What Is a Passive Income?
A passive income is an initial investment of time, money, or both to invest in or create something that will give you a stream of ongoing income.
Many of the ideas require you to maintain your assets. For example, if you create a blog and use Adsense, the process is automated once it’s built. Therefore, you can depend on money flowing in automatically. However, you still need to maintain the blog and add content.
Another idea is investing as a silent partner in a company. You invest funds for a return on your investment. In this case, you have no control of the business, and no effort on your part is required.
How a Passive Income Compares to Other Sources of Income.
Passive income requires less effort and interaction, while other forms of income require the investment of constant time and effort. For example, your income stops if you have a job and are not there to work. On the other hand, a passive income generates funds whether you’re working or not. Some investments require no effort, while others require setup, maintenance, and interaction but with less effort and time than working as an employee or running some types of businesses.
Points About Creating a Passive Income
Let’s look at a few key points to creating a passive income.
Research The Idea
You don’t want to jump into the first opportunity you see. You want to make sure you get into something you will put the time, effort, and money into. Not all ideas will work for you, so take the time to do your research to make sure the opportunity is right for you.
Once you have decided on an opportunity and have done your research, take it one step further and get the help you need. Creating a passive income stream is not something you want to do by trial and error. So instead, get professional advice to speed up the process and eliminate errors.
Use Your Passion
Sure passive incomes are all about the money, but why not invest in something you believe in and can be proud of? For example, is the opportunity legit or shady? Would you tell your spouse, friends, and parents about it, or would you hide it and just make money?
There are many opportunities out there, and when you find something you’re interested in, you will do a lot better than investing in something you care nothing about.
Building a Passive Income Takes Time
Many of the ideas for a passive income take time. Sure there are a few ideas like lending money and rental properties where you start to earn passive income in 30 days, but many ideas require time to start delivering returns, such as online business ideas and stock and mutual fund investing.
Online Passive Income Ideas
Let’s start by looking at a few ideas for online income opportunities to deliver a passive income.
1. Start a Dropshipping Store
A dropshipping business allows you to sell items without inventory or even handling the product. You simply set up your store, and your orders can even be automated to go to the supplier. The supplier will prepare your order and ship it to your customer with your company details. The package appears to be shipped from your business, not the supplier.
Dropshipping has become popular in the past few years because it opens up doors to people that don’t have the money to invest in products and store and ship them.
2. Selling Digital Products
Digital products are in demand and easier to manage than a brick-and-mortar business that carries physical inventory. Digital products include some of the following:
- Digital Photos
- Audio Files
- PowerPoint Presentations
- Digital art
- PDF documents
One of the issues you need to consider before getting into the digital product space is piracy is a concern. One person can download one of your products and start to distribute it. Or even sell it. Naturally, this isn’t legal but enforcement is a problem. So if you plan on using this business model, look into ways to protect your products from piracy.
Once you have your products created and have visitors to your site, you can see a passive income. However, to maintain and experience long-term success, you have to put effort into marketing and developing new products.
3. Online Courses
Creating courses on sites such as Udemy and Coursera makes creating marketing your content easier for people who want to create online courses but don’t have the technical skills to create a site from scratch. In addition, platforms like Udemy provide tools to build your content and provide a platform for students to sign up and pay for your service. As a result, you don’t have to focus on the technical issues and can focus on creating quality courses.
It’s to your advantage to become an expert in a topic and provide courses around that area. Then, in time, you’ll be known as an expert in the field and build credibility instead of creating courses for many different unrelated topics.
Once your courses are created, your job would be to answer questions from students so that you’re active on the site. When you are active, new students see that and are more open to signing up for your course. You will also benefit from creating new courses and marketing your content.
Once your blog is successful, you can enjoy having a passive income. It takes time to build a successful blog and a lot of work to create the content market for your site to attract visitors.
I have been doing this for years. One issue is that you are always competing with other blogs, and new ones appear daily.
Another important issue is if you depend on search engine traffic, then there are constant changes. I once worked for a few years to build a site it was gaining a lot of traffic, and then suddenly, Google had an algorithm change that caused the site to loos 70% of its traffic overnight.
