Passive income is money people earn without actively exerting consistent effort (after an initial investment of one’s time and money). Both employees and business owners can make passive income, such as by earning steadily from smart investments and creating online courses. The potential return can be anywhere from tens to thousands of dollars a month.
Here are 25 proven passive income ideas to help you get started:
1. Get Cash Back From Using Credit Cards
Credit card providers create healthy competition among themselves by offering cash-back incentives to their customers. You can earn money through rebates for making personal or business purchases using your cash-back credit card. You just have to do shopping like you normally would to earn the rebates.
In order to qualify for the cash back, you should use your credit cards regularly and pay off your bill before any interest is charged. Large credit card providers offer anywhere from 1% to 5% for every dollar that the customer spends. They also offer sign-up bonuses, waive annual fees, and provide travel perks.
2. Collect Video Royalties
Originally, royalties referred to earnings that artists received for their copyrighted performances. These were often computed as a percentage of revenue or a fixed price for each sold unit of the artist’s work. Nowadays, anyone who has original content can earn royalties for their music or videos. YouTube, for example, pays royalties to the content owner, performers, and songwriters whose videos are used for public broadcast.
“I collect video royalties, and so far, I’ve made almost $6,000 from video royalties. My videos were featured by major media outlets such as Yahoo, MSN, Daily Mail, The Guardian, and many others. It’s pretty simple. Do you have any interesting videos on your smartphone? Cute pets, wild animals, protests, weird weather—anything goes. All you have to do is to upload the video to the website of a content licensing agency, like Newsflare.”
– Peter Koch, Founder, Dollar Sanity
3. Build a Traditional Investment Portfolio
The easiest way to make truly passive income is to invest your money in stocks, ETFs, mutual funds, and so on. Stocks provide the biggest payoff but are considerably riskier than bonds. Anyone interested in investing should start by seeking the proper knowledge; you can have a professional consultant guide you in understanding the process and show you how to diversify your portfolio.
“Dividend stocks are a tried-and-true method to earn passive income; history has shown this to be a successful option for building wealth over time. In order to be successful, you need to do a great deal of research upfront to find good stocks and have enough money to invest with in order to receive dividend checks worth noticing. Once you have done the research, open an account with the best online brokerage you can find, and check that it offers rewards.”
– Jared Weitz, CEO & Founder, United Capital Source Inc.
4. Open a High-yield Savings Account
A high-yield savings account offers you a higher interest rate for your savings deposits. The interest rate can range between 1% and 1.35% as opposed to the traditional .01% annual interest for normal savings accounts. Account holders are usually free to transfer funds to or from this type of account anytime they want. However, most high-yield savings accounts require you to maintain a minimum balance in order to earn the interest.
The first step to earning passive income for your savings account is to choose the right bank. There are banks that won’t require a minimum balance or charge additional fees, so it’s important to read the fine print and ask the right questions. Consider saving at least three to six months of your total monthly budget to get the most out of your interest. Some banks even offer better rates if you can maintain $10,000 in your account.
5. Start a Drop-shipping Business
Drop-shipping allows retailers to sell their goods online without having to hold physical inventory. The manufacturer can deliver merchandise from your online store without your help, so you earn money passively. With the drop-shipping method, your online shop’s customers can complete a sale and have the merchandise delivered while you sleep.
If you choose to start a drop-shipping business, consider using Shopify for a quick and easy way to create an online store with beautiful, responsive themes. Choose from the many Shopify drop-shipping apps like Oberlo to help you curate and add products automatically to your store. Sign up to Shopify for free.
6. Invest in an ATM Machine
This strategy is popular for brick-and-mortar business owners looking for passive income. They buy (or rent) ATM machines and earn a commission from the $2 to $3 ATM transaction fee charged to the users. ATM machines usually cost anywhere from $1,000 to $10,000, and you are responsible for maintenance. Expected annual earnings are as much as $20,000 to $30,000 for 15 to 30 transactions a month.
“According to statistics, 3% to 5% of people who actually see an ATM machine in an establishment will likely use it. Say, for example, your location has an average of 200 customers visiting each day. One would expect, or speculate, that approximately eight of those 200 people would use the ATM daily. With that being said, consider approaching your local grocery store, barbershop, salon, or local business to see if you can place your machine in their facility, and once you find a place that will accept it, it’s smooth sailing ahead. You will probably invest between $2,250 and $3,500 to have a good ATM machine by the time you add professional installation, signs, and other extras you may want.”
– Tayvon Jackson, Financial Adviser & author of “ATM Life: Guide to Quitting Your 9 to 5 and Investing in Money Machines,” Tayvon Jackson
7. Create Online Courses
Use your expertise to create online courses. There are now a number of platforms that allow individuals to upload a series of instructional content that registered users can pay for to access. Content can be a combination of videos, audio files, and even PDF documents for all kinds of topics. It should offer significant value with tons of resources (some of which can be downloaded), so users are more willing to pay.
