Looking for passive income ideas to pad out your wallet and give you more free time?
Look no further. This article covers 11 different ways to make passive income—after you put an initial upfront investment, of course.
Unfortunately, there are no passive income sources that don’t require an investment of some sort. You’ll either need to put in some money up front to get things going, or you’ll have to dedicate a good chunk of your schedule until things are running more smoothly.
That’s why I’ve divided this article into two sections—passive income ideas that require money and passive income ideas that require time.
Remember, you aren’t limited to only one form of passive income. In fact, it’s wise to eventually make money online from multiple passive income sources, to increase your overall earnings.
When one passive income idea is off the ground and more or less running itself, go back to the start and find another stream to invest in.
6 passive income ideas that require money
1. Invest in crowdfunded real estate
Many people see real estate as the best form of passive income, but normally, you need a lot of money to invest upfront to start earning money off property.
However, it’s possible to at least get a piece of the action thanks to real estate investment trust (REIT).
In a REIT, investors pool money together to purchase property that produces income. This may be an apartment block, an office building, hotels, or even public buildings like hospitals and shopping malls.
Income derived from rentals at these properties are then redistributed back to investors—meaning you can start earning money off property even if you aren’t ready to own an entire home or building yourself.
The cherry on the sundae is that you have zero landlord duties.
How much money will you need to invest in the beginning? At least $500.
Here’s more information from NerdWallet on how REITS work and how to get started:
2. Invest money with a robo-advisor
You probably know that investing your money wisely is one of the best forms of passive income—when invested properly, your saved money can grow through good interest rates, or dividends paid on your investments.
But the whole idea of investing can be intimidating, especially if you’re working with a smaller amount of money initially or you have no experience investing.
Fortunately, the advent of AI has made it a lot easier for anyone to get into the investing game. You can use what’s known as a robo-advisor to select the best forms of investment for your money, no matter where you are financially right now.
These platforms typically start out by asking you a few basic questions around your age, your financial background and goals, and your comfort (or discomfort) with risky investments.
From there, the robo-advisor will suggest the best forms of investment for your money, and they’ll even make automatic adjustments based on shifting markets.
You’ll still want to keep an eye on your investments to make sure they’re earning you money as expected—but so much of the guess work and learning curve is alleviated when working with a robo-advisor.
To get started, check out this list of the top-rated robo advisors from Bankrate.
3. Rent out a room in your place
If you own your home and have some extra space, you’re in a unique position to start earning passive income by renting out your spare room.
Airbnb is by far the most popular option for earning passive income from your property, but other services like VRBO and HelloLanding.com also offer ways for you to rent out a room in your house, or your entire living space if you’re away for more than a month or so at a time.
You may be worried about strangers staying in your home, especially if you’re not there, but don’t be. Airbnb offers up to $1 million in insurance, if something happens.
Note that you will have to invest a few up-front costs to make your additional space an appealing rental to potential visitors. This may mean purchasing some new furniture, decor, and linens, installing new locks, or hiring a cleaner to tidy up between guests.
Before you get started, check out a few of those potential sites, and search for similar rentals in your neighborhood, and then set your price based on what you find.
4. Invest in dividend-paying stocks
Learning how to make passive income from dividend-paying stocks may not sound sexy, but it does pay.
Playing the stockmarket comes with risks—if the stocks you invest in don’t rise in value as expected, you may be forced to take a loss when you sell your shares.
Dividend stocks can help you mitigate some of this risk, because you are likely to get payouts more frequently, with less inherent risk. With dividend stocks, you get payouts not only when the company pays out dividends to shareholders, but also whenever the stock increases in value.
Though these payments may be relatively small, if you own shares in a number of dividend stocks, and all or most of those stocks steadily increase in value, you could see a significant amount of passive income coming into your bank account from your initial investments.
Many of the robo-brokers mentioned above can help you identify potential dividend stocks to invest in, or you can visit a traditional stockbroker or financial advisor to investigate this option further.
5. Try peer-to-peer lending (P2P Lending)
P2P lending marketplaces connect people with money with people who need money, so the former group can lend money to the latter, just as a traditional bank or lending institution would.
For example, say your friend, James, needs $10. You loan him $10, and he pays you back $11—that’s a 10 percent return on your investment (ROI).
P2P lending is a similar concept, but on a much bigger scale. Loans will be managed through a secure platform, like Lending Club, so you don’t have to worry about the details—just reap the benefits of loan payments.
6. Buy a profitable internet business
If you have the capital, and you don’t want to put in the grueling startup hours to get an internet business off the ground, then consider buying one that’s already profitable.
There are a number of online marketplaces, like Shopify Exchange, Empire Flippers, and Flippa, that list different businesses for sale. These businesses will come at different price points according to their value, so you can decide which type of business is best based on your budget.
Purchasing a business is no small decision, so I recommend reading over Shopify’s guide to buying a business for more info.
