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- 1 How do you make passive income?
- 2 What is not passive income?
- 3 20 Ideas for passive income
- 3.1 1. Put your money into a high-yield savings account or certificate of deposit (CD).
- 3.2 2. Dividend stocks
- 3.3 3. Rental income
- 3.4 4. Invest in crowdfunded real estate
- 3.5 5. REITs
- 3.6 6. Affiliate marketing
- 3.7 7. Set up a course
- 3.8 8. Write an e-book
- 3.9 9. Resale retail items
- 3.10 10. You can sell photos online
- 3.11 11. Peer-to-peer lending
- 3.12 12. Develop an app
- 3.13 13. You can rent a parking spot.
- 3.14 14. Invest in a bond ladder
- 3.15 15. Monetize social media posts
- 3.16 16. Set up an annuity
- 3.17 17. Buy a local business
- 3.18 18. Buy a blog
- 3.19 19. Short-term rent for your home
- 3.20 20. Start a channel on YouTube
- 4 Which source of passive income is best?
- 5 How can I make passive income without money?
- 6 How can I make passive income with money?
- 7 Best passive income sources for beginners
In short, passive income gives you more security and the opportunity to build wealth. Here are 20 ideas to help you earn passive income.
Passive income can be a great way to make extra money, whether you’re running a side business or just trying to get a little extra cash each month. This is especially true as inflation rages throughout the economy.
Passive income can help you make more money when times are good and keep you afloat if you suddenly lose your job, decide to take time off, or if inflation keeps eating away at your purchasing power.
How do you make passive income?
Money that comes in regularly from somewhere other than a job or a contract is called passive income. The Internal Revenue Service (IRS) says that you can get passive income from a rental property or a business in which you don’t actively work, like getting paid royalties for a book or stock dividends. But in reality, it often takes a lot of work to make passive income.
Getting something for nothing is not what passive income is. But if you stick to the plan, it can be a great way to make money and give yourself more financial security at the same time.
What is not passive income?
Your job is not passive income. Passive income doesn’t come from doing something and getting paid for it, like getting a job.
Having a second job is not passive income, either. You’ll still have to show up and do the work if you get a second job. Passive income is a steady flow of money that doesn’t require you to do much work.
Things that aren’t making money. Investing can be a great way to make money without having to do anything. But this works only if the assets you own give you dividends or interest. Cryptocurrencies and other stocks or assets that don’t pay dividends may be interesting, but they won’t bring you passive income.
20 Ideas for passive income
If you want to make money without doing anything, check out these 20 ideas and learn what it takes to be successful with each one, as well as the risks that come with each one.
1. Put your money into a high-yield savings account or certificate of deposit (CD).
When you invest in a high-interest savings or certificate of deposit (CD) account at an online bank, you can get one of the highest interest rates in the country and make money without doing anything. To make money, you won’t even have to leave your house.
The UFB Best Savings account from Axos Bank earns a market-leading rate. Read about their high-yield savings account here.
Opportunity: If you want to get the most out of your CD, you should do a quick search for the best CD rates or the best savings accounts in the country. Most of the time, it’s much better to go with an online bank instead of your local bank because you can choose the best rate in the country. And if your bank is backed by the FDIC, you will still get a guaranteed return of principal up to $250,000.
Risk: Your money is safe as long as your bank is backed by the FDIC and stays within the rules. So, a CD or savings account is about as safe a place to put your money as you can get. And that return can be small compared to inflation, which makes your money worth less. Still, a CD or savings account will give you a better return than cash or a checking account that doesn’t pay interest, where you’ll get nothing.
Read More: Best Online CD Rates
2. Dividend stocks
Shareholders in companies whose stocks pay dividends get a payment from the company at regular intervals. Quarterly cash dividends are paid out of a company’s profits, and all you need to do to get them is own the stock. Dividends are paid for each share of stock, so the more shares you own, the more money you get.
Opportunity: Owning dividend-yielding stocks can be one of the easiest ways to make money because you don’t have to do anything other than put money into them in the beginning. The money will just go into your brokerage account.
Risk: Choosing the right stocks is the hard part.
For instance, companies that pay out very high dividends might not be able to keep doing so. Too many people who are new to the stock market jump right in without doing enough research on the company selling the stock.
