People can make money in two ways. The first way is the traditional way to earn income.
The traditional way is to get out of bed at 8:00 in the morning and work till 8:00 in the evening. This 8 to 8 job will help you to earn money by working hard daily.
But the second way to make a constant source of income is quite interesting. It helps you to earn money even while you are not actually working.
This means you can earn passive income while sleeping, reading a book, enjoying a vacation on the beach, or even bathing.
Hence, passive income is one of the best ways to get an extra cash flow, even during distressful times.
The source of income serves as security. If you lose your employment opportunity or your primary job, then you may create a source of passive income as your only job.
Or, you may pursue a profession along with generating passive income.
As we all know, the world has been under the vicious wave of the coronavirus. The outbreak of the pandemic has made people realize that having multiple sources of income is a must these days.
This increases the importance of different sources of passive income.
In these bothersome times, employment or job opportunities have become very less. Organizations are even terminating the employment of their prior employees.
So passive income helps such people to maintain financial stability when they suddenly become unemployed. These people can also take a rest from their hectic lives by earning passive income.
Passive income can also help people to meet their after-retirement goals. This is because it helps to make huge revenues and hence, increases the savings of the people.
But before beginning to know the different sources of passive income, let us know the meaning of passive income in detail.
What Is Passive Income?
As the name suggests, passive income is the income generated by not performing much of the active work activities. This means that individuals need not perform work activities daily to earn passive income.
But you may invest in terms of money and time beforehand. After making an upfront investment, you can perform additional work along the way to generate a constant source of passive income.
An individual cannot earn a passive income without making any investment. He or she needs to make an upfront time investment or an upfront monetary investment, or both.
In other words, we can define passive income as a source of constant earnings for individuals. But this source does not include any employer.
According to the Internal Revenue Service, the two main sources of passive income include:
- A business that does not require the active participation of the individual
- An individual involved in rental property
These two types of sources can include stock dividends, royalties, or an affiliate marketing niche website, etc. All such sources do not require you to work daily.
But they do require a lot of work upfront in terms of time and monetary investment. This means you may be required to update your product or your business.
Now you are ready to earn great revenues and build up savings. You can generate revenues from your earlier saved up money. But what are the different ways to earn a passive income which you can choose?
Let us have a look at them.
Ideas to Earn a Passive Income
As a result of increasing technological advancements, there are a greater number of passive income ideas that can help you to earn a constant source of revenue.
The best thing about these ideas is that some of them may require as little as $5 as a monetary investment.
But, the ideas require investment in terms of time and hard work of the individuals.
So, here is a list representing different passive income ideas. You can choose any of these ideas according to your budget preferences and upfront in terms of time and efforts you are ready to put in.
The individuals can also choose a combination of two, three, or more different passive income ideas. This will help them to increase their earnings accordingly.
1. Dividend Stock
The top idea to make passive income on our list is investing in dividend stocks. Different companies have dividend-yielding stocks. The shareholders of such companies receive regular payments.
This dividend is paid to individuals based on the profits of the companies. The only efforts which the individuals need to put in are in terms of monetary investment.
This monetary investment includes the price of the stocks which the people are supposed to purchase. Hence, investing in dividend stocks is one of the most passive forms of income, requiring only investment in monetary terms.
Once you purchase the stock, you are paid a dividend on a per-share basis. So the greater number of shares you own, the greater is your possibility to earn profits or dividends.
But with great profits comes great risk. The risk included in investing in stock dividend includes the part where the individuals have to choose the right stocks.
The individuals should always investigate and scrutinize the company that is issuing the stocks. You can go through the website and the financial statements of the particular company.
Give at least two to three weeks in the researching and investigating process.
Another risk of liquid assets and stocks is that they are highly uncertain. Their value may fall drastically in a short period. The value of the stocks may also not be stable in cases of uncertain situations like the coronavirus outbreak of 2020.
Some companies may also decrease the number of profits due to their economic stress. So before investing in stock dividends, the individuals must go through all factors to reduce their risk.
2. Rental Income
Rental income is another form of passive income. As the name suggests, this income is generated by owning or taking on mortgage different properties.
These are the properties in which different individuals or tenants may live and give you rent. But before purchasing or taking on any property, you should consider the following three questions:
- What is the cost of the property?
- What will be the price of the taxes and additional expenses incurred on the property?
- What will be the price for which you can rent out this property?
These major questions decide on your rental income and profits. Out of this rental income, you can make up for the expenses incurred by you.
Additionally, you will receive your dividend on it. So, you can adjust the amount of dividend by setting up the rental income accordingly.