Once your blog is up and running, you still need to update it and add content. The more you add quality content, the more overall traffic you’ll receive.
A blog that receives consistent traffic turns into an automated revenue generator.
You can sell advertising space on your blog or use a system like Google AdSense. You sign up for an account, and once approved, you add code to your site, and you’re done. Google provides the ads and optimizes the ad location and ad types. Google collects money from the customer and pays you a high percentage of revenue generated from your site.
5. Affiliate Marketing
Affiliate marketing is another idea to create a passive income. Once you have a blog and traffic, you can monetize that traffic by providing products and services the reader would be interested in.
The concept of affiliate marketing is you refer people, to other sites and earn a commission for each sale generated from your referral.
You sign up as an affiliate, and you receive a code to embed in your website, allowing you to refer people to the affiliate site or product pages.
For example, if you have a page on your site that receives thousands of visitors, you could look for affiliate programs that offer products and services related to that topic. You would then place the code on your webpage so that those that are interested go to the affiliate site and hopefully make a purchase.
With affiliate marketing, you don’t need to deal with customer service, returns, or product support. Your job is done once you send the visitor to the affiliate website. If they make a purchase, you receive notification that you made a sale through your affiliate link. In addition to or instead of a blog, you can perform affiliate marketing through a newsletter, social media, an app, etc.
One of the main parts of becoming a successful affiliate marketer is to have a decent amount of traffic or a large following. In addition, you must only participate in quality affiliate programs and only recommend products you endorse. It’s not about the money. It’s about keeping visitors and followers happy and maintaining their trust. And finally, you must let people know that you earn commissions if they make a purchase. You don’t have to do this for every link, but you must disclose this information on your site.
6. Starting a YouTube Channel
As you may already know, YouTube is one of the most visited sites on the web. With millions of people visiting every day, you have a chance to create a YouTube channel that can produce passive income.
When visitors to the site watch your video, there will be Google ads displayed where the visitor can see them. When a visitor takes action on one of the ads, you will revise a portion of the ad revenue, just like in the blogging example above. All you need to focus on is creating quality content to build your channel, promoting it, and YouTube will do the rest.
You could have a video that has been around for years, still receiving views and earning revenue. The key is having hundreds of videos that will continue to earn revenue and require no maintenance.
You can also combine automated ad revenue and affiliate marketing by using the video to recommend products and services from which you can earn commissions. Here again, you need to disclose that you are an affiliate.
7. Domain Name Auctions
Investing in domain names is the process of buying and selling domain names. The key to succeeding in this opportunity is identifying and acquiring valuable domain names. There are many domains that have been sold for thousands of dollars because they are in demand and attractive to buyers.
You find domains in demand, purchase them or register a new one, then resell the domain for a profit. For example, you could keep an eye out for trends in the news and for popular topics, and you could register a domain name and put it up for auction to make a profit.
Registering the domain name can usually be under $10 per year. As long as you keep the registration payments up-to-date, the domain is yours; however, your domain is lost if you forget to renew.
I would suggest looking at a few domain name auctions to get a sense of the market and develop ideas.
8. Buy and Sell Websites
Like the example above, where you purchase or create domain names and resell them, you could do the same, but instead of just a domain name, you could build a site around each domain and sell the site.
For example, you could sign up for a hosting account that allows you to host multiple websites, and for each domain, use WordPress and for each of those sites, have a writer create a few pages so the site has content. You could then sell the website and domain as a website which can be more attractive for a buyer.
One thing to keep in mind when selling websites is that a lot of people look for websites with a lot of traffic, and if you’re selling a website with no traffic, it will be difficult to get a premium price for it; however, if the domain is desirable than that could give you the edge you’re looking for.
You could also look for websites with a lot of traffic, purchase them at a good price and resell them. Looking at a site like flippa.com will give you an idea for buying and selling websites.
9. Build an App
The app market has exploded in recent years. A large majority of the population owns smartphones that run apps. As a result, there’s a lot of competition in the marketplace for apps. But if you can come up with a unique idea or improve on an existing one, you could be on your way to building a passive income.
