If your full-time gig isn’t getting you to your financial goals, passive income can mean extra money with no extra effort. Here are some of the best passive income sources you can start taking advantage of today.
What is passive income?
Passive income (or residual income) is the holy grail: revenue streams that make money without your attention.
Passive income isn’t a side hustle where you generate money by taking on odd jobs here and there. Driving for Uber would be a side hustle. But renting out your car to someone else would be passive income.
Adding income sources is key in building wealth. Passive income allows you to have multiple revenue streams while not requiring your attention elsewhere. The catch? There’s the upfront cost of time or money to start generating passive income.
Here are some passive income ideas to get started.
Sell an online course
It wasn’t that long ago having an online business was mostly people selling off dusty workout equipment and outgrown clothing on eBay. But the ecommerce landscape has expanded with whole new earning opportunities.
Platforms like Thinkific or Udemy are a great place to increase cash flow with the skills you already have. Are you a master at building websites? Start a web development class. Marketing whiz? Consider SEO tutorials. Or if you prefer to teach through writing, an ebook is an alternative. Amazon Kindle makes selling your writing a breeze.
The work upfront is making the content. Once you have the content, you can start selling it on any of these digital platforms or your own website and let it make money. No tracking inventory, no shipping products, no more work on your part. If you have a subject you’re passionate about, this passive income strategy is for you.
Sell digital products
When you sell physical products online, you have to worry about inventory and shipping. Every sale made is more work for you.
Digital products allow you to sell something, but not worry about restocking or shipping.
Etsy has expanded so you can start selling digital products today. If you’ve got an eye for aesthetic, you can sell digital art licenses.
If you already organize everything in spreadsheets, think about how you can convert your work into a template. Your DIY budgeting, inventory management, and project costing tools can be put to use by other businesses willing to pay.
Join an affiliate marketing program
If you’re a blogger or have a decent social media presence, your audience can be turned into a passive income stream.
Affiliate marketing is earning a commission by promoting other people’s products. You can start by looking at your high traffic blog posts or content. Do you mention any products? Check to see if there’s an affiliate program for them to start earning. This lets you earn off the content you already have.
The Amazon Associates Program is one of the easiest ways to get started. Their simple link-building tools will direct your followers to products and you earn from the traffic generated and qualifying purchases.
Take advantage of referral programs
Referral programs act a little differently than affiliate programs. While you don’t have to use the product to be an affiliate, you will have to be a customer to take advantage of a referral program.
Most referral programs work similarly to affiliate programs where you can use a personalized link to start generating referrals. Add a referral link to a piece of content you already have—or plugging a referral link on your social media—and let it earn for you.
Businesses love referral programs because they get high quality leads—and they’re willing to pay you for them. The catch is most programs will only pay you once the lead actually purchases the product.
For example, Google’s G Suite referral program will offer you $15 to $30 depending on what plan they purchase. You’re allowed to earn up to $3,000 from referrals. PayPal will similarly reward you with up to $50 for referring 5 friends.
Even Bench has a referral program. If you’re a client, you can earn a $150 gift card and a free month of service. Learn more.
Earn rental income (on real estate and more)
If a closet in New York City can be considered a bachelor suite, you might have something you can rent out as well.
Subletting a section of an office that isn’t being used to its full potential is a simple way to turn empty space into recurring revenue. But rental income doesn’t necessarily have to be from real estate.
If your business is seasonal, other assets can be rented out as well. Look for opportunities to rent out any vehicles or equipment that will be sitting around unused for longer periods of time. Turo works like an AirBnB for cars—you post your vehicle online and get connected with renters. So the next time you’re on a business trip or out of town, let your car generate some easy income for you.
Advertise on your vehicle
If you spend a lot of time driving, you might as well make some extra cash while doing so.
Agencies like Carvertise set up drivers with advertisers to advertise on their vehicles. You will get paired up with a company based on your location and how frequently you drive. Once you’re paired up, they take care of putting the advertisements on your car. But this isn’t a permanent alteration and you aren’t locked in to any long term contracts. For the entrepreneur on the go, this is a great way to cover your transportation costs if you’re not already advertising your own business.