But gaining rental income comes with a lot of risks. First of all, you will have to decide the location of the property which you purchase. The location should be favorable for tenants.
This is because the tenants consider location as a crucial factor while deciding their place.
Secondly, you should always make efforts to know the background of your prospective tenant. You should have an idea whether your prospective tenant will be able to pay the rent on time or not.
The next risk which the owners should consider is whether their property will be able to rent out or not.
Moreover, the coronavirus outbreak has also posed several risks or threats to the property owners. Due to the economic challenges, the tenants may face it difficult to pay the rent.
Hence, the owners should consider all such factors before renting out the property.
Let us understand the concept of rental income with an example. Your goal is to make $12,000 per year as your rental income. The monthly mortgage of your property is $2000 per month.
The extra expenses and tax amount is $300/ month. Now, the owner should rent the property for at least $3200 per month. Only, this amount will help them to reach their target.
Also Read: Most In-Demand Jobs that Don’t Need a Degree
Dropshipping is one of the most lucrative sources of earning passive income. People can easily pursue dropshipping due to the limited amount of funds needed to begin it.
Dropshipping is the business where the individual purchases products from a supplier and delivers them directly to his buyers. Thus, this process frees the person from the strenuous task of storing the stock or inventory.
But before beginning, you should select your niche carefully. This niche will help to decide your target audience. The niche is a particular category in which you will sell the products.
You can deal in products ranging from fashion, beauty, home decor to essential commodities.
Then, you need to conduct thorough research regarding your competitors. Be aware of the strategies of the famous dropshipping giants like Amazon, Walmart, etc.
Besides researching the particular competitor, you should also research about your product. This research will help you to assess the demand-supply level of your product.
Accordingly, you can decide whether you are dealing with the right product or not. The last step in the process of dropshipping is to find the right suppliers.
Now you are ready to create your dropshipping website. One of the best aspects of dropshipping is that it provides users with full control over their business.
Moreover, this source of passive income does not require a huge investment. You can even start it with little monetary investment and grow it gradually.
4. Savings Account or CDs
You can easily generate passive income by investing in a certificate of deposit (CD) or savings account. The passive income generated in such investments is due to the high rates of interests of different banks.
This means that the individuals can earn income online, even while sitting at their homes from such investments.
But while sitting at the homes, the people need to conduct thorough research. This research will help them to earn high passive income by determining the interest rates.
To get the highest interest, the individuals can search for the CD rates or the rates of savings accounts of different banks in their country. If the rate of your local bank is not high, then you should opt for any online bank.
This will help you to select the top rates of your country.
5. Bond Ladders
As the name suggests, a bond ladder includes several bonds that have different maturing periods. The bonds ladder helps you to decrease the reinvestment risk.
This means the individuals need not invest in a single bond that offers low interest. The investment money is divided into a series of bonds offering different interests.
Bond ladders are one of the best ways of making passive incomes for different retirees. It helps you to sit in the comfort of your homes and collect your interest payments.
Once your bond matures, you can purchase another bond to extend the ladder. Hence the name of the term is a bond ladder.
For example, you purchase bonds of two years, five years, and seven years. When the bond of two years matures, you receive your payment. You can use this payment to extend your little bonds to longer durations or purchase another bond.
Moreover, the bond ladder also helps individuals to eliminate their risk of purchasing bonds when interest rates are not much higher. Besides this, there are different types of bonds.
Some bonds are owned or backed up by the federal government, while some are not. So a bond ladder helps you to diversify your risk. This is because there are different types of bonds in a bond ladder that can help you to earn income.
6. Create Software or An Application
In this era of digitalization, software or applications play a crucial role. Almost every individual owns a smartphone. This smartphone has several apps that help users to perform different activities.
The popularity of different applications is evident from the fact that there are many apps on the Play Store. So why don’t you reap the benefit of this popularity? You can easily create an application or software to earn residual income.
To create an application, you need effective technical skills. But you can also hire the efforts of a programmer to help you create such software. You can create an application for different purposes.
It may be a gaming application or an application that helps you to save your time. You may also create different applications that help students to study.
But before creating an application in any niche, make sure to make it better than the other similar apps app on the Play Store. Only a good application will be able to survive in this competitive digital market.
Once your software attracts a greater target audience, it will help you to earn passive income. So what are you waiting for? Invest your hard work and a little money and start making money from applications.
7. Deal in Domain Names
Nowadays, it has become very crucial for businesses to create their online presence. One of the best ways of creating an online presence is through a website.
The name of the websites or the domain names serves as the online identity of the individuals. Hence, individuals should be very careful before choosing any domain name.
Due to the increase in technological innovations, almost every individual has an online presence.