Once the app is up and running, you can make money from it in various ways. For example:
- Earn revenue from affiliate marketing.
- Revenue from ads that run in the app.
- Generate revenue from a subscription.
- Sell the app for a few dollars each.
- Build a large following and sell the app to a company.
One thing to keep in mind with apps is you will need to provide support for your users. In addition, you will need to update the app as smartphone operating systems are continually updated, and you must make sure your app is updated and in compliance with each operating system update.
Passive Income From Financial Investments
10. The Stock Market
This type of investing is an opportunity to make your money work for you. However, it can get confusing for those who don’t have experience in the stock market. You may invest in a mutual fund where a fund manager will create a diverse portfolio to earn investors a good rate of return.
You may be interested in dividend stocks, CDs (Certificate of Deposits,) CD Ladders, Annuities, etc. There are numerous investment opportunities, but you must know what you are getting into.
I suggest you find an excellent financial advisor who can help you create a diverse portfolio as safely as possible. The more aggressive you are when investing, the higher the risk. So you may be interested in earning as much money as possible in a short period, but you could lose your entire investment.
11. High Yield Savings Account
Having high-yielding savings accounts can provide you with a passive income. There is a minimum balance to be maintained to open a high-yielding savings account. So basically, you put the money in the account and wait. You have to Forget about the money for a certain period. These types of accounts are a safe investment even though the percentage earned is lower than investing, for example, in a mutual fund.
12. Peer-to-Peer Loans
You loan money to people for an agreed-upon interest rate using peer-to-peer platforms. Usually, when people apply for loans using a peer-to-peer network, they have difficulty getting a loan from conventional financial institutions and are willing to pay higher interest rates. Since you are financing a high-risk loan, you need to charge a higher interest rate, to cover losses, incase someone defaults on a loan.
In addition to peer-to-peer loans, you could also offer loans to people in your community. Once the word is out that you offer loans, there may be good opportunities where it’s a win-win for you and the borrowers.
Offline Passive Income Ideas
Next, we’ll go over a few offline passive ideas to get your creativity flowing.
13. Earn Royalties Through Inventions
Coming up with an invention that you can patent allows you to sell your invention to an interested company that may pay royalties. You’ll get an agreed-upon percentage for every item they sell that can last for many years. So the first step is coming up with something that a company may be interested in.
To patent an invention, it has to be something that hasn’t been invented before or an improvement for an existing concept that differs by a certain percentage. For example, it has to be different by 25% from the closest patent.
Once you have a patent, you can work on presenting it to companies. There are also companies out there that will help you get a patent and present it to companies for a fee. It’s something worth looking into.
14. Get a Book Published
If you’re an expert in a field, you can write your own book and try to get it published. If a publisher likes your book and publishes it, you would receive royalties from every book sold. If your book is popular and sells many copies, you could be in for a long-term passive income stream. Another option is to get an agent that may help you get your book published.
15. Invest in Vending Machines
Purchasing vending machines and locating them in prime locations is another idea to create a passive income. You basically lease the space and ensure your machines are full and maintained. Then you make your scheduled rounds which could be once a week, twice a month, or once a month, refill the machines and collect the money.
The key to this business is getting locations where people would be interested in the products the machines dispense. Having multiple prime locations, you can become a source of passive income for your vending machine operation.
16. Invest in ATMs
ATMs are similar to the vending machine business model. Your main concern is where your ATM machines are located and ensuring that your vending machines are well-maintained and contain enough cash for the area. See how to start an ATM business for more on this business model.
17. Rental Income
Rental income can be a lucrative source of passive income. Especially when the property is paid off because you have a passive income and have built equity over the years.
You need tenets that pay on time, stay out of trouble, and won’t damage your property.
If you want to earn some extra cash by renting out your home, Airbnb is one way to do it. The site allows people to rent out their homes to travelers looking for accommodation. It’s free to list your home, but you will need to pay a listing fee if you choose to accept guests. Another way of doing this is locating property in a tourist area, purchasing it, and listing the house on services like Airbnb to have it constantly rented.
