In this article, we will look at what is passive income and the best passive ideas for you to get started with.
We want to help you achieve complete financial freedom in your life, and developing streams of passive income is the key to making that happen.
What is Passive Income?
According to Investopia, passive income is “income that requires little to no effort to earn and maintain”.
Usually what we do is go to work for a certain amount of hours and are compensated for those hours that we go to work.
This means that if you want to earn more money, you will have to work more hours.
If you have passive income, however, you will not need to exchange your time for the money that you are earning.
The money will keep on coming in regardless of whether you have shown up for work or not.
You can make an income while you sleep! Yes it’s almost like free money once you put in the upfront work.
Why Build Passive Income Streams?
You probably don’t want to have to work more hours in order to earn more money, and it’s nice to have some time off too!
If you have money coming in from various sources at all times during the day, this means that you have the freedom to do other things.
You can use this money to fund your retirement (either the money you save, or as an income when you are retired), or as an income whilst you’re going around doing whatever you want to do!
The best thing would be for us all to have several passive income streams because this means that we are covered in case anything happens with one of the income streams e.g. with a job loss.
This also means that we could scale back a bit and work less. If you have passive income streams this means that you can take a break if you need to such as on maternity leave or if you are poorly.
The dream that is sold to a lot of people is sitting on a beach with a cocktail in your hand whilst the money rolls in – but it tends to require a lot of effort before you get near that point.
The truth is, we don’t know what the future holds and we need to prepare for things as well as we are able.
This means making sure that if we have a dip or something goes wrong, we will still have the money needed to live our lives.
They can be great side hustle ideas as well and you can scale up as needed.
What Does It Take to Earn Passive Income?
To earn the passive income you will need to understand that there is generally a lot of work that is required upfront before it gets to the ‘passive’ stage.
We will cover how to generate passive income in this article, but let’s first look at the difference between passive and active income:
Passive income is where the money is continually coming in despite you not having to exchange the hours of work for the money.
This will require effort upfront to put the passive income streams in place but you can reap the benefits in the future.
Active income is what we are used to in the more traditional sense of exchanging time for money. When you go to a job for 9-5 you are paid for the time that you are there.
The Best Passive Income Ideas That Require an Upfront Monetary Investment
If you have some spare cash then you may be happy to put some money upfront into a passive income stream.
Not all passive income ideas require money to be put into them from the start so don’t let that put you off.
We will look at how to make passive income below:
1. Robo Investing
Investing your money is one of the best passive income streams out there, that we should all be doing.
If you are feeling a bit nervous about what to invest in and you feel as though it’s holding you back, robo-investing could be for you.
Robo investing is where you will invest your money and the robo-advisor will allocate the funds for you.
We recommend Betterment as your go-to robo investing platform.
2. Passive Real Estate Investing
Want to get into real estate without all of the hassle? Real estate investing could be a viable option for you.
REITs are Real Estate Investment Trusts where you can invest in real estate – they are investment vehicles that hold property in them. You will get to benefit from all of the ups and downs with the properties.
This can be the perfect option for you if you are a bit apprehensive or nervous about getting into real estate but still want to get a taste of it.
A platform that you can use to get started investing in real estate is Fundrise.
3. Buy Your First Rental Property
Rental properties are great sources of passive income because you should have rent payments coming in from your tenants each month.
It’s obviously not as easy as just buying a property – you will have to save up for the down payment and make a proper business plan.
Hopefully, you will have other passive income streams to tide you over in case something happens such as a tenant not paying rent. Always pays to have a backup plan!
Once you have the house and have it all up together, you can get tenants in and keep earning each month.
In order to be even more hands-off, you could hire a management company to deal with the tenants. If you wanted to do it yourself this could still be a fun work from home job.
4. Open a High Yield Savings Account
This one is a bit of a no brainer in terms of earning money on the money that you already have.
It’s not somewhere that we would recommend putting all of your money as there are places which offer you more interest over time (e.g. through investing) but it’s still a good passive income stream to have.