Still, there are ways to invest in stocks that pay dividends without spending a lot of time researching companies. For example, choose ETFs, which stand for exchange-traded funds. ETFs are investment funds that hold stocks, commodities, bonds, and other assets, but they trade like stocks. ETFs also spread out your investments so that if one company cuts its dividend, it doesn’t affect the price or dividend of the ETF too much.
ETFs are a good choice for new investors because they are easy to understand, highly liquid, cheap, and have much better potential returns than mutual funds because they have much lower costs.
Another big risk is that stocks or ETFs can drop a lot in a short amount of time, especially in uncertain times like 2020, when the coronavirus crisis shook the financial markets. Some companies can also stop paying dividends when the economy is bad, but diversified funds may feel the pinch less.
3. Rental income
A good way to make money without doing anything is to invest in rental properties. Most people don’t realize how much work it takes, though. And if you don’t take the time to learn how to make it profitable, you could lose your investment and more.
Here are three things you need to figure out if you want to make passive income from rental properties:
- How much do you need to get back?
- All of the property’s costs and expenses
- The financial risks for the property owner
When it comes to risk, there are a few things to think about. Does your property have a market? What happens if you get a tenant who doesn’t pay on time or damages the property? What if you can’t find anyone to rent your house? Any of these things could hurt your passive income a lot.
Hard times can also happen when the economy goes down. You might have tenants who suddenly can’t pay their rent, but you still have to pay your own mortgage. As incomes go down, you may not be able to rent the house out for as much as you could before. And home prices have been going up quickly, in part because mortgage rates have been low. This means that your rents may not be enough to cover your costs. You should think about these risks and have backup plans to protect yourself.
Read More: Best Mortgage Lenders
4. Invest in crowdfunded real estate
If you want to invest in real estate but don’t want to do a lot of the work (like management, repairs, dealing with tenants, etc. ), you could use a crowdfunding platform to buy property. A team of experienced investors chooses the property, and then you can decide if you want to invest and how much.
The real estate platform will charge you an annual management fee, and the minimum amount you can invest could be anywhere from ten dollars to tens of thousands of dollars.
Opportunity: You can get access to private real estate deals that have already been picked out by investors who know what they are looking for. You can look at the returns on the platforms to get an idea of how much you can make and how long it will take. Real estate investments can also help you spread out your investments and make your returns more stable.
Some platforms put their money into equity (stocks), while others put their money into debt. Most of the time, stocks have high returns for taking on more risk, while debt has lower returns for taking on less risk. Some platforms require you to be an accredited investor with a certain amount of income or assets. Fundrise, Yieldstreet, and DiversyFund are all popular platforms.
Risk: On many crowdfunding sites, it’s up to you to make your own investments. So, even though past returns may look good, they aren’t a good way to predict future success. And you’ll have to decide for yourself what to buy. So, for every deal you’re interested in, you’ll need to read the prospectus and figure out what the pros and cons are.
Also, real estate is usually paid for with a lot of debt, which makes it more vulnerable to any kind of economic downturn. You’ll also want to know how long your money will be locked up in the investment and when you can get it back, especially in an emergency.
A real estate investment trust, or REIT, is a fancy name for a company that owns and manages real estate. REITs have a special legal structure that lets them pass most of their income on to shareholders and pay little or no corporate income tax.
Opportunity: Like any other company or dividend stock, you can buy REITs on the stock market. You’ll get whatever the REIT pays out as a dividend, and the best REITs have a history of raising their dividends every year, so you could get a steady stream of dividends that keep growing over time.
Individual REITs can be riskier than an ETF made up of dozens of REIT stocks, just like dividend stocks can be. A fund gives you instant diversification and is usually a lot safer than buying individual stocks. You’ll still get a nice payout.
Risk: Just like with dividend stocks, you’ll need to be able to pick the good REITs. This means you’ll have to look into each business you might buy, which can take a lot of time. Even though it’s a passive activity, if you don’t know what you’re doing, you can lose a lot of money. The price can change a lot in the short term, just like any stock.
Even when the economy is bad, dividends from REITs are not safe. If the REIT doesn’t make enough money, it will probably have to cut or get rid of its dividend. So you may lose some of your passive income just when you need it the most.