So dealing in domain names can be a profitable option to earn passive income. To deal in domain names, you can purchase profitable domain names that are in demand.
Profitable domain names include the names with a .com domain. This is because most people want a .com domain that is easy to remember.
Moreover, the domains which you choose should be easy to remember and type. These domains should not have double characters. Let us say, an individual wants to keep the domain name as "deep pie".
Here they will prefer a single ‘P' instead of double P. So, a profitable domain name, in this case, should be deepie.com.
Apart from this, you can also research the profitable domain names in different niches. Once you purchase the profitable domain names, you can list them for sale.
These domain names can help you to earn passive income. But the risk associated with dealing in a domain is that sometimes you may not be able to sell the domains.
This will lead to losses because you could not sell a domain that you paid for. So you need to be careful while dealing in domains to earn passive income.
Also Read: Best Freelance Websites & Online Job Sites
8. Rent out Your Car or Parking Space
Your car is in the garage for months. Maybe because you are too busy to go out on a drive. So why not earn money with this car? Yes, this is possible. You can rent out your car to earn income.
Renting out can be either short term or making your car available to the drivers of various services like Lyft, Uber, etc. Such services also integrate the facility of insurance. This makes it less risky for you to give your car on rent to strangers.
Besides your car, you can also rent out your parking space. This is possible for individuals living in high traffic areas. You can rent out your parking space using these services.
This is possible if you have a two-car driveway or if you have a parking space but no car. Renting out parking space is also a popular option in places that have high tourism value.
9. Purchase a Blog
Instead of putting in investment and your hard work from the beginning to create a blog, you may purchase one. This will help you to earn passive income in a short period.
After purchasing the blog, you can outsource it to different content writers and digital marketing experts. Such professional help will assist you to make huge incomes from your blog.
You may actively communicate with professional experts. They can help you to update new content in your blogs. Several features can help you to earn passive income through a blog.
These features may include online courses, affiliate links, ebooks, etc. Though purchasing a blog and monetizing it requires time, it is one of the best ways to earn high passive income.
10. Write and Publish an Ebook
Ebooks have a growing demand and importance on the web. These books were first introduced to the people in 2009. Since then, they have become famous and include content on different topics.
There can be ebooks that serve as guides to operate a particular device. Or there may be books that help you to pursue a particular profession.
No matter whatever is the category of your ebook, it can help you to easily earn passive income. But this is possible only if you have a flair in writing skills.
Before creating an ebook, you should always assess the demand-supply level of the content or the category of the ebook. This is because writing on categories that do not attract the target audience is of no use.
So you should choose topics that can help to entice a greater target audience.
Apart from the topic, your content should be appealing and intriguing enough to capture the attention of the readers.
Once you create an ebook, you can market them. Creating and selling ebooks regularly will help you to earn a fanbase of readers. These readers will help you to make passive income.
You can even earn a 6 figure income from this business by publishing your ebooks on Amazon Kindle.
11. Sell Digital Products
Digital products have become very important in this technological era. You can easily create your digital products and sell them online on software like Shopify.
These digital products may include graphic designs, PDFs, ebooks, online courses, or other digital information and content.
You can use your writing skills, drawing talent, or even oral skills to create digital content. After creating the digital products, you can easily sell them on Shopify.
This process can even be automated with the help of the instant downloads of this software. By giving your best, you can easily make more than $1500 in just a few weeks for your sales.
12. Sell Stock Pictures
Online and offline content consists of different images. Have you ever thought about where do these images come from? These pictures come from people like you who have an interest in photography.
So if you have great photography skills and you like to click pictures, then you can sell stock photos. These pictures are used in different websites, magazines, blogs, or other content.
Once you are ready to sell your stock pictures, you can connect with any stock photo website. These websites purchase the stock pictures and provide the sellers with the commission.
This commission is paid when a prospective buyer purchases the stock picture of the individual. One of the best stock photo websites is Depositphotos. You can try selling your stock pictures on this website to earn a huge passive income.
13. Earn Cashback Rewards
Cashback rewards help you to earn money while you spend money on something. You can earn cashback rewards while you are paying your bills with a credit card.
You may have to wait for a while to receive your cashback. But this is one of the easiest ways to earn passive income. It is an easy way because you do not need to work to earn cashback.
You receive cashback due to the money you spend on certain things.
Besides earning cashback rewards while paying out your bills, you can also visit various cashback sites. These websites help you to earn cash back when shopping online.
14. Niche Affiliate Website
Creating a niche affiliate website can help you to earn passive income in various ways. But before creating such a website, you need to determine a niche.
A nice is a particular category or topic on which you want to write about on your website. Before selecting a niche, make sure to assess the demand-supply level of this niche.
