Warren Buffett once said, “if you don’t find a way to make money while you sleep, you will work until you die.” Powerful words, indeed. And it sums up quite nicely what motivates entrepreneurs to build their own passive income streams.
For entrepreneurs, passive income is the elusive holy grail we strive to attain. It’s literally earning money while you sleep. Steady passive income requires a variety of wealth-building opportunities that don’t necessarily take a lot of your time, energy, or effort to run.
So what are some of the great ideas for making passive income today? There are many ways one can generate some passive income. I’ve broken these down into five main categories:
- Online activities. Building niche-market blogs, affiliate marketing, and running a podcast or YouTube channel fall under this category.
- Creative endeavors. These involve putting your technical know-how into creating various things you can sell online (and keep selling even while you sleep).
- Financial tools. Basically, these activities let your money make more money.
- Real estate. The end goal of many entrepreneurs and business-folk.
- Others. You’ll be surprised at some of the other ways some folks use to make passive income.
According to the folks over at the IRS, however, passive income activities fall into two broad categories:
- Trade or business activities in which you don’t materially participate, including actions you might make in anticipation of starting one.
- Rental activities involve some form of property, whether it’s under a lease, a service contract, or some other arrangement.
Note: Passive income is about minimizing the time and effort it takes to make some money. But the ability to earn money passively MUST come from something– from other assets, from creative endeavors, or through some sweat equity.
Online activities
An awesome bunch of ideas for passive income you can start today fall under online activities. If you have a bit of time on your hands, you can get to work now and set up an online money-making machine that brings in passive income for you.
Blogging
The key to success with different ways of online passive income is to bring in traffic– steadily and sustainably. Blogging is arguably one of the best ways to bring in lots of organic traffic over time– if you do things right.
Blogging has been around long enough for folks to be a lot more thoughtful about it, leveraging best practices on search engine optimization, content marketing, and conversion optimization to keep bringing in high-quality traffic. Monetization comes not just through ad revenue but also with many other passive income streams detailed below.
Affiliate Marketing
Through your online content, like blog posts, videos, and podcasts, you can refer customers to various e-commerce companies that pay you commissions for sales. There are affiliate marketing programs for just about any industry, which means you can position your passive income website to cater to a specific niche (ideally, one which you can leverage on your experience and expertise).
Podcasting and/or Running a YouTube Channel
Instead of a blog or a website, try growing a YouTube channel or a podcast series. These two content areas are on track to grow exponentially over the next few years.
A word of warning: these are now highly competitive spaces, which means you’re going to put in quite a bit of sweat equity before you can expect a regular profit from a passive income website.
Creative activities
If you have a cool creative hobby, there will always be high demand for your work. Some of the more achievable passive income ideas involve creative endeavors. Here are a few creative activities that can make you a good amount of passive income:
Digital media
Whether it’s an ebook or audiobook, comprehensive guides, or even patterns or prints you made, you can put these up for sale online as ways of making passive income.
Different sites specialize in a type of digital media. Etsy, for example, is a great place for selling your prints and patterns, while Amazon’s Kindle store is more suited for ebooks. Other popular print-on-demand sites worth checking out today include Teespring and Redbubble.
WordPress themes and plugins
If you’re handy with WordPress, you can create themes and plugins for other users to purchase. The effort-to-reward ratio can be quite high here.
Stock photos and videos
Sell the rights for companies and content creators to use photos and videos you’ve taken. There’s always demand for cheap, quality content. Better than leaving them on a hard drive somewhere!
Art and Design
You can create artwork that customers can purchase for you and print for their use. This also includes designs for t-shirts, bags, and other personalized items. You can earn a cut of the profits for the merchandise.
Financial tools
These are some of the best ideas for passive income that you can start today.
Peer-to-peer (P2P) lending
With P2P lending, you can lend out money to individuals, businesses, and startups online. Rates are usually steady and paid out on a monthly, quarterly, or yearly basis.
Services like MyConstant let you participate in crypto-backed P2P lending with as little as $10 for returns as high as 7% APR.
Stock dividends
When you invest in the stock market, you can get dividends, or regular, periodic payments as owners of certain companies’ stocks. These are usually a small percentage of the stock price, but they add up! You can even buy ETFs full of dividend stocks for extra income.
Certificates of Deposit (CDs)
A certificate of deposit (or CD) is federally insured savings account with a higher fixed interest rate than a bank account and a fixed date for withdrawal. Investing in a high-yield CD from an online bank can get you decent interest rates (but still below inflation).
Bonds
Bonds are small loans that you give to the government or a corporation in return for interest. Investing in the right bonds can give you passive income for life. However, be wary of rate change allowances in your contract.
You can buy high-risk bonds in small businesses as passive income investments rather than the government.
While traditionally the territory of an accredited investor, services like Worthy, for example, make small-business bond investing much more accessible.
Annuities
Annuities are contracts that you can buy from an insurance company with a lump sum. At a predetermined future date, you’ll start receiving monthly payments for the rest of your life. There are several different kinds of annuities, so take the time to research and consult with a trusted financial advisor.
High-yield savings accounts
You can also earn passive income (although lower than stocks and bonds) by investing in a high-yield online savings account. These are like normal savings accounts except with higher interest rates.
Buying existing businesses
If you have money to spare, you can look into buying an already-established business outright. Again, the idea here is not to get too involved in running the business but to let the existing leadership run it for you.
You’re not limited to just brick-and-mortar operations. You can also buy things like an established blog or an e-commerce site. Flippa, for example, allow you to purchase a domain, an app, or an e-commerce business for as low as $1,000.
Real estate
Owning property gives you a wealth of new passive income opportunities to build even more revenue streams for yourself.
Real estate renting/leasing
If you have real estate, you can rent or lease out your property.
Short-term rentals have become popular in recent years. Whether you’ve got a spare bedroom upstairs or an entire house, you can rent your property for days at a time and potentially make more than you would on year-round renters.
Real estate investing
You can join a REIT or real estate investment trust and get in on real estate without taking out a big loan. You can get into real estate crowdsourcing online too.
Now, apps and services such as Fundrise, Crowdstreet, or RealCrowd offer you a way to invest in real estate with as little as $500 or $1,000 without actually getting your hands dirty.
Others
Even if you don’t have cash, real estate, or discernable creative talent, you still have plenty of passive income opportunities available today. Here are a few other passive income investments for you to make money on the side with minimal effort:
Ad space
(e.g., outdoor, vehicle, etc.). Put advertisements on your car. Or allow companies to put up ads (via billboards) on real estate that you own.
Vending machines
You can earn money from a fleet of vending machines. Just check the laws and regulations in your state governing these.
Rent out your gear
If you have in-demand tools or items that cost quite a bit that people would prefer to rent (rather than buy), apps like Fat Llama allow you to rent these out for folks to use.
A Final Word About Ideas For Making Passive Income
Passive income is a great way to make money besides your 9-to-5 job or running a business.
Remember, as opposed to regular ways of generating cash, passive income is all about minimizing the time and effort it takes to make some money. Everyone knows that having multiple passive income streams is the best way to build wealth. Many great options for earning passive interest are increasingly accessible to just about everyone today.
Traditionally, you’ll need a significant amount of money (or real estate) to build wealth via passive income. Today, however, many apps and services can show you how to make passive income with $1000, $500, or even less.
You can choose almost anything based on your skills, expertise, and interests. All it takes is the drive to take action now. Pick a passive income stream idea or two that you think works best for you and work to master those.
Then choose another. Lather, rinse, repeat.