THIS IS PART 1 TO THE PASSIVE INCOME SERIES.
Before covering some of the best passive income ideas that you can use to automate your revenue, it’s important to understand specifically what the concept means and what it doesn’t. You’ll likely find countless posts on the web covering dozens of passive income ideas, whether online or in the real world.
When an income stream is passive, it means it requires little to no maintenance to keep the money flowing. Now, that doesn’t mean it can simply be completely ignored or forgotten about. It’s important to track every passive income stream and watch it like a hawk, no matter how automated it might be.
Best Passive Income Ideas
Below you will find all the passive income ideas I researched over the years (including the things I am doing to build my passive income stream). Some of these passive income ideas require more work than others upfront, and some of them come with financial risks that you will have to evaluate before jumping in.
I classified these money-making ideas by:
MONEY: the amount of money you’ll need to have to generate a significant passive income.
RISK: how risky this passive income idea is. This will also depend on your risk tolerance.
TIME: how much time you will need to put in, which could be research time at the beginning or actual work to set up your passive income stream.
GAIN: how much passive income you can generate. This is based on an average. Every passive income idea can generate an amazing gain (or very little if poorly executed, or if dependent on external factors).
This score, of course, is just based on my view and experience.
1. Invest In Dividend-Paying Stocks
What are dividends? Dividends are cash paid by a company to its shareholders.
When you invest in a dividend-paying stock, you are buying a share of the company and you literally become part-owner of that business. As the company grows and generates extra cash that it doesn’t necessarily want to re-invest, it might decide to return some of the extra cash to the shareholders in the form of dividends. And because you own a fraction of the company, you will receive a portion of the cash!
Dividend-paying shares can be an excellent tool for generating income, but make sure you do your research on the shares you buy as dividends are not guaranteed: if the company isn’t generating enough cash, it can cut or suspend its dividend.
2. Buy Index Funds And ETFs
If you have the capital to invest, but don’t have the time, knowledge or energy to get stuck in dividend investing, index funds and ETFs are a much easier alternative. Both index funds and exchange-traded funds (ETFs) track specific returns of a market index.
If you want your money working for you, you are looking for a simple approach and don’t want to play with risky strategies, this passive income stream might be for you.
It took us a long time to decide how to invest our money. I have always been terrified of investing in the stock market as I am the worst gambler in history. Then I discovered index investing and ETFs and I am converted. Last year my investments made a return of over 10%!
3. Peer-to-Peer Lending
Peer-to-peer lending means loaning money to other people. Specifically, you lend money to people who don’t qualify for traditional financing. Companies like Lending Club and Prosper offer returns in the range of 4-10%, which are a lot higher than a typical saving account. You will be able to select the right investment for you, based on your risk assessment strategy.
Make sure you do your research, as there is always a risk of losing your money.
4. Crowdfunded Real Estate
I love real estate investing, but it requires a lot of upfront capital plus you are going to have to learn to love your tenants (see point 6 below)! Crowdfunded real estate investing gives you a way to still invest in the real estate market, without having to necessarily put in a lot of money upfront. It’s definitely a much more passive investment than owning a flat or a house!
When you invest in crowdfunded real estate, you are normally funding loans, which are then used to buy and improve real properties, and you get paid for that.
With Crowdfunded real estate investment, you can get returns in the range of 7-10%, similar to peer-to-peer lending, but you have the actual house to back up the investment..
Please keep in mind that this is a new market, and there are risks to investing. Make sure you do your research before you dive in!
5. Invest In REITs (Real Estate Investment Trusts)
Another way to invest in real estate is to invest through a REIT.
A REIT is a company that owns, operates or finances real estate and allows anyone to invest in portfolios of real estate assets, the same way as stocks: you can purchase individual stock or exchange-traded fund (ETF). You can then earn a share of the income produced through the real estate investment without having to own, manage or finance a property.
A REIT offers capital growth and generally high dividend yields.
6. Open A High-Yield Account
We have been experiencing low-interest rates for years, and most bank accounts pay close to nothing for savings. If you have money sitting in your bank account, and you still don’t know how to invest it or prefer a no-risk investment strategy, make sure you pick the best possible rate for your savings.
You normally need to look at online banks to get a much better interest rate, but the difference can be massive. You can get up to 155x more than traditional banks! Do you think I am kidding?
Although the interests paid by Bank of America are extremely low, CIT Bank still offers over 25x the national average, which is unbelievable compared to the others.
Renting Things Out
If you own things, you might be able to generate residual income by renting them out. Taking advantage of things you already have is one of the best ways to make passive income a quick reality.
7. Invest in a Rental Property
This is one of my favorite passive income ideas! It’s the first one we explored and decided to go for, as we love houses and we do like to have a tangible investment. You will normally need some capital to invest and it will require doing quite a lot of work to find the right rental property.