Read More: Trion Properties Review
6. Affiliate marketing
With affiliate marketing, website owners, social media “influencers,” or bloggers promote a third party’s product by putting a link to the product on their website or social media account. Amazon is probably the most well-known affiliate partner, but eBay, Awin, and ShareASale are also big names. And Instagram and TikTok have become very popular places for people who want to build a fan base and sell things to do so.
You could also build an email list to draw people to your blog or send them to products and services they might be interested in.
Opportunity: The site owner gets a commission when a visitor clicks on the link and buys something from the third-party affiliate. The commission could be anywhere from 3% to 7%, so you’ll probably need a lot of visitors to your site to make a lot of money. But if you can get more people to follow you or find a more profitable niche (like software, finance, or fitness), you might be able to make a lot of money.
Affiliate marketing is considered passive because, in theory, you can make money just by adding a link to your website or social media account. In reality, you won’t make any money unless you can get people to visit your site, click on the link, and buy something.
Risk: If you’re just starting out, it will take time to make content and get people to visit your site. Building a following can take a long time, and you’ll have to find the right way to attract that audience, which may take some time in and of itself. Worse, once you’ve used up all that energy, your audience may move on to the next popular influencer, trend, or social media platform.
7. Set up a course
Making and selling an audio or video course is a popular way to make money without doing anything. Then you can just sit back and watch the money come in. Courses can be shared and sold on sites like Udemy, SkillShare, and Coursera.
You could also try a “freemium model,” in which you build a following by giving away free content and then charge people who want more information or want to know more. This model could be used to help teach a language or pick stocks, for example. The free content shows how knowledgeable you are and may attract people who want to go to the next level.
Opportunity: A course is a great way to make money because, after the initial time investment, it’s easy to make money.
Risk: Making the course takes a lot of work and time. And you can’t be sure that anyone would buy it.
Read More: Get a free month of SkillShare
8. Write an e-book
Writing an e-book is a good way to take advantage of the low cost of publishing and even use Amazon’s global reach to get your book in front of millions of people who might want to buy it. E-books can be between 30 and 50 pages long, and since they are based on your own knowledge, they don’t have to cost much to make.
You’ll need to know a lot about a certain topic, but it could be a niche topic that requires skills or abilities that not many people have but that many readers need. On an online platform, you can make the book quickly and even try out different titles and prices.
But just like when you make a course, a lot of the value comes from adding more e-books and attracting more customers to your content.
Chance: An e-book can do more than just give good information and value to its readers. It can also be used to get people interested in your other products, like audio or video courses, other e-books, a website, or maybe even higher-value seminars.
Risk: If you want to build a following, your e-book needs to be very good, and it helps if you have a way to market it, such as an existing website, a promotion on other relevant websites, appearances in the media, podcasts, or something else. So you might have to put in a lot of work at first and not get much back, especially at first.
Even though an e-book is nice, it would help if you wrote more and then built a business around the book or made the book just one part of your business that helped the other parts. So your biggest risk is probably just wasting time without getting much out of it.
9. Resale retail items
Use online sales sites like eBay or Amazon to sell things you find for cheap elsewhere. You’ll make money from the difference between the prices you pay and the prices you sell for. You might also be able to build a group of people who follow your deals.
Opportunity: You can take advantage of price differences between what you can find and what the average consumer might be able to find. This could work well if you know someone who can help you find discounted items that not many other people know about. Or you might be able to find something valuable that other people have missed.
Risk: Sales can happen online at any time, which makes this strategy passive, but you’ll have to work hard to find a good source of products. Plus, you’ll have to put money into all of your products until they sell, so you’ll need a steady source of cash. You’ll have to really understand the market so that you don’t pay too much. If you don’t, you might end up with things that no one wants or that you have to cut the price of a lot to sell.
Read More: Current Ways To Save Shopping At Amazon
10. You can sell photos online
Selling photos online might not seem like the most obvious way to start a passive business, but if you can sell the same photos over and over again, it could help you scale your efforts. You could work with a company like Getty Images, Shutterstock, or Alamy to do this.
To get started, you’ll need to be approved by the platform. After that, you’ll need to give permission for anyone who downloads your photos to use them. Then, every time someone uses your photo, the platform will pay you.
