What is Passive Income?
Passive income is money that gets added to your bank account without requiring too much 'active' effort on your part. As the name suggests, passive income makes minimal demands on your time and energy, allowing you to continue investing fully in your job or business while opening up an alternate revenue stream.
In this article, we're going to take a look at some practical means of passive income and help you start earning FREE money!
Table of Contents
Although there are a multitude of ideas for generating passive income, they're not all created equal. Almost all Ideas for generating passive revenue streams require an Initial Investment of either time or money.
If there was ever a way of 'making money while you sleep,' passive income is it.
In this article, we'll outline 20 ways to earn passive income, as well as basic information on how to get started with each idea. So, if earning passive income is something you're interested in, keep reading.
Passive Income Ideas
Here are some ways to earn passive income. Of course, the effort required from you may vary depending on the time, money, and other resources you'll need to invest initially.
1. Rent out valuable household items
Have you ever thought about renting out items that are just sitting idly in your garage or attic? You probably have some household items that are expensive but not being used presently. Instead of gathering dust in a corner or getting rusty from lack of use, you could put them to good use by renting them out. Some examples of things you can rent out (and websites that facilitate the transaction) are:
Tents and other camping tools - Loanables.com
Lawnmowers - FatLama.com
Power tools - FatLama.com
Baby gear - BabyQuip.com
Camera equipment - ShareGrid.com
Event or party furniture such as tables and chairs - Loanables.com
The idea is to rent out high-value items that people typically require for a short time and, therefore, would be more cost-effective to rent instead. You can list your items on platforms such as Facebook or Craigslist or let your neighbors know that they can visit to check your rental inventory at any time. Ensure that you protect your assets by demanding a security deposit or similar assurance in case any of your items incur damages.
2. Rent Out Your Computer's Processing Power
Did you know that your computer can function as a money-making tool? Many individuals and companies are looking for extra processing power to carry out tasks usually related to research or big data analysis.
The concept of having people' rent out' their hardware's computing power is called distributed computing.
Simply put, you only need to leave your computer running to earn money.
You don't need to perform any research or data-related tasks at all. In other words, it's all about renting out your PC's CPU to individuals or companies in need. While this will not help you get rich, it allows you to have an additional income stream to supplement your budget and clear off some bills.
You can earn passive income with the help of a distributed computing platform, your computer, and an internet connection.
Here are some platforms you can look up if you are interested in learning more about this concept:
3. Recover your old 401(k)s
Companies will contribute to 401k retirement savings plans for their employees during the the course of their employment; but when you change jobs, that money often gets left behind.
Unless you transfer that money into your own person IRA, it will just sit in limbo for forever.
Beagle helps people recover their old 401(k)s.
Just sign up for an account and they'll help you recover your money!
4. Invest in a high-yield CD or savings account
You can generate a passive income and enjoy high-interest rates by investing in an online bank's high-yield certificate of deposit (CD) or savings account. Online banks offer more flexibility and allow you to choose the best rates in the country, making it a better option than your local bank. Ensure that the FDIC backs the financial institution you are considering to enjoy a guaranteed return on principal deposits up to $250,000.
To make the most of your CD or savings account, check the following resources:
5. Real estate investment trust
A real estate investment trust or REIT is a company that owns and manages real estate. They have a unique legal structure that allows them to pay very little corporate income tax as long as they can pass along most of their income to shareholders - a win-win for all concerned.
If you're already familiar with the stock market, REITs are something you can purchase just like any other company or dividend stock. Whatever the REITs payout as a dividend will be your earnings. REITs increase their dividend on an annual basis, which means the chances of growing your dividend streams over time are also high.
Some of the leading REIT platforms are:
Again, this is great if you already have experience with purchasing stocks. But, if it's your first rodeo, proceed with caution and thoroughly investigate each business in which you consider investing. A much better option involving lesser risk is owning exchange-traded funds (ETFs) consisting of REIT stocks. This way, the fund can provide diversification, and it will be a lot safer than buying stocks individually while allowing you to still get a good payout.
For more information about investing in REITs, be sure to read: "Investing in Stocks and Cryptocurrency for Beginners."
6. Selling information products
Information products are a great way to generate a steady income stream because they allow you to make money consistently once you've created your product. Some popular types of information products are:
Membership apps for fitness & nutrition
You can publish your ebook via Kindle and distribute online courses through sites like Coursera, Udemy, or Skillshare. Some creators follow the 'freemium' model by providing a certain amount of high-value information or teasers on platforms like YouTube, Instagram, or even TikTok. Interested audiences can then access additional information by paying for it. For example, many fitness channels on YouTube establish their expertise and build audiences by disseminating valuable and free content. Followers who want one-on-one training, access to workout videos, recipes, or ebooks containing practical training and nutrition info, are required to pay an extra fee.
