Passive income, or unearned income as defined by the IRS, is non-employer-generated income that requires little effort to generate and maintain.
Investing in mutual funds or real estate, selling products online, publishing online courses, or other side hustles can generate passive income.
Passive income generates residual income with little effort. It can boost your finances and free up time. Additional cash flow and not having to trade your time for money can reduce stress and anxiety.
Consider these passive income ideas if you’re a service provider looking to stop selling dollars for hours or a product business looking to add revenue streams without shipping products.
Course creation
Creating an audio or video course and sitting back while it sells is a popular passive income strategy. Udemy, SkillShare, and Coursera sell courses.
You could also use a “freemium model” to build a following and charge for more detailed information. Language instructors and stockpickers may use this model. Free content shows your expertise and may attract advanced users.
Write an ebook.
Writing an ebook can use low publishing costs and Amazon’s global distribution to reach millions of potential buyers. Since they use your expertise, ebooks can be 30–50 pages and are cheap.
You’ll need to be an expert on a niche topic that requires rare skills that many readers need. You can design the book online and test-market titles and prices.
Rent income
Rental properties generate passive income. It usually takes more effort than expected.
John H. Graves, an Accredited Investment Fiduciary (AIF) in Los Angeles and author of “The 7% Solution: You Can Afford a Comfortable Retirement,” warns that you could lose your investment and more if you don’t learn how to make it profitable.
Affiliate marketing
Website owners, social media “influencers,” and bloggers promote third-party products by linking to them. eBay, Awin, and ShareASale are also big affiliate partners. Instagram and TikTok are huge for product promotion and following growth.
Flip retail goods
Sell cheap products on eBay or Amazon. Arbitrage the difference between your purchase and sale prices and build a following.
Online photo sales
Selling photos online may not be the best way to start a passive business, but you can scale if you can resell the same photos. Getty Images, Shutterstock, or Alamy could help with that.
Buy crowdfunded property.
Use a crowdfunding platform to invest in real estate if you want to avoid managing, repairing, or handling tenants. After an experienced investing team chooses the real estate, you can invest as much as you want.
P2P lending
You and a borrower can use Prosper for a peer-to-peer (P2P) loan. Funding Circle targets businesses with higher borrowing limits, while Payoff targets better credit risks.
Dividend stocks
Dividend-paying companies pay shareholders regularly. Companies pay quarterly cash dividends to stockholders. The more stock you own, the higher your dividends.
App creation
Creating an app could be a way to invest time and reap the rewards later. Your app may be a game or one that helps mobile users do something difficult. Users download your app, and you make money.
Rent parking
Do you have an unused parking space? You could sell it. It could be better if you have a larger area that can fit several cars or be used for multiple events or venues.
REITs
Real estate investment trusts (REITs) own and manage the property. Due to their legal structure, REITs pay little or no corporate income tax if they distribute most of their income to shareholders.
Bond ladder
Bond ladders are a series of bonds with different maturities over time. Staggered maturities reduce reinvestment risk, which occurs when bonds pay too little interest.
Facebook ads
Are you popular on Instagram or TikTok? Get growing consumer brands to pay you to promote their products on your feed.
Buy a high-yield CD or savings account.
An online bank’s high-yield CD or savings account can generate passive income and one of the nation’s highest interest rates. Earn money without leaving home.
Short-term rental
This simple strategy turns unused space into money. If you’re going away for the summer or want to travel, rent out your space.
Car advertising
Driving around town can make you money. A specialized advertising agency will assess your driving habits, including mileage and location. If you match an advertiser, the agency will “wrap” your car for free. Agencies want clean drivers and newer cars.
Start a blog or YouTube channel.
Thailand travel expert? Minecraft expert? Swing sultan? Turn your passion into a blog or YouTube channel and make money with ads or sponsors—expertise in a popular topic, even a niche. Building a suite of engaging content and attracting an audience can generate a steady income stream.
Rent useful household items.
Renting a parked car: Start even smaller with other household items people may need but are collecting dust in your garage. Lawnmowers? Power tools? Mechanics tools? Or tents? Look for high-value items that people need temporarily and may not make sense to own. Create a way for customers to find and buy your inventory.
Sell designs online
Sell products with your designs if you have design skills. CafePress and Zazzle let you sell custom T-shirts, hats, mugs, and more.
Establish annuities
Annuities can provide steady income. A typical annuity pays a financial company, usually an insurance company, for a future income stream. Annuities can be set up to pay monthly immediately or later.
Buy a local business.
You can generate cash flow from an established local business. If the business is profitable, you can hire a manager to run it while you make only the biggest decisions or none at all. To reduce risk, you can get a good loan to buy it.
Buy a blog
Instead of building a blog, buy one. You can use the previous owner’s contacts and bring your own. Instead of hoping, you can start earning immediately.