You’ll need photos that are appealing to a certain group of people or show a certain scene, and you’ll have to figure out where the demand is. Photos could be of models, landscapes, creative scenes, and other things, or they could be of real events that might end up in the news.
Opportunity: One of the benefits of selling or licensing your photos through a platform is that you might be able to do more, especially if you have photos that people want to use. That means you might be able to sell the same picture hundreds, thousands, or even millions of times.
Risk: You could add a lot of photos to a platform like Getty Images, but none of them would really sell anything. You may make all of your money from just a few photos, so you need to keep adding photos while you look for that “needle in the haystack.”
It may take a lot of work to go out and take photos, process them, and keep up with events that may bring in money for you in the end. And it can be hard to stay motivated. Every next picture could be your ticket to the lottery, but it almost never is.
Read More: Find promotions from eBay here.
11. Peer-to-peer lending
A peer-to-peer (P2P) loan is a personal loan made between you and a borrower through a third party like Prosper or LendingClub.
Chance: As a lender, you can make money from the interest payments on the loans. But because the loan isn’t backed by anything, you could lose everything if you don’t pay it back.
You need to do two things to lower this risk:
Diversify your loans by putting smaller amounts into more than one loan. At LendingClub and Prosper.com, the least you can invest in a loan is $25.
Look at the past of the potential borrowers to make smart choices.
Risk: It takes time to learn how P2P lending works, so it’s not completely passive, and you’ll need to carefully check out anyone who wants to borrow from you. Since you are investing in more than one loan, you need to keep a close eye on payments. If you want to make more money, you should put back any interest you get.
Recessions can also make high-yielding personal loans more likely to go bad, so when the economy gets worse, these loans may go bad at a higher rate than usual.
Read More: Prosper Personal Loan Review
Read More: LendingClub Review
12. Develop an app
Making an app could be a way to spend that time up front and then get a return on it in the long run. Your app could be a game or something that helps people do something hard on their phones. When your app is out in the world, people can download it and pay you for it.
Opportunity: If you can make an app that people want to use, you can make a lot of money from it. You’ll need to think about how to make the most money from your app. For example, you could put ads in the app or charge a small fee for people to download it.
If your app becomes more popular or you get feedback, you may need to add new features to keep it useful and popular.
Risk: In this case, the biggest risk is probably that you waste your time. If you spend little or no money on the project (or money you would have spent anyway, like on hardware), there’s not much of a financial risk. But it’s a crowded market, and apps that really work must give users something they can’t live without.
If your app collects data, you’ll also want to make sure it follows privacy laws, which vary from country to country. Apps can be popular for a short time, so your money could run out a lot faster than you think.
13. You can rent a parking spot.
Do you have a parking spot that you don’t use or that someone else could use? You could get some money for that spot. It could be even better if you had a bigger space that could fit more cars or be used for more than one event or venue.
Opportunity: If your parking spot is in a popular area or at a popular time, like during a concert or sporting event, it could be worth a lot of money. For example, if you live near a place where a lot of people go to work but there aren’t enough parking spots, you might be able to make money. You might be more likely to make money if you rent to someone who needs the space every day rather than for one-time events.
Risk: This idea might not be very risky, but you should make sure that renting out a parking space doesn’t break any rules from your place of residence or another group. It might also be a good idea to have a liability waiver as a requirement for parking in your spot.
Read More: Pawns offers another option for earning money through surveys and internet sharing.
14. Invest in a bond ladder
A bond ladder is a set of bonds that mature at different times over a number of years. The staggered maturities let you lower the risk of reinvestment risk, which is the risk of putting your money back into bonds that pay too little interest.
Opportunity: A bond ladder is a classic passive investment that retirees and people getting close to retirement have liked for decades. You can sit back and collect your interest payments. When the bond matures, you “extend the ladder” by rolling the principal into a new set of bonds. For instance, you could start with one-year, three-year, five-year, and seven-year bonds.
When the first bond is paid off in a year, you will still have bonds with terms of two years, four years, and six years. You can use the money from the bond that just came due to buy a new one-year bond or switch to a longer-term bond, like an eight-year bond.
