Passive income ideas do require an upfront work to earn, like writing an e-book, building and monetizing a blog and some don’t take any physical effort at all, such as investing in stocks or real estate. Passive income has been loosely defined as money that you earn with the least or zero amount of effort. People often associate passive income with dividends, interest as well as lottery winnings and capital gains from real estate. Passive income or residual income can also be derived from a business where you do not have substantial investment in terms of labor.
It’s easy to see why people like the idea of passive income. You are able to do the work once and get that passive income forever. Passive income is the opposite of how most of us earn a living. Passive income is at its core passive, money that comes in without much work on your part. The question for many is how to earn a real passive income. What does it take to earn passive income? What are legitimate strategies for earning a real passive income? Let us answer all these questions and discuss some of the best passive income ideas that can be used to make more money or build wealth.
Do Passive Income Ideas Really Work?
Yes, all these passive income ideas do work and can supplement your existing income. Even better, you could use some of them as main source of income. You get to earn without having to exert a lot of effort. All you have to do is find the right one for you. The best passive income ideas combine decent returns with little effort on your part once you’ve sealed the deal.
You aren’t left worrying about the state of the financial market or struggling to manage a small business. You’re free to search for the next deal, but you don’t have to, and that’s the point of passive income. While there are many ways to generate passive income, it is important to further diversify your portfolio and look for alternative vehicles to earn more money. We’ve shortlisted some of the best passive income ideas & strategies which are apt for beginners who want to make more money or build wealth.
Active Income vs Passive Income
The difference between active and passive income – Your business associate who does most of the work will consider the income that they earn from the partnership as active income. This is the polar opposite of passive income because the former is money earned from rendering a service. Your salary is considered as an active income, so are tips and commissions.
Let us assume that you have a 50% interest in a business venture, you have invested more than 100 working hours to make the enterprise prosper. In this scenario, you consider this as an active income whereas a passive income is earnings derived from any form of business or partnership in which a person is not actively involved. A passive income can also be referred to as residual income.
Importance of Passive Income For Financial Freedom
What does it take to earn passive income? The best passive income ideas require little to no work on your part after you’ve set up the deal. They certainly require far less work than trying to day-trade stocks, manage your own small business, or work for a large firm. The best passive income ideas will generate revenue while you’re asleep or on vacation. This includes ad revenue from a blog, royalties from a book or online course, and the rent from a rental property. People promoting passive income systems or frauds will tell you that it is so easy that you’ll earn money while you sleep.
In reality, it may do so, though you’ll always want to check in on things periodically, and there will be work to do at the very beginning. One of the misconceptions about passive income is that you can do so by trying to game the stock market or another financial institution. Day trading stocks, trying to trade cryptocurrency and other methods are touted as the best passive income ideas, but in reality, they require work on your part and put your money at far greater risk than most investors are willing to take.
Considering the nature and benefits of passive income, a lot of people are attracted to it. A passive income can be very rewarding because you become your own boss. This equates to the ability of managing your time. You can still financially gain on a business transaction while you spend time with your loved ones. Even better, you can go on vacation and still earn money. Although you earn paid leaves in a regular job, the vacation time is counted. As you probably know, this carries a lot of risk because you are not actively doing something to ensure the success of the endeavor.
But you can lessen such risk by investing on passive income ideas that have been tested and proven to be successful. Passive income will give help you in making a safer retirement plan. Creating passive income streams means you have cashflow. Cashflow is different from savings because you’re getting an amount on a regular basis. There is something coming in and it’s not much different from getting a pay check. Except you’re not actively working.
Passive income in most incidents are taxed at a lower rate or can be easily deferred for a later date. Getting taxed a lower rate means you can leverage your cash flow better, which is an important benefit of passive income. You can create multiple streams of passive income. If you can successfully build a blog from scratch and earn through Adsense or affiliate marketing commissions, you can surely repeat and add multiple blogs in your portfolio. The effort for building successive affiliate blogs or websites is gonna be much easier than before. Similarly, after breaking even on your first rental property you buy another and so on.
Best Passive Income Ideas To Make Money & Build Wealth
Passive income is money that is usually (but not always) received on a regular basis without any or only little effort. You either have to do much in the beginning to set up your passive income stream or/and you regularly have to invest at least a bit time, effort or money to maintain that income.
There are thousands of best passive income ideas you can come across on the internet for earning monthly residual income. But we can filter these down to some easy passive income ideas and strategies that actually work. Here is the list of 18 passive income ideas and strategies that can help you make more money.