7. Rental income
A lot of people invest in rental properties to prepare for retirement. The reason is that it's often a steady source of income once you've placed your initial investment in buying a rental property and have the place/s set up for rent. It also takes less effort to maintain than running a business, making it an ideal income stream for retirees (and other demographics, too).
To maximize passive income from rental properties, consider the following:
Your desired ROI (return on investment)
How much you spent on the property (total cost + additional expenses for renovation, furnishing, maintenance, etc.)
The financial risks of owning and renting the property
The above factors will help determine a reasonable monthly rental rate for your tenants. However, before buying a property, factor in other things like if there's a market for it, the neighborhood, what your plans are in case a tenant delays payment or damages the property, or your plan B if you're unable to rent it out. It's essential to think about these beforehand, as proceeding without a contingency plan might leave a huge dent in your income.
Weigh out the risks and potential rewards before fully committing to renting your property to ensure that your investment is protected and has the highest earning potential for you.
8. Affiliate marketing
Affiliate marketing is about promoting a third party's product through an affiliate code or link. Website owners, bloggers, YouTube vloggers, and social media influencers maximize this effort to earn passive income.
Through their affiliate code (usually a discount code) or affiliate link (link directly to the purchasing platform), companies track and give commissions to people who can help them promote their products.
Among the most popular affiliate marketing programs are:
For more information on affiliate marketing, be sure to read: "A Beginner's Guide to Affiliate Marketing" and "60 Marketing Experts Reveal Their Best Secrets for Driving Traffic to an Affiliate Site."
9. Flip retail products
Offer good deals by taking advantage of online sales and bulk discounts on platforms like eBay and Amazon. Flipping retail products is a great option, especially if you have contacts in retail or a supplier who can give you access to discounted merchandise.
You can sell just a few products consistently over time and eventually build a clientele that trusts you as their supplier (because you can give them great deals too). The key here is in finding a niche market and understanding demand trends. For example, you can supply 'purple shampoo' at lower prices to independent stylists, hair dye enthusiasts, and maybe even neighborhood salons once you've found a reliable online supplier or retailer that can give you bulk discounts.
We've used this example because purple shampoo is an overlooked commodity that's always in demand among stylists (and people who color their hair blond regularly). Still, it's also very often out of stock at neighborhood stores.
Even specialty beauty stores like Ulta often run out of them. The demand tells you that you can fill in the gap between neighborhood drug stores and consumers by simply finding a reliable supplier and offering competitive prices.
For more information on flipping products, be sure to read: "Retail Arbitrage: An Easy Way to Earn Fast Money."
10. A bond ladder
A bond ladder is a series of bonds that mature at different dates over a specific period. Because maturities are staggered, a bond ladder allows for decreased reinvestment risk.
Bond ladders are a great source of passive income and usually appeal to retirees (and near-retirees) because of their investment-risk ratio. It allows investors to collect interest payments while allowing them to roll the principal from a matured bond into a new set of bonds.
If you invest in a bond ladder, you can choose among bonds with maturity dates of one year, three years, five years, or seven years.
11. stock Dividends
When you are a shareholder in companies with dividend-yielding stocks, you receive a payment from the company at regular intervals. Companies pay dividends quarterly out of their profits; all you need to do is own the stock.
Since dividends are paid per stock share, you get higher payouts when you own more shares. This makes owning dividend-yielding stocks one of the most passive ways to make money, as the money is simply deposited into your brokerage account.
However, this is not entirely risk-free. To ensure that you'll be making money instead of losing it, you have to be discerning about choosing your stocks. Financial experts suggest thoroughly researching each company issuing stocks for two to three weeks before investing. Of course, you can also go with ETFs, which trade like stocks but are funds that hold assets (stocks, commodities, and bonds).
12. Advertise on your vehicle
Believe it or not, you can earn extra money by just driving your car around. And no, we don't mean as an Uber or Lyft driver—that's more of a side hustle. Instead, we suggest letting brands and businesses advertise on your vehicle and maintaining your driving route and schedule as you normally would.
All you need to do is contact an advertising agency. The agency will evaluate your driving habits, usual routes, and usual mileage per trip. Should you match with one of their advertisers, the agency will 'wrap' your car with ads. It won't cost you anything, and you won't have to change your routes. You just have to be comfortable about having your car wrapped with ads.