Risk: A bond ladder gets rid of one of the biggest risks of buying bonds, which is the chance that when your bond matures, you’ll have to buy a new one at a time when interest rates may not be good.
There are other risks that come with bonds. Treasury bonds are backed by the government, but corporate bonds are not. If the company defaults, you could lose your principal. And you’ll want to have a lot of bonds so that your risk is spread out and no single bond can hurt your portfolio as a whole. If interest rates go up in general, it could hurt the value of your bonds.
Because of these worries, many investors turn to bond ETFs, which offer a diversified fund of bonds that you can set up in a ladder, removing the chance that a single bond will hurt your returns.
Read more: All about Savings Bonds…
Do you have a lot of people who follow you on Instagram or TikTok? Get growing consumer brands to pay you to post about their product or otherwise include it in your feed.
You’ll need to keep adding interesting things to your profile to keep your audience interested. And that means you need to keep making social media posts that help you reach more people and keep your followers interested.
Opportunity: Using your social media presence to make money is a good way to run a business. With good content, you can get people to look at your profile and click on it. Then, you can make money off of that content by setting up sponsored posts from brands that your followers like.
Risk: Getting started here can be a Catch-22. You need a large audience to get meaningful sponsored posts, but you’re not an attractive option until you have a meaningful audience. So you’ll have to spend a lot of time building an audience first, and there’s no guarantee you’ll be successful. You might end up spending a lot of time following trends and making content in the hopes of getting the sponsorship you want.
Even if you find the sponsored posts you want, you’ll need to keep posting to keep your audience interested and keep advertisers interested in you. That means you have to spend more time and money, even if you have a lot of freedom over when to do it.
16. Set up an annuity
An annuity is a good way to set up a steady source of income. In a typical annuity, you give money to a financial company, usually an insurance company, in exchange for a steady stream of income in the future. Annuities pay out money every month and can be set up in many different ways, such as to start paying right away or not until a long time later.
Opportunity: There are a lot of different ways to set up an annuity, depending on what you need, but they are the definition of passive income. The insurance company can set up a monthly payout right away, or you can set it up so that it starts when you retire, for example. You can also set up an annuity that gives you a fixed return or one that gives you a variable payout based on how the investments in the annuity did.
An annuity can be set up to pay for a certain amount of time, like 20 years, or for the rest of your life. It could stop giving money when you die, or it could keep giving money to your spouse. There are a lot of choices.
Risk: Annuities are very complicated, and once you sign up for one, you’re usually locked in for a long time. However, you may be able to get out by paying a big fee. Carefully read the small print on the contract so you know what the pros and cons of that contract are.
Every annuity contract is different, and each one may offer a different set of benefits to fit your needs. So it’s important to know what you’re getting into before you sign up.
17. Buy a local business
A local business offers you the potential to generate a cash flow stream through an existing and established company. If the business is profitable enough, you may even be able to hire a manager to run it for you while you make only the biggest decisions or none at all. You may be able to get an attractive loan to buy it, so that you put less of your own money at risk early on.
Opportunity: Local businesses may have attractive and profitable niches that you can buy into, and ones that cannot be easily replicated by competitors. You may be able to piggyback off the seller’s expertise or credentials, especially at the start as you get up to speed. Sellers may be willing to finance part of the sale, giving them some incentive to see the business succeed. Also, you may make part of the purchase price contingent on certain profit goals or other metrics.
Risk: You’ll need to carefully vet any potential acquisition candidates, lest you end up with a business that’s much less profitable than it appears or that has fading prospects. It can prove valuable to work with experienced and honest brokers to get the best deal and avoid pitfalls, or hire a consultant to help evaluate a potential deal. In addition, if you’re hiring a manager to run the shop, you’ll want to be sure they’re honest and competent, or you’ll have problems.
18. Buy a blog
If you want to get into the blogging game, consider buying one and skipping the line on building it. You can get the contacts and relationships of the prior owner and may be able to bring your own, too. And you can be generating income from day one rather than building and hoping.
Opportunity: Buying a blog gets you in the game today rather than tomorrow, but you’ll want to be already knowledgeable and passionate about the subject. It will be even better if you have a few ideas to improve the blog (better content, higher efficiency, lower costs, etc.) so that you can leverage it into greater profitability than might have been indicated by the purchase price.