1. Making Passive Income with Real Estate Crowdfunding
Bankrolling a real estate deal has always been the top choice for tried and tested as one of the best passive income ideas. You may not be constructing anything on that specific property. But you stand to gain something in the future as land never depreciates. If you do not have that much spare cash, you can still invest in the real estate market with this money making scheme. Real estate crowdfunding has become quite popular because investors are able to view deals online, do their due diligence with the information organized on the platforms, and then invest with the click of a button. What is great about this is that your money will not be tied to just one project. You can invest in as many projects as you want.
2. Passive Real Estate Investing
There are many ways to make passive income in real estate and passive real estate investing is considered a “smarter strategy” in real estate investing. There are two basic ways to make profit in passive real estate investing; one of them is direct income from rentals. Once the income surpasses the expenditures, then you are on the winning side. Owning rental real estate is a classic way of earning passive income. This is one of the best passive income ideas because the tax code and the legal system are designed to reinforce your rights.
You can write off the deprecation of the property and offset your rental income. The courts will help you evict a nonpaying tenant. Banks are eager to lend you money because real estate almost never loses value, and insurance can offset the risk of losses. This strategy isn’t as popular as fix-and-flip because it doesn’t have the potential of tens of thousands of dollars at a single go, and the long-term maintenance obligations are a turn-off to some. This is perhaps the best passive income ideas if you have enough money to buy an apartment complex.
You can hire an apartment manager and maintenance workers to handle all the day-to-day work you’d have to do yourself if you own one or two single family houses for rent. The other way you can benefit is by increasing the value of your investment property and mining the equity that you generate. You either can take low interest loans against the equity or sell your investment property for a profit and reinvest by buying more rental properties.
If you are a beginner in rental property investing, it very important to read good real estate books and learn from the savvy investors who have made fortunes by investing in some of the best real estate markets in the U.S.
3. Own Rental Properties Indirectly For Cash Flow
There are several ways you can own rental properties indirectly. One is to be an investor in a rental house, owning a share of it while someone else handles the maintenance and collects the rent. This is truly passive income. The downsides include lower returns that if you owned the property outright, illiquidity, and potential problems if your business partner makes mistakes.
If they choose bad tenants, there’s no income and you have limited say. If they are sued or go into bankruptcy, you’re joined at the hip as their business partner. One alternative is owning shares of a real estate investment trust or REIT. The shares are often as liquid as shares of stock. The rates of return are lower than if you owned the apartment buildings they built and manage, but you don’t have any liability, either.
You can invest in REITs in a variety of different ways, including purchasing shares of publicly traded REIT stocks, mutual funds and exchange-traded funds. REITs generally own and/or manage income-producing commercial real estate, whether it’s the properties themselves or the mortgages on those properties. You can invest in Retail REITs, Residential REITs, Healthcare REITs, Office REITs and Mortgage REITs. REITs will provide you high dividend yields along with moderate long-term capital appreciation. Investing in REITs is one of the best passive income ideas for investors.
4. Passive income from AirBnB
Airbnb provides a passive income system to monetize living space. Airbnb makes it easy to earn passive income from renting a room, an apartment or an entire house. Their systems handle, the bookings and the payments while the hosts handle all the rest. If you have a spare room in your house, then you can have it rented it out. This is one of the passive income ideas where the risks are quite minimal. All you have to do is put up an advertisement online that such room is available for rent. You will just have to wait for people to check your spare room and rent it. You can partner with Airbnb and earn passive income as an Airbnb host by renting your room.
The sharing economy is based on people renting out assets they aren’t fully utilizing in order to earn income. This can be rather passive income, or you can be an active player. The best passive income ideas in this space require almost no work from you, such as when you rent out your vacation home on Airbnb while the property manager maintains it as they always do. There are many turnkey AirBnB management companies out there that can make your short-term rental passive income hassle-free.
Renting out a spare room in your house is a little more work, but it is open to almost everyone. Passive income is renting out your car by the hour on rental sites, whereas active income is driving people around through Uber or Lyft. Note that there are many things you can monetize this way. Depending on where you live, you could rent out your parking space for money. You may be able to rent out tools that you own. The questions you have to ask are what you’re willing to lend out and what demand for these items is like in your area.
5. Buying Bonds For Passive Income
This is often included in most passive income ideas because you can just sit back as the money rolls in. Buying bonds are considerably safer compared to investing in stocks because bonds are considered as liabilities by the company that issued them. Bonds are loans offered by corporations, cities, and governments. In exchange, there is a written and signed promise to pay a certain sum of money on a certain date and condition.
On the other hand, stocks are considered as equity. If ever that company files for bankruptcy, they have to settle their liabilities first before anything else. Governments can also issue bonds but not stocks. To build a large enough passive income stream you can invest in tax-free municipal bonds, government treasury bonds and corporate bonds.