If you own property or acquire property that is suitable for a commercial lease, then that has benefits over home rentals. A business lease consists of a few years, so you don’t have to worry about vacancy rates occurring every few months and good tenets with successful businesses may renew if they don’t buy their own property.
Rent Out Storage Space
Renting out space for storage is another idea for generating a passive income. For example, you could rent out space in your basement, rent your garage or build an entire storage facility or warehouse to attract more customers and increase your income.
18. Invest in a REIT
A REIT is a trust fund for commercial real estate. These publicly traded companies usually pay dividends to shareholders based on profits generated from company leases properties. The concept was created to bring investment opportunities to people that want to invest in real estate but don’t want to get into the fine details of dealing with property ownership.
19. Become a Silent Business Partner
You can invest in a business that you believe in by using your money to help them improve and expand their business. Your return on investment could be a percentage of the profits. You may get interested on your investment, or it can be interest and a percentage of the profit. As a silent partner, you have no say in how the business operates and have no control over the business. You simply provide the funds and let management run the business.
Operating a laundromat is a business model that is considered a passive income. Once it’s set up, you really have to be there for the business to operate. It doesn’t hurt to pop in once in a while. You can even have a manager on-site, but it’s not the type of business where you have to be there from opening to closing. You just have to make sure your machines are operating and maintained, have security footage, and come drop by to collect your earnings from the machines. Today, many machines use credit and debit cards, so you don’t even have to go in to collect your earnings.
21. Coin-Operated Car Washes
Liked the example of the laundromat above. A coin-operated car wash is also a semi-automated business. You set it up. People come in, pay their money and wash their cars and leave. You just have to make sure you take care of maintenance and come by to pick up your earnings; basically, that’s it. After the initial investment, the rest turns into a passive income.
You have a few ideas for creating a passive income. As mentioned earlier in this article, with any opportunity, you want to research it and look at the risks because opportunity doesn’t come without risk, and you have to make sure you’re willing to accept the risks involved. You don’t want to just jump into any opportunity but look into it and get professional advice when available.
I also suggest when it comes to investing, invest in something you’re passionate about and don’t just think about the money. When you’re passionate about something, you look into it more and your heart is in it. You take time to understand it and study it, the more you understand what your investing in the better off you are.
Below you’ll find a collection of resources to help you make better decisions for creating a passive income. Many of the links lead to search results, and that’s by design, so you’ll always have the latest and most popular information at your hands.
Books about creating a passive income are an excellent source of information to help you expand your knowledge and make good decisions. However, you don’t have to read the book from cover to cover to get the information you’re looking for with many self-help books. Instead, you can look at the table of contents and go directly to the chapter that interest you.
A couple of books worth mentioning include:
Passive Income: Step-By-Step Tutorial to Generate Passive Income Streams Online with Proven Business Models and Ideas by Kevin Stuart – 2018
This guide shall discuss, in a systematic manner, proven business models and ideas that when well implemented, shall help you create multiple streams of online passive income. Let’s begin. Here’s Just A Small Preview Of What You’ll Learn.
Passive Income: How to Make Money Online by Blogging – Stephen J Jackson – 2022
This book will make you realize how special and easily generating passive income can be!
Understanding the Risks of Investing
As mentioned earlier in this article, there are risks when it comes to investing and when you understand those risks, you tend to make better decisions. Below you’ll find a link to search results for understanding the risks related to investing. So why not take a few minutes to browse the articles to see what catches your eye.
See the latest Google search results for Understanding the Risks of Investing.
Passive Incomes in the News
The news is another great resource for getting information related to creating a passive income. I like to go through Google’s News site to see what the media covers about passive incomes. With Google’s news site, you get the latest and archived stories, so why not take a few minutes to see what the media covers about passive incomes?
YouTube is another excellent source of information. Even though there are a lot of entertaining videos on YouTube, there are also many you can use to expand your knowledge on virtually any topic. One thing to keep an eye out for is when you’re watching a video, you’ll get a list of related videos that often present topics you may not have considered before. I’m always on the lookout for these because I find them interesting, and they help expand on the topic you’re looking at.