The interest rates for each bank change all of the time so it’s worth doing your research and finding the best one for you.
5. Invest in Dividend Stocks
When you buy stocks you can choose to get paid via dividends.
This means that you own part of a company’s stock and they will pay you a small part of their earnings in the form of a dividend.
The amount that you get paid will depend on the amount of the stock that you own and how much the company decides to payout.
You can start making passive income with dividend stocks by starting a free account with Robinhood.
6. Invest in CD Ladders
CDs are certificates of deposits from banks whereby you can be paid in certain increments which will allow you to earn a better rate of return on your investment.
Something to note with CD Ladders is that you will not be able to withdraw the money until the account has reached maturity.
When you set up your account you will choose the maturity of it. It’s up to you to decide how long you wish to do this for, with it ranging from a few months – years.
7. Peer to Peer Lending
Peer to peer lending (p2p lending) is a great way to get some passive income if you have some money that you don’t need immediately.
You will be acting as the lender for the individuals or businesses that require a loan.
The benefit of doing this is that you will receive the money-back with interest.
One of the most popular peer to peer lending sites is LendingClub. The minimum deposit on there is $25 and the average return is 4 – 7%.
8. Pay Off or Reduce Debt
One of the best passive income ideas that you can do for yourself and your family is to get rid of the debt that is hanging over you.
If you aren’t in a great place with your debt right now don’t worry – there are lots of things that you can do to get a grip on your debt.
To start with you need to write out all of your debts – including the total balance, monthly payments, interest rate, etc.
The next step is to figure out which debt you want to start with first. There are two main debt payoff strategies that are widely discussed – the debt snowball method, and the debt avalanche method.
The debt avalanche method is where you start with the debt with the highest interest rate.
The debt snowball method is where you start with the smallest debt and then once that is paid off you put the amount that you were paying off into the next debt.
Once you have paid off your debt you will have all of that money that you were putting into debt to use for all of these other passive income streams!
We have a complete Debt Payoff Planner that has helped thousands of families on their journey of become debt-free.
9. Refinances Your Student Loans or Mortgage
Another way to give yourself another quick cash boost is to refinance your student loans or mortgage.
Check out the interest rates to see if it is worth refinancing your mortgage to take advantage of any low-interest rates. It’s really important to look at the big expenses that we have to make the biggest savings.
The same with your student loan as well – if you refinance your student loan you could save thousands over the term.
If you are looking for a place to compare all of your refinancing options Credible is a great option!
10. Invest in a Business
There are businesses out there that need a cash injection and this is where you can come in to invest.
If you invest in the business then you can get some returns.
It’s important to note that you shouldn’t just invest in any business that you come across – you should speak to them about their business plan and how things are going to go in the future.
A great site to start finding businesses that you can invest in is Worthy Bonds.
11. Purchase an Already Profitable Blog
Starting a blog is a great income stream (which we will go over in another example further along) but how about making money from a blog that is already profitable?
There are lots of blogs that are for sale – the owners may have created them with the intention to sell, but a lot of the time it’s because they can’t keep up with it.
Blogs generally tend to sell for 24 times their monthly income. You will need to do your research on this – whether the blog in question will be a sound investment.
There are sites that you can buy which will have ads and content which are already generating a passive income, which is something to look out for.
A good site to start looking for blogs to buy is Flippa. It’s easy to use and provides a lot of helpful information.
The Best Passive Income Ideas Requiring an Upfront Time Investment
There are some more passive income ideas that we can look at, but that will require some time put into them from the start. And that’s ok!
Hopefully, you will agree with us that it’s still a good idea to put the work in upfront if it means that you will be able to work less in the future.
12. Affiliate Marketing via Blogging
I said that we’d talk about making money from blogging, and here we are!
A way to make money passively from a blog is to use affiliate marketing.
Affiliate marketing is where you recommend a product/company/service to a customer and when they click through to purchase, you receive a commission for pointing them there.
The best way to do this is naturally and to only recommend things that you truly believe in.