6. Stock Investment
Owning stocks and bonds to many doesn’t seem like one of the best passive income ideas. Yet this is the very basis of private retirement accounts. You’re buying stocks, bonds and mutual funds that contain both so that you can live off the passive income in retirement. Companies need money to finance their business so they earn it by either borrowing or sharing stocks through an IPO. An initial public offering (IPO) refers to the process of offering shares of a private corporation to the public in a new stock issuance.
Investing in stocks of a company, you become one of its “owners”. When the market is down, this is the best time to buy stocks. If you aggressively save money and seek good-value, dividend-paying stocks, you may be able to achieve a solid passive income before traditional retirement age. Diversify your holdings to reduce the risk of losing everything because a company cratered.
We have separated this from investment in bonds because of the nature of the two. In the previous paragraph, it was mentioned that this is a share of ownership of a certain entity. Some entities pay their stockholders every quarter so it is an excellent way of making a living without doing anything. But you have to be careful in choosing the company to invest in.
7. Time Deposit
You can earn passive income by investing money in fixed deposit accounts. This is one of the best passive income ideas that presents very minimal risks. Unlike other savings account, a time deposit has stated date of maturity. You cannot withdraw such deposit before the maturity date. The interest rate of this type of savings account is considerably higher compared to other accounts, but it depends on the term and amount placed. Once you will withdraw your savings, you have to notify the bank at least 30 days before the said date. The higher and longer you park your money, the higher the interest rates will be.
8. Affiliate Marketing For Passive Income
Blogging is often seen as a great way to earn almost passive income. This isn’t completely passive income; you have to create content that will attract enough viewers for the ad revenue on the blog to be worth the effort. You have to write content, but you can hire others to write content for you, as well. You can use software to schedule posts to be published when your readers expect new content.
General ad revenue for blogs has been declining due to sheer competition. The alternative for bloggers is affiliatizing the blog. For example, a Mommy blogger could be paid to review various baby products, though she’s legally required to disclose the relationship. You could mention sponsors and post a link to their site or products for sale. On the other hand, you could do it yourself, doing product reviews and sharing affiliate links to the product Amazon. Then you receive a few percent of every sale as a commission.
This is one of the best passive income ideas for those blogging consistently about a topic for which they can recommend related products. This is one of the passive income ideas that do not require any investment from you. This would be an excellent money making venture especially if you already have an existing website and a band of loyal followers. In this scenario, you post a link that will send the viewer to a certain website where they can buy the item. If they do purchase, you get a commission.
9. Lending Money
Another one of the best passive income ideas is to loan money to others. We’re not saying to loan money to a broke friend who never pays you back. Instead, utilize peer-to-peer lending sites to loan money to others. The lending site collects the payments and provides more leverage when someone is late. You as a lender can lower your risk by diversification. Simply lend money to a variety of people instead of putting all of your money, literally, in one basket. This is a wise strategy if you’re pursuing the higher yields that beat stock market returns.
This is probably one of the few passive income ideas that involve high risks. But it is quite profitable. You can lend money to people who cannot qualify for conventional financing means. You could lend money with an interest of 6 to 10%. A good way to lessen your financial exposure is by investing in a company that will act as a mediator. They will ensure that you are paid back.
Another easy passive income idea through lending is called peer-to-peer lending in which you can give loans to other individuals who don’t meet all requirements for conventional financing. A crowd lending website is where you become someone who loans out money and you get paid interest. You’re like a bank now, getting paid interest. It’s an awesome feeling to be the lender instead of the borrower. You invest in portions of loans. With returns of 6-10%, investing with a company like Lending Club can get you substantially higher passive income than normal investment funds or bank interests.
10. Earning Passive Income As Silent Business Partner
One of the best passive income ideas most people have never heard of is becoming a silent partner in a business. Instead of lending the business money, you buy a stake in the business. Then you’re paid a percentage of the profits, and your money is backed by a percentage of the assets of the firm. There are sites where you can search for businesses seeking silent partners. Instead of giving a friend thousands of dollars for a 10 percent stake in their restaurant, you can choose from thousands of startups or small businesses for one that looks good to you. Moreover, you can reduce your risk by investing in several startups.
This is one of the best passive income ideas for those who were thinking of starting their own business but decided they didn’t want to do all the work. Know that passive income ideas like this require doing your due diligence, vetting the business’ numbers and verifying that your rights as an investor are protected. You can also bankroll the business of your friend or family. They will then be able to run the business for you.
