Look no further. If you want to make money while you sleep—well, after you put in that initial upfront investment, of course—keep reading.
Types of Passive Income
To keep it simple, I’ve divided this article into two sections—passive income ideas that require money and passive income ideas that require time.
As I mentioned in another post, making money online requires diversifying, meaning “a lot of small streams will form a big river.” So just keep that in mind throughout this post.
6 Passive Income Ideas That Require Money
1. Invest in crowdfunded real estate
Normally, you need a lot of money upfront to invest in real estate and start collecting rent, but of course, real estate is the ultimate form of passive income.
Today, you can at least get a piece of the action thanks to a “real estate investment trust” (REIT).
A REIT is a pool of money from many investors that is managed by professional real estate investors. The money in the pool goes towards investing in real estate. Investors put money into the REIT, the REIT buys properties, and the returns are disbursed back to investors. (source)
The cherry on the sundae is that you have zero landlord duties.
How much money will you need to invest to get started? At least $500.
Robo-advisors are computer automated investment platforms. After signing up and filling out a short survey answering questions about your age, retirement goals and risk tolerance, the robo-advisor will put together an optimal portfolio for your goals and automatically manage it to stay on track over time. They typically cost less and offer more than a traditional investment advisor, but take out the one-on-one human element from the equation. This leads to more objective and lower cost investment services. (source)
If you own your home, consider renting out your extra bedroom(s) on Airbnb to earn mostly passive income.
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.
Before you get started, check out its website, 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.
When you buy stocks, you do it with the hopes of “buying low and selling high.” Dividend stocks work the same way, but with one other benefit: just for owning the stock, you are paid a small portion of the company’s earnings in the form of a dividend. With these types of stocks, you get paid when the stock goes up in value, and when dividends are paid out.
Let’s say you buy shares of Colgate-Palmolive stock. Not only is the stock price likely to rise over time, you’ll also get paid for each share of stock you own. Over the past seven years, Colgate-Palmolive has paid between $0.34 and $0.68 each quarter for every single share owned by stockholders. (source)
5. Try peer-to-peer lending (P2P Lending)
P2P lending marketplaces, like Lending Club, 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).
Now, with a platform like Lending Club, you can loan money through a secure platform to people who can’t get financed by big banks.
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 an already profitable one.
Flippa is for those with little to no budgets while Empire Flippers’ sites range from $20,000 to millions. Shopify Exchange is somewhere in between, but on the higher end.
5 Passive Income Ideas That Require Time
1. Become an affiliate marketer
Affiliate marketing is a way to make money by linking to other people’s (or company’s) products or services and earning 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 that companies are willing to pay to advertise to.
Where do you grow an audience though?
The answer is: there are numerous places online to grow your audience.
You could own a blog, where you create content about a certain niche and link to affiliate products you like in posts and as ads on the site. Example: WPBeginner.
And/or you could grow an email list of people interested in what you have to say.
Newsletter formats could be a simple curated list of posts from relevant sites, or feature long-form, original content (like The Hustle does) that you offer exclusively to email subscribers. You could also teach subscribers how to do stuff they’re dying to learn, like how Ramit Sethi and Andre Chaperon do.
In addition to assets you own, you could also make affiliate money via social media outlets, such as YouTube and Instagram.
Last but not least, you could open an affiliate ecommerce store, where you curate other people’s products, and make money off referral clicks.
It was easier to make money with this tactic back in the day, when it wasn’t so competitive and noisy online, but I still believe there’s some opportunity here for a handful of niche markets.
2. Develop online courses
According to a report by Degreed, nearly 85 percent of people said they learn things for work by searching online, at least once per week, and nearly 70 percent of them learn by reading blog articles weekly and asking for recommendations from peers and mentors.
A course can be a big upfront investment that has a big monthly (recurring) payoff.
Aside from updating the course, your only other investment is the initial time spent making the course content. And of course, you’ll have to purchase a domain name and website hosting — both of which are a minimal investment.
Course Tips and Tricks
Take other people’s courses to get inspiration for things like formatting and making sure your content is better than others.
Start with the content first. Open a G-Doc, and start outlining your course.Don’t worry about technology until you have your content down.
Launch your course before you finish. This will light a fire for you to get it done.
Research course ideas on Udemy, Gumroad Discover, and Product Hunt.
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 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 bookmark this hub.