Although a lot of people don’t really consider real estate rentals a passive business, it’s definitely more passive than going to the office every day! We have 1 rental at the moment and we are renovating the second one. Last year we generated over $14,000 net passive income (after mortgage payments and taxes) from one apartment, and all I had to do was go in to inspect the property 3 times to make sure the tenants weren’t destroying it! It turned out they kept it in perfect condition and they were lovely people! Call me lucky.
Every time we buy a rental, we renovate it to high standards to make sure it’s in perfect shape and won’t need much work done for quite a few years. If you want to make it even more passive, you can outsource the property management duties and maintenance tasks.
8. Rent Out Your Spare Room
What could be better than earning passive income from home? Earning passive income from your home!
If you own your house and have some extra rooms or you rent a place with some extra space, you can start earning money now with websites like Airbnb.
If you are renting, make sure you check with your landlord first, as you will need his/her permission to rent out the extra space for some cash.
How much you can make will depend on the location, the size and condition of your home, but this is definitely a way of earning money from space that might just be sitting there empty.
9. Rent Out Your Car, Bike or Parking Space
Got a car? A bike? A garage or an extra parking space? You should probably rent it out! Just like renting out a property, this will require some maintenance and work, but you can definitely earn some good money.
If you want to rent out your car while you are on holiday, or while you are not using it, check out this website:
If you have a free parking space, driveway or garage, post it on websites like Craiglist. If you live in a major metropolitan area, you will be surprised by how much you can make for your spot!
Investing In Digital Content Creation
If you don’t have savings and don’t own many things, you can still generate residual income by creating digital content. This normally requires more time upfront, making it a bit less passive than other ideas, but if you stick with it for long enough, you will be able to reap the benefits and generate real passive income streams.
10. Start A Blog
Really? Yes really! Blogging isn’t 100% passive and requires A LOT of hard work in the set up phase. Believe me, I did it! It took me 3 months before I launched to generate enough good content, and don’t trust anyone who tells you that you can create a money-making blog in a week!
But what I found out myself is that if you put in the hard work, and you are clever about what you write about, you can quickly generate traffic, and TRAFFIC = MONEY.
You can generate income by adding ads to your blog, or you can generate money using affiliate marketing. With affiliate marketing, every time people click on affiliate links on your site and make a purchase, you receive a small commission at no additional cost to them.
11. Write An E-book
Writing an E-book requires a bit of time investment upfront, but it can be an amazing source of passive income month after month. And with digital technology, it has never been easier to become an author!
If you love writing content, you won’t find it hard to write an 80-100 page e-book on the things you love. Make sure you pick a profitable niche and you market your book through bloggers and influencers in that niche. Non-fiction e-books that educate your potential audience on specific topics like finance, online marketing and business are going to make you more money than fiction books. Of course, there are always exceptions and you could write the next Harry Potter book, but if you want to create some residual income opportunities quickly, I would suggest you go for what sells first!
12. Teach Your Expertise
Teaching your skills by creating an online course has the potential to become a fantastic way to earn passive income. You will have to put in the work first, and then you will profit forever (or shall we say for a very long time?)
There are plenty of people that make a living from selling online courses. You can create videos, e-books, checklists and audio files to supplement your lessons and share your passion with others.
You can create different courses at different prices to maximize your chances of selling it.
13. Set Up Your YouTube Channel
I won’t lie: it’s not easy to make money out of a YouTube Channel. You will need to create quite a lot of video content before you can start to earn any significant amount of money. But if you pick the right target, and manage to create great and useful content, you will be able to get organic traffic from YouTube and Google.
You will make money by display ads on your channel, and get paid every time someone watches your videos.
On the plus side, great quality video content is relatively scarce, compared to text-based content. Also, people prefer watching a 5-minute video recipe, than reading a long set of instructions. The market is less competitive. If you have great video and editing skills, you should give it a try!
14. License Your Photos
If you have a great eye and friends keep telling you how beautiful your photos are, you might be able to pick the best photos from your hard drive and make money by selling them online.
You don’t have to be a professional to sell them and you still have the opportunity to earn some money, even if you are just a novice.
Most websites pay you based on the number of downloads: you get paid a percentage every time someone downloads one of your pictures. So once the pictures are uploaded, you will be earning passive income every time someone buys them.
15. Sell Printables on Autopilot
If you love design and you are an artistic person, selling digital products on Etsy could be a great way to earn passive income. Digital products require little maintenance, your customers will simply receive a link to download them (which means you don’t have to worry about shipping and returns handling). All you need to do is spend time upfront to create beautiful artwork! (Easy right?)
Printables can bring you plenty of passive income success. Some examples of the most popular printables include:
- Greeting Cards
- Wall Art
These are just a few examples: there is no limit to your imagination! Are you a great cook? You can sell meal plans and recipe cards. Are you a fanatic organizer? You can sell beautiful planners or calendars.
Use your knowledge and expertise to make beautiful products. As long as printables are appealing to your target audience and high quality, they will sell!
Credits: Gathered Dreams