot places that could benefit from an ATM or two. Once you’ve placed it, you can earn a small percentage of the income that these generate. It’s not the most passive option on this list, but when ATMs can charge upwards of $5 per transaction, it’s definitely a money-spinner.
- Eating Out with Seated
Yes, you really can earn passive income by eating out. Using Seated you can get up to 30% back when you dine out, simply by booking a reservation through the app and going to eat at the restaurant. I know, it sounds too good to be true, but it really works.
- Cashback on credit cards
Cashback credit cards are a great way to get some passive income, with rewards ranging from 1-5% of the amount you spend. If you’re going to be out spending the money anyway, why not use the opportunity to earn back some money as you do? There are usually a variety of instant rewards and longer-term point collecting, so think about whether you want to save up your rewards, or invest them in other passive income sources. With the free Experian Boost program, you can increase your credit scores fast. The higher your scores, the more likely you are to qualify for loans, mortgages and credit cards at the most favorable terms, which will save you a lot of money.
- Cashback Sites
In the same way credit cards provide cashback rewards, there are platforms online that help you earn cashback when shopping online. Perhaps “passive” is the wrong word for this source of income, but when you’re shopping online for yourself…well, it hardly feels like work, does it? Check out MyPoints, its members get up to 40% cash back with every purchase at 2,000 top retailers.
- Display Ads
Display ads are all those banners and pictures you see on every site you visit. You’ll scroll past them all the time on social media, probably without thinking too much about it. However, you earn a passive income through display ads by offering ad space on your website or blog. There are display ad networks that will more or less automate the process of filling the ad space you provide, allowing you to step away from the details. Check out platforms like Monumetric or Mediavine if this interests you.
- CDs
A certificate of deposit (or CD) is a product offered by banks and credit unions that provides an interest rate in exchange for the customer agreeing to leave a deposit untouched for a predetermined period of time. There can be penalties attached for early withdrawal, so you need to be certain you can put this money aside for the assigned period of time. As long as you’re okay with that, then you’ll be earning passive income on the money you’ve put away. Check out CIT Bank’s Certificates of Deposits.
- Take Part in A Sleep Study
There is so much research surrounding sleep and the effects of changing sleep patterns; researchers are always looking for healthy participants for their studies. You can be paid for every step of the study, and whilst the evaluations that tend to happen before you qualify for the studies may not be passive, the research itself is done whilst you sleep – and what could be more passive than sleeping on the job?
Some of these methods are more passive than others, but using a combination of them can provide you with a great source of passive income. Remember, nothing is truly “passive” and will require some effort or monetary investment from you in the beginning, but passive income is all about focusing on the long term return you’ll receive.
