Passive income is the dream, right?
Warren Buffett even says it himself:
“If you don't find a way to make money while you sleep, you will work until you die.”
But honestly, what is passive income? Is it money earned for doing nothing?
That's what some people seem to think, but if it were that easy everybody would be sitting on a tropical island right now sipping pina coladas.
Here's the real definition of passive income:
Passive income is money that you earn on a regular basis that requires little to no effort to maintain.
That means it could take you an entire year (or longer) to set up a passive income source, but after that, it could generate revenue for years without much maintenance.
It doesn't mean that passive income requires little to no effort to achieve. If someone tells you otherwise, run the other way.
Now, does this mean that in order to create a passive income stream you need to neglect your family and friends and start working 80 hours a week? No. You can if you want, but you don't have to.
Because some passive income sources are easier and quicker to set up than others. Some require a lot of money, some require a lot of time, and some require both.
That's why I've split the passive income ideas in this article into 5 different categories:
- Get Started With Passive Income Investments (Good for people with money but not a lot of time)
- Generate Passive Income With Real Estate (Good for people with money and a bit of time)
- Create Your Own Passive Income Sources (Good for people with a lot of time but not a lot of money)
- Rent Out Your Stuff to Generate Passive Income (Good intro into passive income)
- Other Passive Income Sources
Get Started With Passive Income Investments
If you've got money saved, one of the best and quickest ways to start generating passive income is to invest that money!
By far the easiest way to get into investing is to use a robo-advisor.
A robo-advisor invests your money for you, automatically. You simply choose how much risk your willing to take, and the robo-advisor takes it from there.
But what about the fees?
Luckily with most robo-advisors, the fees aren't too bad if you consider the convenience a robo-advisor brings. The average fee for a robo-advisor is anywhere from 0.25% to 0.9% per year.
That means if you have $10,000 invested you're going to be spending anywhere from $25 – $90 per year on fees. That's a pretty small amount to pay for the convenience and awesomeness of having your money invested for you automatically. It's also a lot cheaper than a traditional investment advisor.
That's why, in my opinion, robo-advisors are the way to go.
Here are my favorite ones:
- Annual fee: 0.4-0.5% of the account balance
- Minimum account balance: $0
I've been using Wealthsimple for a few months now and it's been great. Signing up was a breeze, my investment account transferred over smoothly and the customer service has been excellent so far. I highly recommend Wealthsimple as a robo-advisor.
- Annual fee: $10
- Minimum account balance: $0
Blooom is the best (and pretty much only) robo-advisor for managing your 401k. When you sign up they'll show you the current health of your 401k and then tell you how you can optimize by cutting hidden fees and improving diversification.
2. Dividend Paying Stocks
Certain companies give a portion of their profits to their stockholders. This is known as a dividend.
Investing in dividend-paying stocks is a great way to earn passive income, but there is a fair share of risk involved as well (just like any investment). For example, companies can lower their dividend yield, or stop paying dividends altogether, which can cause the stock price to drop rapidly.
That's why, just like with any other investment, you must always do your research.
Just because a stock is paying dividends doesn't mean it's a solid investment.
Resources to learn more:
3. Peer to Peer Lending
People need to borrow money all the time, but not everyone can get accepted for a loan at the bank. That's when they might turn to peer to peer lending, which is exactly what it sounds like: people lending money to other people.
You can earn passive income through these sites by acting like the bank and lending your money to people who need it. The amount of interest you earn on your money will depend on the borrowers' credit score.
Peer to Peer Lending Sites:
4. High-Interest Savings Account
Your traditional bank is probably paying you under 1% interest each year. That means your money is losing value due to inflation being somewhere around 1.9%.
$100 in your bank account may be able to buy 100 bananas today, but next year it might only be able to buy 95 bananas.
Now I'm not saying you shouldn't save money, that's ridiculous. Instead, you should save your money in a high-interest savings account so that you can beat inflation.
There are several different savings accounts you could sign up for, but I always recommend Wealthsimples high-interest savings accounts.
5. Certificate of Deposit
A certificate of deposit (or CD) is a relatively safe investment opportunity offered by banks and credit unions. How they work is simple:
You give your money to the bank for a specific period of time, and you get more money back when the time is up. The bank or credit union will tell you exactly how much money you'll get back when you apply.