Risk: A blog, like any business, is not that liquid, so if you decide you want to move on to something greener, you may not get what you paid for it or even be able to sell it at all. And of course, you have to be able to gauge the market effectively, producing content that readers want or that attracts sponsors or other revenue drivers.
Flippa.com is an example of a place where you can buy an existing blog.
19. Short-term rent for your home
This simple plan lets you make money from space you’re not using. If you’re going away for the summer, need to be out of town for a while, or just want to travel, you might want to think about renting out your current space.
Opportunity: You can list your space on websites like Airbnb and decide on your own rental terms. You’ll get paid for your work and don’t have to do much more, especially if you’re renting to someone who might stay for a few months.
Risk: There isn’t much of a downside in terms of money, but letting strangers stay in your house is a risk that most passive investments don’t have. Tenants could, for example, damage or even destroy your property, or they could even steal valuables.
Read More: Find Airbnb promotions here.
20. Start a channel on YouTube
Do you know a lot about traveling to Europe? A Roblox expert? A king of the swing dance? Create a YouTube channel about something you’re interested in and use ads or sponsors to make money. Find a popular topic, even a small one, and learn everything you can about it. At first, you’ll need to create a lot of content and get people to read it, but over time, if your content is popular, it can be a steady source of income.
Opportunity: You can use a free or very cheap platform and then build a following with great content. The better your chances are of becoming “the” person to follow, the more unique your voice or area of interest is. Then you should find sponsors.
Risk: You’ll have to create a lot of content at the beginning and continue to do so, which can take time. And you’ll need to care a lot about the product, since that will help you keep going, especially at first when people are still finding you and following you.
The main problem is that if there isn’t much interest in your subject or niche, you might spend a lot of time and money for not much in return. Your area of expertise might not be popular enough to bring in enough people to make money, but you won’t know for sure until you try it out.
Which source of passive income is best?
Which passive income source is best depends on a lot of things, like how much money you have to invest, how big the opportunity is, how interested and skilled you are in the area, how much time you have to put into it, and how likely you are to succeed. Usually, the less difficult it is to get into a market, the more competitors there are and the less likely you are to succeed.
So you’ll have to weigh the opportunity against these factors and see which passive income strategy works best for you. But it can help to be good at what you want to do and to be interested in it, because that can keep you going when things are hard in the beginning.
People who start out with some money and people who start out with nothing can both find ways to make passive income.
How can I make passive income without money?
If you start out with little or no money, you’ll have to rely mostly on your own time investment, at least until you get some money. That means you should look for sources of passive income that take advantage of the following:
- A subject you know a lot about. Here, you can turn your skills, like design, software coding, and so on, into a product or service that people will find useful.
- A chance to do a lot of work right away. You’ll need a way to make money that takes time or work, like making a course, building an influencer profile, or something else.
In a sense, you’re using your time to make up for your lack of money until you can get enough money to open up more options.
How can I make passive income with money?
You can get more passive investment opportunities if you have more money. If you have money to invest in a passive opportunity, you not only have the one listed above, but you also have a new set of options. You need money to make money from the following passive income sources:
- Buying dividend-paying stocks or REITs.
- Use bonds or CDs to save money.
If you want, you can use your money here to make money with little or no work on your part. You could also use your money and a lot of time to move into a niche that would make you even more money.
Best passive income sources for beginners
- Reward Checking Accounts: These accounts generally can have rates matching or beating those of the best Savings or CD accounts. But, the accounts earning the highest rates typically have maximum balance restrictions for said rates. Lately, the maximum has been in the $10k – $30k range. The advantage is the use of Checking account features like checking writing, ATM withdrawals, debit card use and bill pay.
- Savings/Money Market Accounts: These accounts generally earn lower rates than CD accounts. They have the advantage of allowing you access to your funds without penalty. You can make 6 withdrawals per month per federal regulations. For most accounts, you can withdraw the entire balance and close your account at any time without penalty. So, this serves as a good option for emergency funds.
- CD Accounts: These will usually earn higher rates than Savings accounts for terms 1 year and greater. The disadvantage is that you won’t have access to your funds for the length of the CD term without an early withdrawal penalty. No-Penalty CDs are the exception, but those are mostly limited to shorter terms.