You should choose a niche only if its demand is greater than the supply. The greater demand will help to attract a greater target audience to your website.
After choosing the niche, you can create your website and choose a domain. You may purchase the hosting services and domain name from a single provider.
But you can also purchase both these services from two different providers. Make sure to choose an easy to remember domain. After getting your website created, you need to focus on its content.
Use effective search engine optimization strategies and techniques. Such techniques will help you to rank your website on the Google search engine result pages.
You can receive a great target audience if you rank higher on the search engine result pages.
Integrating effective search engine keywords in your content will help to attract greater traffic to your website. After this, you can generate ongoing passive income from your website in various ways.
But the best way of earning income on your website is through affiliate marketing.
Affiliate marketing is the process in which different bloggers or website owners promote a product. This product is of a third party. The affiliates can promote the product on the website by placing affiliate links in their blogs.
When the visitors click on such affiliate links, they are redirected to the official website of the product. From here, these visitors can make their purchases.
Bloggers or affiliates earn a commission when the visitors purchase the product through their referral or affiliate links. The commission may range between 3% to 10%.
So, you need to attract serious traffic to earn income in huge figures through affiliate marketing.
After creating a niche affiliate website, the website owners can pursue affiliate marketing. They may join an affiliate marketing network for this purpose. On the other hand, they may even directly join the particular affiliate marketing programs.
Also Read: What Are the Work from Home Jobs I Can Do?
15. Peer-to-Peer Lending
You may have taken loans to make up for your raised expenses. After taking the loan, you need to pay interest on it. But have you thought of it the other way? You could be a lender and earn interest from the loans given by you to other people.
But to lend money to your peers, you need to part with some liquid funds. You may also go through different peer-to-peer lending websites. These websites help to connect the borrowers and lenders.
But before registering, you need to enter your personal verification details & sign a contract. This helps to verify the credibility of the borrowers and lenders.
But you should not provide too many loans on a single website. This is because there is a risk that the borrower may not be able to pay back your loan.
Economic recessions, like the outbreak of the COVID-19 pandemic, can also make your borrowers default the loan. So, you should consider all the aspects of the loan and research the background of the borrower before lending money.
One of the best ways to minimize the risks of default of loans is to diversify your lending on different platforms. You can invest small amounts on different peer-to-peer lending platforms.
By providing multiple loans you can receive passive income regularly.
16. Own an ATM or A Vending Machine
You may be surprised to hear, but owning an ATM or a vending machine can help you to earn passive income. In today’s world, we see many ATMs or vending machines around us. So, why not own some of them and earn profits?
You can purchase an ATM and place it in a favorable location. If you are the owner of the location, then you do not need to pay rent.
Otherwise, you can take a property on rent that has a favorable location. In such cases, you can divide the profits in a certain ratio with the owner of the land.
You receive profits from your ATM from the fee which is charged to the customers. But with high profits comes great responsibility as well. You need to be responsible for the cash which is stocked in the machine.
You can also hire the services of a third party for this purpose. This will help you to earn passive income with the least effort.
In the same way, instead of an ATM, you may purchase vending machines. Select a location that has a high amount of traffic. This traffic should include mainly foodies.
Your vending machines need to be restocked with drinks or snacks. For this also, you can hire the services of a third party.
Your profit depends upon the fees charged from the customers for these snacks. There is a possibility for a higher profit margin in the case of purchasing a vending machine.
This is because you may purchase the snacks and drinks in bulk at comparatively lower costs. Hence, due to low inventory costs, the profits can be high.
A REIT stands for Real Estate Investment Trust. As the name suggests, a REIT is a company that manages real estate. These companies are legally valid and do not have to pay high corporate income taxes.
You can purchase REITs just like you purchase dividend stocks. Your income will be the profit or dividend which the company pays on these REITs. Some of the best REITs generally pay increasing dividends to their owners annually.
So, you have chances of earning high passive income by investing in these real estate investment trusts.
But like the dividend stocks, these REITs also come with different risks. So you need to analyze them before purchasing.
This is because, in times of economic recessions or downturns, the REITs may not generate enough income. In such cases, the company is likely to cut down its dividend.
So to minimize the risks, you can purchase an ETF. An ETF consists of different REITs. This is safer than buying individual REITs because of diversification.
18. License Music
In this era of technological innovations, you can find a greater amount of YouTube videos and podcasts. This means the demand for music has risen more than ever before.
Due to this, people are even ready to pay high costs for getting music. So you can reap the benefit of this opportunity.
You can license music just like you stock your pictures. Licensing music can help you to earn royalty or commission.