For example, say that you are teaching people how to draw, and you recommend the type of pen that you are using.
If you do a search and find that the pen company has an affiliate program, you can stick an affiliate link in there and it’s a win-win!
There are affiliate programs on an individual basis, but there are also affiliate networks such as Shareasale.
We highly recommend Making Sense of Affiliate Marketing if you want to start making passive income with affiliate marketing.
13. Start a YouTube Channel
I’m sure that you realize how much work goes into running a Youtube channel – there’s not just the filming of the videos but the editing, marketing, research, etc. It’s a lot!
Nevertheless, starting a Youtube channel is a great way to generate some passive income over time.
There are a few ways to make money via Youtube with the most common ways being through ads, sponsored content and affiliate links.
You can create a video that will circulate around Youtube and bring you in some money when people watch your video and click on your links.
14. Start an Online Lead Generation Business
If you start to look around at the small businesses in your local area you may find that some of them don’t have an online presence.
This is where you can come in! Reach out to them and offer to get them online.
This could be in the form of getting a website set up for them and social media accounts.
A course we recommend for getting started with this is Bobby Hoyt’s Facebook Ad Side Hustle course. It’s amazing!
15. Open an eCommerce Site
eCommerce is what is known as online or internet commerce. It is the act of selling items online.
There are physical items that you could sell online and then get them shipped out. If you want to make this passive then you could use a drop shipper to send out the products for you.
There are a million different things that you could sell on an eCommerce site, and the fun part will be all of the brainstorming!
16. Sell an eBook
Writing a book will always require some time investment upfront as you will need to actually write the book!
After that though, you can put it up for sale and sit back to let the sales roll in.
It’s easier now than ever to publish a book because you don’t need to go down the traditional publishing route. You can use streams such as Amazon Direct Kindle Publishing.
17. Create an Online Course
There’s a lot of work that you have to put into creating an online course, but it can continue to bring in a lot of passive income over time.
There is likely one subject that you know a lot about, which you can turn into an online course!
Lots of people like to learn about a subject online, and you will be surprised at the subjects that are popular – don’t dismiss any of your ideas.
18. Sell Stock Photos
You don’t need to be a professional photographer to sell stock photos – if you like doing photography then you can get paid for stock photos.
A lot of websites – such as this one for example – need photos to use, and will typically head on over to stock photo sites to purchase them.
You can submit photos for pretty much anything, although it will be in your best interest to upload photos that will be popular.
Semi-Passive Small Business Ideas
There are some other small business ideas that we can look at but they will be more semi-passive.
What we mean by this is that they are more like business ideas which will need money and time investment. But they can be passive and not require you to be there to exchange time for money.
19. List Your House or Room on Airbnb
Airbnb is hugely popular which is good news if you are thinking about renting out a room or even your entire house!
Short term lets are becoming more popular and this can bring you in more money than perhaps just renting it out traditionally would do.
Airbnb charges 3% for the bookings on there for homeowners, but you can set any price that you want for renting out your accommodation.
Have a look at what other people are charging in your area and price accordingly.
If you are renting out a room in your house this will be less passive as you will be there at the same time as them.
Click here to read our entire guide on how to become an Airbnb host.
20. Rent Out Your Car
It’s not just property that you can rent out – you can even rent out your car!
If you don’t use your car that often (perhaps you work from home or are going away) you can put your car to use instead of leaving it sat on the driveway.
The most popular site for renting out your car is Turo, although it’s always a good idea to look around and do some research as to which will be the best for you.
21. Vending Machines
This is a really cool income stream idea and one that we have seen parents gifting to their children!
You will have to ask around to find local businesses that will allow you to put vending machines on their site – you will want to go for businesses that are popular and have a lot of foot traffic.
They are not completely passive because you will have to maintain and replenish them. Still, they are a pretty hands-off semi-passive income stream.
22. Storage Rentals
Storage rentals are spaces that people rent out to store their things in.