The catch is that the money you put into a CD will be locked up until the term is over. If you withdraw early, you'll be penalized and you might actually end up losing money.
Generate Passive Income With Real Estate
There are a few different ways to generate passive income with real estate:
6. Crowdfunded Real Estate
If you want to invest in real estate but you don't want to go at it alone, one option you have is to invest in crowdfunded real estate.
Crowdfunded real estate works just like other types of crowdfunding:
- A company finds a real estate opportunity
- A group of investors pools their money together to fund the project
- Any profit generated by the project is then distributed among the investors
If you want to get started, here are some of the best and most trusted real estate crowdfunding companies:
Another way to get into real estate investing without all the risk of doing it on your own is through a REIT or Real Estate Investment Trust. A REIT is a company that owns or finances income-producing real estate.
When you invest in a REIT you get a share of the profit produced by the real estate the REIT owns (a bit like a dividend paying stock). These profits typically come from rental or interest income.
If you want to learn more, go here:
8. Purchasing Rental Properties
So, you're ready to invest in real estate on your own. Welcome to the big leagues! This is where some real passive income can be made if it's done right. If done wrong, a lot of money can be lost.
But won't I have to deal with tenants and property repairs? How is this passive?
Property managers. They are your key to passive income. If you can find and hire a good property manager, you are golden. They'll handle the property management, and you can focus on finding new investment opportunities.
- 28 Tips for Buying Your First Rental Property
- Real Estate Investing for Novices
- Property Investment for Beginners
Create Your Own Passive Income Sources
These passive income sources are a bit different than real estate or investing because they require a different resource: time.
Get started early though, and they will pay off massively in the future.
8. Start a Blog
Blogs blogs blogs. You see them everywhere, and you're reading one right now. They're one of the best ways to create a massive stream of passive income online.
How? Well, there are several different ways to monetize a blog:
- Affiliate marketing
- Digital products
- Physical products
Of those 5 different blog monetization methods, the first 3 can make you money without your presence. People could be reading your blog earning you advertising money and purchasing products all while you're sleeping or walking your dog. How awesome is that?
Want to learn more? Let me show you how to start a blog.
9. Affiliate Marketing
Affiliate marketing involves selling someone else's product for a percentage of the commission. For example, Amazon offers a popular affiliate program where, if you direct a customer to Amazon and they make a purchase, you get a percentage of the sale.
This is definitely most effectively done with a blog or a Youtube channel, but there are other ways to do it, too. For example, Facebook is a popular place to post affiliate links, just make sure you're not spamming. The key to affiliate marketing is to always provide value.
Some other ways you could promote an affiliate offer would be to post in forums or use pay per click advertising.
10. Write an e-Book
This may seem like a daunting task, but think about it:
An eBook may take some months to create, but once it's finished it can be sold over and over again with no physical presence required.
Now you may be thinking – what am I going to write a book about?
Don't worry, you don't need to write the next Harry Potter. The real money is in the non-fiction section. You know, the books that teach you something or help you solve a problem. These types of e-books kill it because people have problems and they're willing to pay for a solution.
If you decide to write an eBook, there are two popular publishing routes you can go down:
Kindle publishing – This is the easier route and it gives you access to Amazon's Kindle users. The downside is that you won't make as much money as Amazon takes a cut of all your sales.
There are other publisher platforms as well that work similarly to Kindle.
Blog publishing – If you go this route you'll have to learn how to set up your own website, but it will be worth it as you get to keep 100% of the profits. You can also build your own audience with a blog and monetize them in other ways, or with more eBooks later on. This route will most likely be more profitable in the long run.
11. Create an Online Course
Creating an online course is similar to writing an E-book except with an online course you'll be filming videos instead of writing chapters.
The key to making a good online course is to do your research. Before you start creating a course on anything, make sure there's a demand for it.
Think about your current skills and what you might know that people would pay to learn. Try to think about what people ask you to help them with, or the things you do for fun.
If you really can't think of anything, find something that you'd like to learn and create a blog around it. By writing about it regularly on your blog you'll start to become an expert in your chosen niche and you'll be building an audience of potential customers at the same time.
Sites to create your online course:
Drop shipping is when you run an online store but you don't hold any product.
If this is your first time hearing about this, it probably sounds a bit silly. How is it possible to run a store with no products?
Well, there are products, they're just with the suppliers. When a customer orders a product from your store, you put the customer's details into the supplier's store, and they handle the rest.