Driving a wrapped vehicle is a great way to earn passive income, especially if you drive around a lot anyway (going to work, school, running errands). In addition, drivers are paid by the mile, so you can earn hundreds of dollars a month at no extra cost to you.
Companies like Wrapify can help you wrap your vehicle.
13. Peer to Peer (P2P) Lending
A P2P loan is a loan between you and a borrower facilitated by a third-party intermediary such as:
Being a P2P lender allows you to earn passive income via interest payments made by the borrowers. However, there are risks involved because P2P loans are often unsecured. Therefore, to avoid losing money, you need to:
Invest in smaller amounts and over multiple loans (Prosper and LendingClub allows a minimum investment of $25 per loan)
Do your research on prospective borrowers' historical data to ensure you're lending to trustworthy borrowers with good payment histories.
14. Open a Dropshipping eCommerce Store
A dropshipping store is another example of an endeavor that requires you to invest in a considerable amount of work upfront before earning passive income. Dropshipping is a popular business model because it enables people to start a business with little to no capital.
As a dropshipper, you also don’t need to worry about storing physical materials. You will be purchasing items from a third party who will then ship the items directly to your customers. There’s no need to worry about inventory—your supplier stores the items and ships them out according to your customers’ demand.
Having said that, here’s a list of things you’ll need to prepare if you want to earn passive income from dropshipping:
An excellent product to sell: Choose something inexpensive to ship but will allow you a high markup.
A wholesale company: Find a wholesale company that is willing to dropship directly to your customers.
A retail website: Purchase a domain and create an online store for your dropshipping business.
Find a shopping cart option: You’ll need to add a shopping cart option to your website. Make sure it’s secure and covers everything you need depending on the products you sell.
Once you’ve set these up, you’ll only need to worry about maintaining and updating your website ever so often. You might also need to attend to customers’ concerns as and when they arise. Other than that, your wholesaler and website will do the work for you, making dropshipping a great way to make money passively.
15. Create an App
Creating an app is another example of an endeavor that will initially require an upfront investment (time, money, and resources) before you begin to earn passive income from it. Once your app launches, you can generate revenue from downloads and in-app purchases.
If you're a developer or have a background in coding, you can develop your own app. If not, you can probably partner with a developer or hire a team to help you build your desired app. But, again, this is something that requires a lot of time, money, and effort.
But as long as your app is evergreen and addresses a real need in the market, it will be a great source of passive income for you. You can maximize earnings by locking certain features behind a paywall or leveraging in-app ads, or straight up charging a small fee per download. Here are some app ideas that you can revamp and add your own twist to:
Comics/Create-your-own story app
Rental or booking app for storage, houses, cars, etc.
Spa services at home app
Cleaning services app
For more information about creating your own app, be sure to read: "How to Create and Develop Your Own App."
16. Storage Rentals
You can invest in one or a few storage rentals and earn passive income by receiving monthly payments from people who want to rent out your storage spaces. You can even rent out unused storage space in your own home! Renting storage space can be a lucrative way to make money because individuals and companies, both big and small, often look for long-term storage solutions.
It is an easy source of passive income because it requires very little work to maintain. Mostly, you'll need to do maintenance work when a renter gets a new unit or vacates one.
There's significant demand for it, too, with a little over 10% of all American households renting a storage unit for their things.
Consider advertising your storage space on platforms like Neighbor.com.
17. Cashback Rewards Cards & Sites
One of the smartest and possibly easiest ways to generate passive income is to make sure your credit card offers cashback rewards, especially if you regularly use it to pay your bills. You can then use the money earned from cashback to invest in another passive income venture.
However, ensure that the card you select has no annual fees since this will nullify your rewards. By using your card to pay for expenses, you're going to cash out anyway, and you earn passive income through the rewards. As long as you pay your credit card bills on time, it's a very wise way to save money and even earn a little extra.
Another option is using cashback sites when shopping online. There are sites like Rakuten and TopCashBack that offer earnings for just shopping through their site. But, again, be wise with your spendings if you want to maximize your income revenue stream from cashback sites.
Don't purchase unnecessary items just to get cashback. Instead, use cashback sites to buy things you actually need and were looking to buy elsewhere, anyway, and enjoy your rewards.
For more information, be sure to read: "How to Travel for FREE."
18. Rent your home
Another way to earn passive income is by listing your condo or home for rent on Airbnb. You don't need to purchase a new property just for this purpose, although you can go ahead and do that too. One way to use any idle space in your home is by renting out a spare room in your house or apartment. It can be the guest room that stays empty most of the time, a detached shed or pool house, or a basement room.
A lot of people earn a good amount of money from Airbnb. In addition, some tenants stay for extended periods, making it a great source of passive income, especially since you won't need to go looking for clients too often.