You can license music for different platforms like YouTube videos, podcasts, commercials, etc. But make sure your music is soothing and enticing enough for the target audience or visitors.
19. Sublease to Roommates
You can take a house or apartment on rent and sublease it. Subleasing means you find a tenant and give your mortgaged house or apartment again on rent. This helps you to earn passive income.
You can cancel out your rent or mortgage with your monthly rental income. Besides this, you may increase the rates of rent and earn extra profit as your commission.
You can also sublease your property to a roommate. This means you share your rental property with a roommate and earn income.
Investing in annuities can also help you to earn passive income. This passive income is paid to investors in the form of monthly payments. Annuities are insurance products that provide multiple monthly payments to users.
But investing in annuities is a risky task. This is because different annuities have different terms and conditions. You should always consult a financial adviser before purchasing any annuity.
Sometimes the price of the annuities may be very high and they may not be worth it. So you should invest in an annuity only if you can afford to suffer the shock of loss.
21. Create Sponsored Content on Instagram
Instagram is one of the best social media platforms to help you make passive income. You can replace your scrolling time with posting time and earn income from it.
But before attracting sponsored post requests, you need to improve your Instagram account.
First of all, you need to create an Instagram account on a specific niche. This niche can include any category like fashion, beauty, travel, home decor, skincare, tips, a particular breed of dogs, etc.
The niche which you choose will determine the target audience which is attracted to your account.
After choosing a niche, you need to create content on that particular category. But the content which you create should be able to stand out from your competitors.
It should be appealing and informational for your target audience. Make sure to clear the queries of your audience through your content.
One of the best ways to increase your followers on Instagram is to be consistent in posting your content. You should also be consistent with your niche.
Once you have put in hard works and effort, you will receive sponsored post requests.
To receive such requests you can add your email ID in the Instagram bio. People can connect with you to get their products or services sponsored through your email ID. These sponsored posts will help you to earn passive income.
22. Create a YouTube Channel
You can generate passive income by creating a YouTube channel. But make sure to create a successful YouTube channel. For your youtube channel, select a particular niche and create content on it.
The user should make sure to post consistently on the YouTube channel to entice the target audience. Once they have a successful YouTube channel with a great target audience or followers, they can earn income.
You may earn income through your YouTube channel in various ways. Affiliate marketing and sponsored videos are some of the best ways to earn passive income through a YouTube channel.
Also Read: Businesses you can do as a freelancer
23. Real Estate
You can purchase properties or real estate to make passive income. But the properties which you purchase are affected by various factors.
You may determine the location of the property and the preferences of your target audience before purchasing any property.
Purchasing pre-construction houses will also help you to earn great passive incomes. This is because you can get the work done on such properties at comparatively lower costs.
Hence, once the property is completely built, you can sell it for huge profits.
But with great profits come great risks, hence dealing in real estate is also risky. So you should consider all the factors before purchasing a property and selling it.
Before purchasing the property, the location and the services available near the property should be considered. And before selling it, you should thoroughly research the background of the person to whom you are about to sell the property.
You can also connect with a real estate agent. Such an individual can help you to minimize the risks of losses and maximize the benefits of opportunities.
24. Advertise Your Car
If you generally travel for long distances, then this is one of the best options to earn passive income for you. You can easily advertise on your car by connecting with an advertising agency.
This helps you to an extra income by simply driving your car and going to the places where you already wanted to go.
But before contacting any advertising agency, make sure to verify its credibility. This is because there are many fraudulent companies these days who want to exploit the general masses.
But a credible advertising agency will initially solicit information about your driving habits. This information may include the distance to which you drive daily or the places where you drive.
The information about your driving habits helps the agency to connect you with a suitable advertiser. The agency may connect you based on the locations where you drive and the target audience, which can sight your car.
Then you are connected with an advertiser, who will put an advertisement on your car. But this advertiser will also like to check about your driving record before working with you.
So you are ready to earn passive income by going to the places where you already wanted to go and incurring expenses that you already had to incur.
You can choose any of the passive income ideas according to your convenience. But now the question arises that how many streams of income should you choose?
The answer to this question is quite subjective and differs from person to person. The number of income streams that you should choose depends upon your financial stability and your financial goals.
Initially, you should try out a greater number of passive income ideas. This will help you to decide the best source of passive income for yourself.
Moreover, it is better to invest in different rental properties or human capital and income-producing securities. Investing in different things helps to diversify your income sources.
But while choosing different income sources, make sure that you diversify your focus according to the income you generate from different sources.
It should not happen that you lose your focus on other income streams while putting the entire focus on one. So, you should know how to balance your efforts according to the output you are receiving.