“When building an online course that is profitable, here are the steps you need to take: select your topic, outline the course, pre-sell the course, build the actual course live in a drip format, solicit feedback and testimonials, refine and tweak the course, and finally make the course evergreen! This is the best plan of action to take, because it helps to ensure you don’t to waste time upfront building a course that won’t sell. After your initial launch, you can continue to market and scale the income that the course brings in each month.”
– Micala Quinn, Online Course Creator, Owner & Founder, Micala Quinn
8. Invest in Fixed Annuities
Annuities are insurance products that you can purchase in exchange for receiving regular payments, either immediately or at some point in the future. This is a form of passive income because you are eligible to receive regular payments even if you have only partially paid for the contract. The terms of the contract rely heavily on the age of the insured.
For example, a 43-year-old client can purchase an annuity for $350,000 in installments. The client will be able to receive a monthly income of $2,000 after five years for 20 years, with an annuity yield of 3%.
To get started, it’s best to do your research and find the best insurance providers that match your requirements. There are online platforms like CoverHound and PolicyGenius that can help you compare insurance products. You can even inquire with your local banks that also serve as brokers and financial advisers.
9. Start a Peer-to-Peer Lending Business
Peer-to-peer lending is when an individual earns income by lending money directly to individuals with fair credit. They use online platforms instead of banks, so lenders can connect with borrowers without undergoing the process of credit checks or high fees. The amount of money you make will depend on how much you invest as well as the type of loan. For example, if you have $5,000 to invest, you can lend this money to multiple borrowers and earn passive income from interest.
“You can easily establish an account with one of the major peer-to-peer platforms like Lending Club or Prosper. There isn’t any real work required upfront if you choose to use the automated loan buying feature. However, lenders can choose to be more active by selecting loans themselves, which may make the venture more profitable. One of the benefits of this opportunity is that the risk of failure is pretty low, meaning it is very unlikely that the lender will lose money.”
– Cody Smith, CEO, Peer Loan Advisor
10. Become an Affiliate Marketer
Affiliate marketing is an income strategy you can use that requires promoting a product or company for a commission. With the right content and audience, it’s one of the easiest ways to earn passive income. To get started, affiliate marketers need a professional blog, but they don’t have to spend a lot of money setting it up.
DreamHost is a very low-cost web hosting service that offers just the right features to efficiently run your affiliate blog. It provides users with unlimited bandwidth, a domain name, and a one-click web app installer to help start their blog in no time for as little as $4.95 a month. Visit DreamHost today, and take advantage of their discounts.
11. Venture Into Real Estate Syndication
Real estate syndication involves a group of investors pooling their resources to invest in a large project and entering into a contract with a sponsor. Becoming an investor creates passive income as your initial investment grows and pays out returns regularly. Your income increases as the value of the property rises, all without you having to put forth any more effort.
“As a passive investor in a real estate syndication, you can leverage your savings to create reliable monthly passive income while also having a positive impact on the communities in which you’re investing. You get to invest in commercial assets (often apartment communities) within growing markets around the country and with professionals who will safeguard your investment while improving the communities. There is quite a bit of a learning curve on the front end when you first start investing in real estate syndications to ensure that you’re confident in the process and understand the risks.”
– Annie Dickerson, Co-founder and Managing Partner, Goodegg Investments
Crowdfunding (raising money through the internet for a big project) has been a successful strategy for anyone looking to venture into real estate syndication. Register with a crowdfunding platform to find investment opportunities with low investment minimums. You’ll find a list of real estate syndication options with all the information you need in the comfort of your own home.
12. Get Paid to Have Apps on Your Phone
Some companies are willing to pay you to simply download an app and keep it on your smartphone. This helps them gather data to develop a more effective business strategy. Marketers are becoming increasingly aware of the role that smartphones play when it comes to consumers’ buying behavior.
Start getting paid to download apps on your phone by answering a provider’s questionnaire to see if you’re qualified for the program. Once that’s done, download their app, update your settings to allow the app to collect your data, and use your phone as you usually would.
“Believe it or not, some companies are willing to pay you to simply download an app and keep it on your smartphone. Nothing more is required; you just use your phone as you usually would and allow the app to collect your data. Nielsen, for example, will pay you up to $50 a year to have their app on your phone. And they aren’t the only one. If you have an Android, check out Slidejoy and Fronto. If you have an iPhone, check out Panel App.”