Here's the broken down version of it:
- A customer places an order on your website
- You receive the order and the customers shipping details
- You go to your supplier's website, input the customers shipping information, and purchase the product
- Your supplier ships the product to your customer
That's the basis of how dropshipping works, and it's generally risk-free because you don't have to purchase a product until someone actually orders it.
13. Start a Youtube Channel
This 6-year old makes 11 million dollars a year from reviewing toys on Youtube. Just let that sink in. 11 million.
Isn't that mind-blowing? He's just one example too, there are many other YouTubers making a good living just from Youtube ad revenue.
How do they make so much?
Well, the average Youtube ad revenue is $2 per thousand views. That means if you have 50 videos each getting 1,000 views per day, you're making $100/day. On top of that, there are a lot of other ways to monetize a Youtube channel such as sponsored videos or merch.
In order for all of this to work though, you need to be willing to make videos. Choose a topic that interests you and get to work!
14. License Stock Photos
If you've got photography skills then licensing your photos could be a passive income idea that's right up your alley.
The way it works is simple, you upload your photos to a stock photo site, and each time someone downloads one of your photos you get paid.
Since content marketing is so huge, there are millions of photos downloaded every day from stock photo sites. That's potential money in your pocket!
Best stock photo sites:
Rent Out Your Stuff to Generate Passive Income
15. Rent a Spare Room
If you've got a spare room that you don't use, why not rent it out for some easy passive income?
People rent from Airbnb all the time looking for better rates than hotels, and you'd be surprised at how much money you can earn just by renting your place out a couple times per month.
It's free to list your room on Airbnb, so give it a shot. Airbnb will even give you an estimate on how much you can earn from each rental.
16. Rent Your Car
Just like renting a spare room on Airbnb, you can rent your car on Turo or Getaround. It may sound like it's not worth the time but it's possible to make $1,000s per year by renting out your car to those in need.
Worried about the risks? Don't be. Both Turo & Getaround screen every renter and cover you with insurance and 24/7 customer assistance. Both platforms are completely free to use as well!
17. Rent Out Your Parking Spot
Parking in some areas is getting ridiculously expensive. Luckily for us, that means opportunity.
You can make some extra cash passively by renting out your driveway, garage, or parking spot to drivers in need. This works especially well if you live in an area where parking is hard to come by.
You can rent your space out either daily or monthly, and you control the availability as well.
Other Passive Income Sources
18. Turn Your Car Into an Ad
Did you know that you can make money by turning your car into a moving advertisement? It's called car-wrap advertising, and it's a great way to earn passive income for doing something you already do: driving.
In order to become a driver you'll need to have a car that's 2008 or newer, and you'll have to be someone who does a fair amount of driving. Those in busier areas will get more advertising offers since advertisers want to show their ads in specific places.
Here are the top two companies for car wrap advertising:
19. Get Cash Back
You're already shopping anyway, so you might as well earn some cash back while you're at it. It's basically free money.
To start off, sign up with the biggest cashback site on the web: Ebates (don't forget to download the browser extension as well). After that simply shop through the Ebates site and/or link your credit cards to your Ebates account and you'll start earning cash back passively.
The next thing you should do is get Paribus (it's free) which will monitor your purchases and check for price drops. If it finds a price drop, it will get you a refund automatically (if the store offers it).
If you want to find more cool tools like these, check out my resource page.
20. Download These Passive Income Apps
If you want to generate passive income effortlessly, just download these passive income apps:
- Join the Nielsen Computer & Mobile Panel and get $50/year in passive income.
- Download the Survey Savvy app on up to 3 devices to earn up to $180/year in passive income.
- Download Sweatcoin and earn money while you walk.
Although many internet marketing gurus like to promote passive income as this magical, make $10,000 fast while you sleep sort of thing, that couldn't be further from the truth.
Most passive income ideas are very long-term, and if you don't stick with them until the end you're not going to see very good results. That's why I encourage you to pick one that interests you and get started on it today. Not tomorrow. Today.
The earlier you start, the more time your asset has to grow.
Now I want to hear from you:
Which passive income idea is your favorite? Which ones are you going to try?
If you found this post helpful, I'd be super happy if you shared it!
I'm trying to help as many people as possible with this blog but I need your help to help more people (lot's of helping). Thanks a lot - you're awesome!