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Making money while you sleep is the ultimate investor dream without intervention. Finding the best sources of passive income can do just that.
What is passive income?
Passive income is money that you can earn without too much continuous effort. After you’ve identified and established a passive income stream, you won’t need to deal with it every day, but that doesn’t mean you won’t have to work every once in a while.
Most passive income ideas require an initial investment of time, money, or other resources. They also require some degree of supervision or regular maintenance to keep things on track, but they won’t require you to spend dozens of hours a week or chatter at the water cooler.
How to get passive income
People typically generate passive income in one of three main ways:
- Invest. When you invest, you are using the money you already have to make more money.
- Construction of assets. It means acquiring an asset that passively earns money over time.
- Asset sharing. Sharing in this sense means selling or renting assets that you already own.
Let’s take a look at different passive investing ideas that benefit from investing, building assets and sharing assets.
Passive Income Ideas: Investing
Investing offers the greatest opportunities to generate passive income, but it can require large sums of money to generate significant returns.
Dividend stocks reward investors with regular payments of company profits. Since you must own the stocks to receive dividends, you will likely have to tie up thousands, if not tens or hundreds of thousands of dollars to earn significant income from the dividend paying stocks. (The S&P 500 offers an average dividend yield of just over 1%, for example.)
Investing in dividends is not without risks. Businesses can go through tough times and be unable or required to pay dividends. Look for preferred stocks or dividend aristocrats for higher dividend yields.
Owning real estate is one of the oldest ways to generate passive income. But it’s not as easy as buying a house or land. When you own a rental property, repair and maintenance needs can become a big waste of time and money, unless you hire a property manager, which will only further reduce your income. Additionally, purchasing real estate can require an initial investment of hundreds of thousands of dollars.
If you prefer to avoid the costs and headaches, consider other sources of real estate investing, like real estate investment trusts (REITs) or real estate crowdfunding platforms like Fundrise or RealtyMogul. You’ll just need to make sure that crowdfunding doesn’t require you to be an accredited investor to invest with them.
Peer-to-peer lending works just as it looks – you act as a lender to a third party, often through a ready-to-use platform like Prosper. You will then earn interest as the original amount you loaned is repaid.
The loan between individuals involves a significant risk that the person or people to whom you lend can default on their loans. You can choose to spread your funds over many different loans to minimize this risk. You meet the income or net worth requirements of the peer-to-peer platform of your choice. Some require you to be an accredited investor, and even Prosper has lower state specific financial requirements.
Domain name investment
Domain investing, also known as domain, is a bit like trading in stocks. You buy cheap domain names and hope you can resell them at a profit. You will generally want to target common terms or specific proper names, and keep in mind that .com domains are more expensive than almost any other in the United States.
While it’s not expensive to get started (you can get some domains for $ 10 or less), it comes with the risk that you won’t be able to sell the domains you buy and therefore lose your initial investment. You will also have to pay the annual fee each year through your registration service.
Owning and operating vending machines can provide a (mostly) passive income stream. You’ll need to find a location and shell out at least a few thousand dollars to get started. From there, maintenance simply requires that you spend a little time each week restocking and maintaining your machines, although you can outsource these tasks if you’re willing to sacrifice some profit.
However, whenever you buy physical property as an investment, keep in mind that you will need to allocate space for storage and bear the risk of moving perishable goods.
Passive Income Ideas: Building Assets
As the name suggests, building assets takes time and initial effort to build an income generating asset. While this does not support the high financial costs of an investment, it does carry the risk that the assets you invest your time in creating will not sell.
Digital products can be anything from eBooks and lesson plans to mobile apps, even NFTs. What is essential here is that you spend time building them once and then you can sell the same asset over and over again online. You can take a completely passive approach to the digital products you create, or you can spend the time and money marketing them.
Music and photos license
If you have a creative streak, you can turn your photography or music into a passive income stream by licensing them to picture and music sites. Other content creators then pay the rights to use your creations. Musicians can sell their songs on sites like AudioJungle.net and Pond5, while photographers can sell their images on sites like Alamy and Adobe Stock.
By uploading original designs to print-on-demand websites like Teespring, Redbubble, CafePress, and Zazzle, you can earn passive income every time someone orders a t-shirt, coffee mug, or any other product. physics featuring your design. Best of all, you don’t have to deal with printing, storage, or shipping, reducing much of the frustration associated with selling physical goods.
Affiliate sales are passive income generated when a person makes a purchase after clicking on a link or redeeming a referral code that you post on a website, video, or podcast. You will usually earn a flat commission or a percentage of their purchase.
You can find affiliate links for just about any type of product or service, meaning you could earn passive income from anything from mattress reviews to software reviews. Keep in mind, however, that this space is very competitive, and the most successful affiliate marketing requires continuous, high-quality content production.
Passive Income Ideas: Asset Sharing
If you can’t devote the time or money to passive income generation, take a look around. You may be able to make money with assets you already own by leasing them or leasing them to others. Think of it as Airbnb for [insert asset here].
If you have extra space in your yard, garage, or carport, you may be able to make a profit by renting space that you don’t even use. Sites like HomeCamper allow you to rent lots to travelers who want to pitch a tent (or park an RV) in your area, and JustPark helps you rent parking spaces on your property.
Running your home for passive income can include anything from renting a spare bedroom to listing your home on Airbnb or Vrbo when you’re out of town to renting it out to movie productions. Kathy Kristof, CEO of SideHusl.com, notes that she rented her own house by the hour to movie and commercial producers using Giggster, making $ 1,400 in a single day.
You don’t have to drive Uber to get the most from your car. You can rent it to others who need a set of wheels using sites like Turo or Getaround, or if it’s your bike that’s gathering dust, you can rent it on platforms like Spinlister. Many transportation rental companies offer their own insurance policies to protect you and your renters, but you should make sure you are aware of any insurance liability you may incur. Also consider the wear and tear that your bike or car may take when you decide to rent it to others.
Advertise on your car
Earn passive income by turning your car into a rolling billboard. Sites like Free Car Media, Wrapify, Carvertise, and StickerRide connect car owners with advertisers. In exchange for putting a vinyl decal on your car for an agreed length of time, you will earn tidy passive income, all without disrupting your normal driving routine. Just make sure the platform and campaigns you choose match your driving habits. Some require some mileage per day or you are a delivery driver.