Even if you don't want to rent your place out overnight to a stranger, you can still earn passive income by renting your home by the hour to film crews and photographers on platforms like:
19. Network Marketing
Network marketing or multi-level marketing has been a popular way of earning money for many years now.
Companies like Young Living Oils have recently increased in popularity because network marketing allows you to earn passive income by building a team underneath you (your 'downlines').
You'll still be able to sell and recruit people, but you'll also earn a commission for every new person recruited by all the people underneath you in the network marketing structure. Overall, it's a great way to earn passive income without having to do much after you've done the initial work of building a large team and introducing them to the company and product.
20. Invest In A Business
If you're unsure about the stock market, another way to earn passive income is by investing in businesses. However, if you're more into seeing tangible assets such as a brick-and-mortar store grow over time, then this might be a better fit for you.
Investing in small businesses is a great way to start. Once you come across an entrepreneur who has a great idea and business plan, the chances are high that you'll be able to earn income along the way. Of course, you have to do your due diligence to ensure they've done sufficient market research and understood the demand for the products they plan to manufacture or sell.
Then, you have to provide them with the money they need to start or grow their business. You can consider 100% financing, where you finance the entire amount required to start the company from the ground up or just a percentage of the investment amount.
Mainvest connects entrepreneurs with investors. Everybody wins!
21. Create a blog or YouTube channel
If you have an idea or an opinion about a particular topic, voice it out with a blog if you prefer writing about it or start a YouTube channel if you want to talk about it. Initially, these will require a bit of effort and demand consistency, but once you've built an audience and have found your groove in content creation, all your old blog posts and videos can be a great source of steady income.
You can consider monetizing both blogs and vlogs in several ways. Google and YouTube ads, sponsorships, affiliate marketing, etc., are a few examples.
You can even create multiple channels, like many YouTube vloggers do, to further diversify your income sources. They may be about different topics (ex. one about makeup, the other about pets) or split into a central channel (ex. fitness channel) and a vlog account where you can talk about your daily life.
Frequently Asked Questions About Passive Income
Is passive income essential?
A quote by Mike Wolf probably answers the question best - "The key to a lifestyle of freedom is to create passive income." In other words, passive income is what will give you security, stability, and freedom in your financial life, as well as the ability to weather any strong economic storms. It is also a significant way to build wealth since it is not limited by your time or your effort except initially.
How much passive income can I earn?
In theory, you can earn as much or as little passive income as you want. It all depends on the amount of time, money, and effort you're willing and able to invest initially and the consistency you're able to maintain over time. For example, renting out a storage space can yield higher income than renting out a spare room in your home.
That being said, the beauty of passive income endeavors is that it allows you to get the most out of the time and resources that you already have. If you constantly reinvest the money you earn, you'll end up with even more streams of passive income, all of which require little to no effort to maintain.
How do I make passive income consistent?
Most of the passive income streams we discussed in this article require you to have an upfront investment initially, whether it is time, money, effort, or all three. However, as you begin to earn revenue, a great way to ensure that you're continually earning passive income is by adding passive income streams to your portfolio. Don't settle for just one stream if you can manage more than one. Instead, reinvest some of your earnings into newer income streams since this will allow you to diversify your income sources and increase your wealth.
Can I make passive income with no money?
Yes, definitely. There are things other than money that you can invest in order to make passive income eventually. You can invest your knowledge, skills, and talent in creating products or services that add value to people's lives. Some examples are creating an eBook, an online course, or using your vehicle as a medium of advertisement.
You can also rent out household items, storage space, or vacant rooms in your home. It's all about finding ways to maximize what you already have so that they work for you and provide you with extra income.
How many streams of income should I have?
There's no right answer to this. But as a general rule, how many sources of income you have should ideally match your current financial situation and goals for the future. Having a few sources is a great start, and you can build on these as you earn more eventually.
Make sure to balance your efforts by diversifying into different income streams; you don't want to be stretched too thin. It's also prudent to be discerning in choosing the best opportunities and the people.
In the words of Warren Buffet - "If you don't find a way to make money while you sleep, you will work until you die."
Passive income can help diversify your income sources and elevate your earnings. It's a great way to supplement what you earn from your business or 9 to 5 job. The premise of passive income is that it allows you to be 'passive' after that initial investment, so it's a great use of your existing resources.
Once you've placed your investment in the desired stream, you can focus on building a business, getting a side hustle, or pursuing your career. You can also choose to focus on investing in several passive income streams full-time.
Whatever your goals are, we hope the ideas in this list help you start earning passive income to supplement your finances.