Sell stock photos
Stock photos can be a fast track to meme infamy for some, but for most, it’s just a revenue source.
Good photography is as accessible as the camera on your smartphone. Uploading these images to websites like Shutterstock will make your photo available for use as a stock image. These websites pay you a royalty every time your image is used.
Experts say to find a niche and master the keyword tagging function to find success. Create stock photos for your industry by running a quick photoshoot during your day-to-day operations.
Once your images are uploaded, you don’t need to do anything but sit back and earn royalties. If your income from your photos slows down, consider adding new keyword tags.
Invest in real estate investment trusts (REITs)
Real estate investing doesn’t mean having the capital to buy property anymore. REITs are the hands-off way to earn money from real estate without being responsible for the managing and upkeep.
How it works is you put in a sum of money that gets pooled with the contributions of other real people to get invested in real estate. As it generates income, it gets passed on to the investors. You can get started today with a $1,000 minimum investment at Fundrise.
REITs are great for consistent growth on your investment, but the rates aren’t much higher than some high-yield savings accounts. This makes REITs a great option for someone looking to have more control over their investments but in a low stakes environment.
Buy dividend paying stocks
If you’re looking to invest in the stock market, dividend paying stocks have one big advantage: monthly payments.
Typically, trading on the stock market means buying, keeping a pulse on trends, waiting for your investment to increase in value, then selling. You have to be hands-on and you don’t get a return on your investment until you sell. Dividend paying stocks are a much simpler experience. They have regular payouts of the company’s earnings to investors letting you reap the rewards without lifting a finger.
While these stocks are typically well-established companies, there is still some risk if your investment comes across hard times. But if you don’t mind some risk with your passive income, dividend paying stocks are a fit for you.
Some intuitive online platforms to check out:
Get started on index funds
Another straightforward way to start investing is index funds. An index fund is a type of mutual fund—a collection of stocks and bonds that makes buying simple. Instead of picking out individual stocks, you buy a portfolio of stocks picked by experts.
While mutual funds can have different risk levels, index funds are unique in that they are made to perform at the market index. Simply put, the market index is an average of how the market is doing. This means you will only experience losses if the majority of investors are experiencing losses. They also have lower management fees meaning you get to keep more of your passive income.
But index funds are also made for long-term performance and the funds aren’t easily accessible once invested. Index funds are best suited for those looking to save for retirement or have a long-term plan.
Get a high-yield savings account
A high-yield savings account is the classic passive income stream. They’re popular among your friends, family, and other entrepreneurs alike because they’re simple and consistently work.
Generally, bank accounts are used by entrepreneurs for storing emergency funds or while saving for that big purchase. They can pay 20 to 25 times the national average of your normal savings account. The internet has made it easier to hold accounts at multiple banks, so you can shop around for the best rate.
For example, if you store $5,000 at the national average 0.08% interest rate, you would earn $4 in a year. But if you find an account with a 0.7% interest rate, that number increases to $35. The amount of money it generates isn’t much, but you may as well let your money work for you if you’re pocketing this money away for the future.
High-yield savings accounts also means your money is accessible any time you need it. This makes a high-yield savings account a great fit if you’re saving money but want to keep access to it.
Invest in peer-to-peer lending
Borrowers have access to new lending opportunities with peer-to-peer lending, and you have the opportunity to be the lender.
Platforms like LendingClub give you an opportunity to back either personal or small business loans. Here’s how it works. Each loan is backed in small chunks by real people wanting to earn passive income. You get to choose how much risk you want to take on then your money will be spread out over multiple loans so if a borrower defaults, only a small portion of your investment is affected.
Depending on how your investment is split up, you can earn over 5% interest on your money. The catch is because you’re lending money to real people, peer-to-peer lending is unpredictable with the possibility of borrowers defaulting. This makes it a good option for someone who doesn’t need that consistency and can sleep easy with a bit of risk in their investments.
Further reading: Peer-to-Peer Lending: What Lenders Need to Know