– Logan Allec, Owner, Blogging Done Right
13. Invest in Cryptocurrency
A cryptocurrency is digital currency created and managed using advanced encryption techniques known as cryptography. This idea has led to the creation of digital currency providers, like Bitcoin in 2009. There are also alternatives like Litecoin, which can be mined using a normal desktop computer, and Ripple, which provides a payment mechanism similar to Bitcoin.
While some experts view cryptocurrency as a high-risk investment because of its susceptibility to huge value fluctuations, others recognize cryptocurrency’s potential because it combines the features of limited supply and growing demand.
Some tips to consider when investing in cryptocurrency:
- Do your research: Understand things like inter-exchange transfers, analyzing market cap size, and ways to diversify your investments.
- Know how to identify scams: Watch out for cryptocurrencies with no available information online and unrealistic claims that can seem attractive to beginner investors.
- Follow and learn from actual experts: Make sure you follow experts who offer valuable information and openly explain the risks of cryptocurrency investments.
- Only invest money you’re prepared to lose: Cryptocurrency is considered a high-risk venture, so only invest an amount that you’re willing to let go of for long periods of time.
- Secure your cryptocurrency: Understand how to use wallets to store your cryptocurrency instead of leaving it at the cryptocurrency exchange.
- Keep an eye on your investment’s value: Use the right tools to track the progress and results of your transactions.
As a passive investment idea, cryptocurrency can be lucrative if you know your way around it with the right timing and strategy. There are even smartphone apps now to help investors conveniently monitor and complete transactions while on the go.
14. Invest in Vending Machines
Vending machines are ideal passive investments because they require minimal upkeep and no manpower to generate sales. Your income will depend on the location you choose and products you sell. Places like factories, government buildings, schools, and hospitals are areas with high foot traffic that can attract a lot of sales.
Research shows that you’ll need two to four machines in different locations for every $1,000 you want to earn per month. Vending machines are available in places like eBay for $1,000 to $5,000 each, depending on features and whether they’re new or used. You will also have to decide which products to sell and the location to use that will have the most potential for customer traffic.
15. Save on Taxes & Open an IRA
One way to create passive income is by investing money you have set aside for retirement. This means you not only save on taxes (investment income is taxed at a lower rate than regular income), but also earn from money you’re not using. Look for online financial advisers and learn about their retirement plans.
If you don’t have an IRA or 401(k), then not only are you missing out on a great opportunity to earn passive income, but you are likely paying way more in taxes than you should, as well. By opening an IRA with Betterment, you can save up to $5,500 of income without having to pay income taxes on that money. Betterment will then automatically invest the money for you using its proven investment strategies. Sign up for Betterment today.
16. Learn Options Trading
Options trading is investing in shares by purchasing a contract to sell (or buy) these shares at a pre-negotiated price on a specified date. Your success at using this form of passive income depends on how well you can project the future value of stock shares, so it requires a certain degree of knowledge to be lucrative. There are also different types of options available, and you’ll need to know which one works best for you.
In spite of having a deadline, some experts consider options trading to have better income potential compared to investing in traditional stocks. The typical initial investment of options traders is anywhere from $5,000 to $10,000, and you need to find a reliable brokerage firm. A broker will assess your trading experience, trading knowledge, and financial preparedness before letting you start trading.
17. Invest in Rental Properties
Investing in rental properties can seem overwhelming at first, but once you’ve completed the initial steps, it’s one of the easiest passive income streams to have. Nowadays, you don’t even need a large investment to own a rental property. You can look for crowdfunding opportunities that will allow you to partially own apartment complexes and even hotel rooms that will be managed by someone else.
“I’m a huge believer in rental properties as a source of passive income. One advantage is leverage: investors can buy an asset worth hundreds of thousands of dollars with only a fraction of that in cash. Over time, your tenants pay off your mortgage for you, and you earn monthly cash flow all the while. Another advantage is that the income rises with inflation, even as the mortgage remains fixed.
“New rental investors need two things: cash and knowledge through free landlord resources. If new investors learn nothing else before buying their first rental property, they should learn how to calculate rental cash flow.”
– Brian Davis, Co-founder, SparkRental
18. Sell Your Designs on Etsy
A lot of people think of Etsy as a marketplace for handmade goods, but there’s actually a huge market for downloadable designs. You can sell posters, greeting cards, or other goods that the buyer will print on their own either at home or at a local printing shop. Be sure to have great picture quality, and offer excellent customer service to help build a solid customer base for your digital products.
You must register as a seller with Etsy to get started. Create an account and provide the information requested, such as shop location, currency, shop name, payment method, and billing method. Verify your account by either adding a credit card or linking your PayPal account.
19. Advertise With Your Car
This passive income idea is similar to renting out your vehicle as a mobile advertising space. Marketers see this form of advertising as a better alternative to traditional advertising formats that can reach more potential customers at a lower cost per thousand impressions. You can earn anywhere from $100 to $400 per month depending on the campaign, your location, your mileage, and the amount of space that you’re willing to use to advertise on your car.