5 Passive Income Ideas That Require Time
1. Become an affiliate marketer
Affiliate marketing allows you to make money by promoting other people’s (or company’s) products or services. You’ll earn a commission for each sale you generate. Think of it as a referral fee for spreading the word.
In order to make money doing affiliate marketing, you must have a somewhat large, engaged audience—one big enough that other companies will want you to advocate for their products and services.
Where do you grow an audience though?
Fortunately, there are a number of ways you can start building an audience. It will take time, but with dedication and a bit of strategy, you can develop an audience by:
- Creating a blog in a niche you’re interested in
- Building an email list
- Becoming an influencer on Instagram or TikTok
- Develop a YouTube channel or Twitch stream
You’ll need to develop a personal brand and use your own marketing savvy to get your audience to a decent size. Here are a few more resources on how to do just that:
2. Develop online courses
If you have a unique skill, then creating an online course is one of the best ways to create passive income.
Creating an online course requires quite a significant time investment up front. Though each course is unique, here’s a general outline of what you’ll need to do:
1. Research course ideas by browing existing courses online
2. Develop a course outline that’s unique from what’s already out there
3. Create course materials for your students
4. Select a course management platform, like Podia or Thinkific
5. Upload and organize all course material (including videos, PDfs, etc.)
6. Create a website or landing page for your course
7. Market your course to encourage students to sign up
That last step can take a lot of time if you don’t already have an engaged audience. But if you plan to build an audience, then you can pair together an online course with affiliate marketing (see above) to double up your passive income sources.
3. Write ebooks
If you’ve got good writing skills, consider selling ebooks as a form of passive income.
Ebooks don’t have to be long. You can write a full novel if you have it in you, but you can also earn income off shorter ebooks on topics that appeal to a wide audience. Some ebooks are only a few thousand words long, meaning if you dedicate yourself to it, you could write, edit, and publish an ebook in just a few weeks.
Think about the unique skills and experiences you have that could make good fodder for a book. There’s truly no limit to what you can write about, but the most profitable ebooks will be on topics that help people learn something new.
For example, if you’ve worked in sales for a number of years, you could put together an ebook on the best sales techniques for newbies in the industry. Maybe you’ve spent time training dogs, or decorating homes, or traveling to hidden destinations—any of these things could make a good ebook (or even an ebook series).
When you’re done writing, you may want to spend some of your budget on hiring a professional editor, book layout specialist, or book cover designer.
From there, you can upload the ebook to online platforms like Amazon, Gumroad, or Smashwords, and then run your own promotions to get people to purchase it.
Your first ebook may not earn you too much passive income, but if you’re able to market yourself well and publish more than one, this can become a very profitable passive revenue stream.
4. Build an eCommerce store
Content management systems like Shopify make it SUPER easy and affordable to create and launch an online store.
And you don’t need to have access to a huge warehouse to hold your products, thanks to the advent of dropshipping. This form of online selling allows you to fulfill online orders as they come in via a third party, such as Amazon or Alibaba. This way, you only pay for products that are already purchased—you can even have all shipping handled by one of these platforms.
To get started, you’ll need to first identify the product (or types of products) you want to sell. You can do this by looking at products that are trending on social media—TikTok and Instagram are full of products that other dropshippers are already selling, and you can use these for inspiration.
From there, you’ll need to set up your online store, which can take some time. And when that’s done, you’ll want to promote your products through paid advertising campaigns, SEO, or affiliate marketing—but as you shine a spotlight on your products, you can make back the money you spent on marketing, and soon start generating purley passive income.
5. Create apps that people need
If you can code, consider building an app, WordPress plugin, Chrome extension, theme, or some sort of program script, which you can then market and sell to people who need it.
Even if you can’t code, don’t write off this option—there are many “no code” platforms out there that can help you design an app or online product with minimal coding experience. You could also partner with an app developer, and share the profits after it goes live.
The first part of this process is to come up with an idea. Start by looking at the apps and programs you use every day—do they fall short in any way? Is there something you wish they did that they don’t do?
You can also turn to Reddit, Quora, and other forums where people are likely to voice their opinions about an app or product that they want but don’t have. This can be a great way to get inspiration for something original that has market viability.
Finally, check out websites like Side Projectors and Product Hunt to get inspiration from people who are already tapping into this passive income stream.
After that, start building the app on your own or with the help of a developer. You’ll need to run it through testing with your target audience, and of course do some promotional work once it’s live.
Choose the best passive income streams for you
Of course, as with all things in life, there is no one right or wrong path for everyone.
Deciding how to make passive income should depend on your goals, timeline, how much you want to earn, and how much time or capital you have to invest.
Keep in mind, learning how to make passive income isn’t the only way to make money online. If you’re interested in learning about other ways to generate income from the internet, you’ll definitely want to check out this article as well.