If this is an ongoing operations, you must study their financial statements and other aspects of their business before shelling out anything. But if you are investing in a new entity, you must know if your business partner is trustworthy. Although this does not lessen your financial exposure, you can sleep peacefully at night knowing that your money is in safe hands.
11. Vending Machine Business
This is one of the often underestimated passive income ideas. But it is a great way to make money especially if you have found the right place to install your vending machine. Consider the number of people going in and out of that place, you will stand a big profit if you have placed the machine in a strategic area. A well-placed vending machine can potentially earn $100 per week or even hundreds of dollars per day.
For example, if one vending machine in a prime location can bring in $50 to $100 per month. If you buy 100 vending machines, all in prime locations, you may be able to hit an average of $1000 per day. Like any business, most states require vending route operators to obtain proper permits and licenses required by their local ordinances. When planning to start a vending machine business, it’s important to check your local ordinances.
12. Cash Back Websites
This may not be considered as something that will help you go to an early retirement. But you can still earn money with no effort required from you. Not to mention that this is completely free. All you have to do is sign up in cash back on shopping websites. They will give back a portion of the total amount that you spend on your purchase.
13. Writing Books For Passive Income
Selling books can be an incredible way to create some genuine passive income in the form of royalties. In today’s day and age, once your book is accessible on a site like Amazon, you could get a check every month for doing literally nothing. Clearly, the more time you spend promoting your books, the more cash you’ll make online and offline.
14. Making Money Through Drop Shipping
With the blast of eCommerce, drop shipping has turned out to be extremely famous. Here’s the means by which it works: you make an online store that offers items from certain manufacturers. A person visits your site, orders an item, and your system sends the order request to the manufacturer of that product.
The maker at that point completes the order by shipping it directly to the person who had placed the order on your site. A cool aspect concerning this kind of business is that you don’t have to stock products that you are selling – No inventory required from your side. Customer pays for the item; you collect the commissions, and the manufacturer or seller of the items stores and ships the items to the customer.
15. Start Your Own Blog To Build Passive Income Stream
The passive income through blogging has allowed many to stop exchanging time for money. For example, as a travel blogger, you can set up a WordPress blog and share your experiences with your readers. Whenever you go to a new place, you can write about all the cool things you saw and did there. You can make money in a few different ways. You can apply for ad programs like Google Adsense and set them up on the sidebar of your site.
If any of them click through, you will get a small fee from your advertising partner like Google. You can also sign up for some of the affiliate programs. As mentioned above affiliate marketing is one of the various ways to make money online by promoting products or websites to earn a certain percentage as a commission.
16. Buy Money Making Websites/Blogs
Many blogs earn revenue from Google ads. Some may have affiliate income as we described above. What most don’t know is that you can buy blogs from the owners and take them over. The ideal cases have evergreen content that generates passive income for years. Add some fresh content, and you’ll increase traffic and monthly revenue. This also raises the possibility of earning money with site flipping.
Alternatively, you can build a niche blog that targets a small subset of the blog’s audience, increasing its value to the audience and advertisers. You can even increase traffic to all of your blogs by cross-linking to each of them. This is one of the better passive income ideas for those who want to do more than blog on the same subject every day.
17. Create Online Courses & Selling Them For Passive Income
One of the best passive income ideas is selling access to courses or guides to an audience that needs such content. When you identify a need and can create a decent online course that fulfills it, you’ll have people paying you for the content. If it is good, they’ll refer it to their friends, generating more revenue. You only have to create the content once and post it on a site where they pay to access it.
Know that if you create an online course, you can sell a companion “guide” or e-book to the students. If your online guide is selling well, then you can create audio books or courses for them as long as it provides additional value. You can also use online courses to promote your expertise and promote books you’ve already written. This is one of the better passive income ideas for writers, since it allows you to monetize content you already have in a new way that can even raise your profile.
18. Buying Notes
This is one of the best passive income ideas for those who want to secure steady and substantial income, though you have to hunt for it. It is possible to buy loans or “notes” from others. Then you are the one that receives the payments. Every person who offered lender financing to the person who bought his or her home has such a note.
In addition, some of them may be willing to take a discount on the note to get most of their cash back. Know that this requires doing your due diligence and drafting the right legal documents to protect your investment.
If you’re looking for passive income ideas, know that you should stay away from tax liens unless you really know what you’re doing.
These are some of the best passive income opportunities we have listed for your knowledge. They could help you to get started in making more money and maximizing your wealth. Do you have any better passive income ideas that you would like to share? Let us know in the comments below.
Active and Passive Income
Benefits of Passive Income
Real Estate Crowdfunding
Peer to Peer lending
Real estate / landlording
Stocks and bonds
Rent out what you own
Owning shares of real estate
Blogs & Online Courses