“A good way to earn passive income is to put a car-wrap advertisement on your four-wheeler. You actually don’t need to do anything different; just drive your normal daily route. It’s a good idea, because it doesn’t require a lot of work or investment, and you don’t have to spend extra time doing it. Many companies do it, such as Wrapify, Carvertise, FreeCarMedia, and AdsToGo.net. You just have to apply on any of those websites, fill the form, and wait until they contact you.”
– Igor Mitic, Co-founder, Fortunly
20. Rent Out Your Parking Space
Some vehicle owners don’t mind paying a premium for secure parking spaces, so if you have one that you don’t use, consider renting it out to create a passive income stream for yourself. Parking spaces in prime locations can yield as much as $250 per month if you rent them out a few hours a day, and it’s perfectly legal as long you own the spot. This income strategy is best suited for anyone living near popular commercial areas, like Manhattan.
Advertise your parking space online and register on apps and websites like CurbFlip, Pavemint, and Parklee. Determine the time your parking space is available (like when you’re out for work or school), and then decide if you would like to rent it out on an hourly basis or exclusively to one tenant.
21. Register With a Ride-sharing Service
A ride-sharing service is a business that allows car owners to charge for carpooling with public commuters. Since you can choose to only pick up passengers if you’re also heading the same way, this can be considered a passive income idea. All you need is your own car and to be registered in a ride-sharing app like Uber of Lyft. Your income will depend on how much time (and distance) you’re willing to put into the business.
22. Upload Your Designs on a Print-on-Demand Website
Graphic designers and other artists should consider uploading their designs on a print-on-demand platform. You start earning every time a customer chooses to print your design on merchandise like T-shirts, mugs, and stickers. You can register for free on most platforms, and they will let you earn unlimited passive income for as long as your designs are available.
“There are online platforms that can help you market, receive payment, and handle shipping for potential customers. The most popular one is Amazon Merch. You have to apply for an account, and they will get back to you if approved. With other platforms, like Redbubble, Etsy, or Printful, you can get started right away. You just have to create an account and then you can start creating and uploading designs in an image editing software like Photoshop.”
– Matt Marrandino, Digital Marketing Manager and Blogger, GeekInformant
23. Sell High-quality Photos to Stock Image Agencies
Being able to turn your hobby into an income-generating activity is always a good passive income idea. If your creativity revolves around photography, you should consider submitting your work to stock image agencies like Shutterstock, where you can sell licenses to use your images. The submission process is easy, and as long as your images meet their technical requirements, you’ll have your photos available for purchase in no time.
24. Start a Lead Generation Site
A lead is a potential customer. Marketers work to bring qualified leads to their business that they plan to convert into paying customers. You can tap into this demand for client leads and turn it into a passive income idea by creating a lead generation website. The objective is to provide a platform that will connect marketers to their ideal audience.
“I started my lead generation website by matching client card processing requirements to suitable brokers worldwide. This allowed me to earn my ideal passive income while still being around for the kids and helping other business owners along the way. This could be small scale to begin with (e.g., matching customers to car mechanics), but once you start making a cut of the profits, things build very quickly. You will need to become an expert in your field, write about problems experienced within the industry, and then present the solution. There’s no doubt the work upfront will be labor-intensive; however, once successfully achieved, your passive income will grow.”
– Libby James, Director, Merchant Advice Service
25. Rent Out Your Spare Room
One of the easiest ways to make passive income is by renting out your spare room. You can choose to rent it out short term or long term depending on what’s convenient for you. There is a huge market for temporary alternative lodging, especially if you live in an area that’s densely populated, like New York. Do a quick search online and find out the going rate for short-term rent on popular rental platforms.
“My wife and I make passive income by renting out the spare rooms in our house. We make about $2,000 passively every month with this. We love doing this because it is an easy yet significant source of passive income for us. It is truly a passive income source that does not require any special skills or even much work upfront. It does require you to own a house with spare bedrooms, sacrifice your privacy a little bit, and spend a few hours occasionally finding new tenants. People will always need housing, and this is a great way that you can make passive income and provide housing to people at a reasonable price.”
– Russell and Maleah Barbour, Owners, UnconventionalProsperity.com
Bottom Line
Nowadays, it’s important to have more than one revenue-generating stream; your main source could end abruptly, and you’ll need some form of income to help make ends meet until you can replace it. Like any business, however, the best ways to make passive income will require a relative amount of investment, usually time or money, in order to succeed. Consider our list of the best passive income ideas to help inspire your next venture.
Want to share more passive income ideas? Let us know in the comments.
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