This could be because they don’t have enough space, they’ve had to downsize, they’re renting before buying, they’ve gone traveling and a whole host of other possible reasons.
Storage rentals bring in decent money that will come in each month as you are renting it out.
It doesn’t have to be in a big storage unit either – you could start with renting out your garage.
This is frequently referred to as a great passive income idea as you shouldn’t have to be on-site, but there could be a lot of maintenance needed.
If you put up instructions for how to use the machines, the customers should be able to carry it out themselves and you won’t need to be on site.
Easy Passive Income Ideas
We have covered a lot of passive income ideas which require quite a bit of time, money and effort put into them upfront, but now we can look at some easier ideas.
24. Cashback Sites
Cashback sites are a super-easy way to make some money passively because you are making money from doing things that you would usually be doing anyway.
The way that cashback sites work is that you are paid a small commission for clicking through to a site and purchasing something from them.
The reason that this is good for passive income is that you can go through the cashback sites to buy the things that you were going to be getting anyway.
Say you knew that you wanted to buy a camera, and you knew which store you wanted to get it from.
You would head on over to the cashback site, type in the company name that you wanted to buy from and then click through onto their site and complete your purchase.
The cashback site will track your visit and purchase and pay you some cashback for this.
It can take a while to come through because it will have to get past the returns period that the store offers.
Click here to grab your $5 sign up bonus with Ibotta and start earning cash back on your grocery shopping
25. Cashback Reward Cards
Another great passive way to get some passive income is by using cashback reward cards.
The way that this works is that you use your card as normal but you will get paid cashback on it.
You can typically earn between 1 – 5% cashback on your purchases.
26. Save on Your Monthly Utilities (Trim)
Sign up with Trim and save money on your monthly utilities. Trim isn’t an app but is an AI assistant which will look at your finances and see where you can make some savings.
It is passive because they will look into your spending and direct debits and analyze where you can save money.
They can also negotiate your bills for you and cancel any unwanted or unused subscriptions. This saves a lot of time and hassle!
Frequently Asked Questions About Passive Income
How Much Money Can I Make?
The amount of money that you can make is dependent on a lot of factors.
It will depend on how much time, money and effort you are able to put into it, and other things such as your location and target demographic.
There is no reason why you couldn’t make a lot of money from passive income sources and use that money to live off.
In fact, that is a great goal to have!
What are the most popular passive income ideas?
The most popular passive income ideas are generally the more traditional ones – investing, using high yield savings accounts and property rentals.
That doesn’t mean that you should just pick the most popular one and go for it as it’s important to think about what you would personally enjoy.
Does passive income really require “no work”?
When it comes to passive income this doesn’t mean that money just floats into your checking account every month for no reason.
You will have to put in the work beforehand and set up systems to ensure the money will come in regardless of how much time you put into it following on from there.
There are some income streams that will be more passive than others though.
What are some examples of passive income?
We have gone over a lot of examples in this article so if you’ve skipped to the end, we recommend going back through and taking some time to read through them.
A passive income stream that a lot of people aspire to is having a rental property. This can bring in an income stream for a really long time.
Does creating passive income really work in building wealth?
Yes, passive income is the best way to build wealth. If you look at very wealthy people then they will have a variety of income streams and a lot of them will be passive.
How to Pick and Get Started Building Passive Income?
The type of passive income stream that you choose will be ultimately up to you.
It will of course firstly depend on how much time and money you have available to put into it.
You may also be drawn to certain income ideas over others e.g. if you are creative then you might want to choose a more creative idea such as a Youtube channel or selling your own products.
Or you may be a more traditional person who finds the idea of being a property owner that rents out rooms more exciting.
The best thing to do is have a read through our list and write down which ideas appeal to you.
It’s also always worth keeping your goals in mind. Think about your short term goals and also your long term goals. Do you want this passive income to carry on when you are in retirement?
Do you want this income to fund your retirement? These are all important questions that you will have to ask yourself before you put up an investment.
Do you have any passive income streams? Are there any that appeal to you from our list? Let us know in the comments below!