Who wouldn’t like to make money while sipping coffee — or even while sleeping? That’s the beauty of passive income. It’s not a quick-fix scheme to get rich overnight, but rather a way to build a secondary income and boost your earnings over time.
Let’s explore the top passive income ideas that can make your money work for you.
Key Takeaways
- Creating passive income streams will earn you money with minimal ongoing effort.
- There are many ways to make passive income, such as real estate, dividend stocks, starting a blog, and dropshipping.
- These passive income ideas require an initial investment of time, money, and effort, but they can all be scaled up over time.
- Diversifying your passive income streams can help to reduce risk.
What is Passive Income?
Simply put, passive income means income that you don’t have to work for actively. With passive income, you continue to make money from the initial work you put in.
Think of it as planting a seed; once planted, you can sit back and enjoy the results with minimal effort.
Why Passive Income Matters?
With passive income, you get to have more time to do things you enjoy.
Once you set up your income stream, you will grow your wealth over time. With this extra money, you will achieve your financial goals faster. You may even retire early if it covers your living expenses.
Lastly, relying on one source of income can be risky. Understanding the importance of money in securing your future means preparing for unexpected situations like job loss or medical bills. Having sources of passive income gives us that safety net and peace of mind if something bad happens.
Top 10 Passive Income Examples You Can Start Today
Building a passive income stream doesn’t necessarily require excessive money, time, and effort. There are easier ways to start generating income. Here are some of the top passive income ideas.
1. Invest in Real Estate
Real estate has great potential to generate consistent cash flow. However, it is not entirely passive, as it requires ongoing management, maintenance, and dealing with tenants. You can always hire a property manager to do the job, though.
Investing in real estate can also be costly in the beginning. However, depending on the type of property, location, market conditions, and economic conditions like the current interest rate, you can make anywhere from $200 to $10,000 and up per month.
Real estate properties also continue to appreciate over time, increasing your wealth more and more.
While investing in real estate, you’re not limited to rental properties.
For instance, for as little as $10, you can buy crowdfunded real estate on platforms like Fundrise or Groundfloor. This type of platform collects money from multiple investors to buy real estate properties. In return, you’ll get your share of the profit, depending on how much you’ve invested.
2. Choose Dividend Stocks
Investing in stocks can generate passive income, but it also has risks. You need to monitor your investments regularly; otherwise, you could lose them due to market fluctuations.
Investing in dividend-paying stocks can be another way to make passive income. These are stocks from companies that distribute a portion of their profits to shareholders, usually quarterly.
If you invest in well-established, reputable companies, you can enjoy annual dividend yields ranging from 2% to 5% or higher.
Let’s take a closer look at some of the most popular companies:
| Company Name | Sector | Market Cap | Dividend Yield |
| Procter & Gamble (PG) | Consumer Goods | $409 Billion | 2.33% |
| Coca-Cola (KO) | Consumer Staples | $255 Billion | 2.72% |
| Comcast Corp. (CMCSA) | Communication Services | $185.2 Billion | 3.04% |
| Johnson & Johnson (JNJ) | Healthcare | $394 Billion | 3.09% |
| ExxonMobil (XOM) | Energy | $464 Billion | 3.37% |
| PepsiCo (PEP) | Consumer Staples | $261.57 Billion | 3.2% |
| Pfizer (PFE) | Healthcare | $207.4 Billion | 5.84% |
| Bristol Myers Squibb (BMY) | Healthcare | $146.7 Billion | 4.79% |
| AT&T (T) | Communication Services | $113.4 Billion | 5.12% |
| Verizon Communications (VZ) | Communication Services | $141.5 Billion | 6.05% |
3. Use Peer-to-Peer Lending
With peer-to-peer lending, you can lend money to people and small businesses. In return, you’ll get interest on the amount you lend. The safest way to do this is by using reputable online platforms, like Prosper, regulated by financial authorities.
Though not as accessible as it once was due to increased regulations, there may still be an entry point here for you.
Even if you don’t have much to lend, you can start small, as low as $25 per loan. Typically, you can earn between 5% to 9%. This also depends on the creditworthiness of your borrowers.
Also, keep in mind that these platforms may charge a servicing fee of around 1%, which may reduce your earnings.
However, be aware that peer-to-peer lending carries some risk. What if the borrower fails to repay the loan? To mitigate this, consider giving small loans to multiple borrowers. This way, if one defaults, you may still receive money from the others.
4. Create a Blog or YouTube Channel
Why not turn your skills and passion into a passive income stream? If you have interesting and valuable content to share, consider starting your own blog or creating a YouTube channel.
Please note that blogs and YouTube channels tend to have several active phases before becoming passive income streams.
When you’re first getting started, you may not notice traffic to your website or channel. But don’t give up. Building an audience can take time. As your blog or channel grows, so will your income opportunities.
So, how do you make money on YouTube or your blog? The most common ways are:
- Displaying ads on your blog using programs like Google AdSense or on your YouTube videos through the platform’s AdSense program.
- Starting affiliate marketing, where you recommend products or services and earn a commission when someone buys something through your affiliate links.
- Partnering with brands and sharing sponsored content to promote their products.
5. Invest in REITs
With REITs (Real Estate Investment Trusts), you can invest in real estate without the hassle of owning property. These are businesses that own, operate, and finance income-generating commercial real estate properties, like office buildings, retail spaces, apartments, and hotels.
REITs allow you to purchase shares from the company, and in return, you receive a portion of the rental income and profits. These are often distributed as dividends, with annual yields typically ranging from 3% to 7%.
Many REITs also offer the option to reinvest dividends. This way, your investment can grow more through compounding.
6. Sell Digital Products
Another way to make passive income online is by selling digital products. If you decide to blog or start a YouTube channel, you can also display and advertise your digital products there.
There are many ways you can make money online:
- If you are an expert in a specific subject, you can write an ebook.
- If you have skills in drawing, you could create and sell design templates for websites, social media, and presentations.
- If you have marketable skills, consider creating online courses and selling them on platforms like Udemy and Teachable.
- If you’re a photographer or videographer, you could sell stock images and footage.
Selling digital products is one of the most accessible forms of passive income. Once you have created and launched your product, it will continue to generate passive income with no additional production costs.
The possibilities of how much you can make with this passive income idea are endless. If you don’t have a big following, you may earn a few hundred dollars at first. But as your following grows, so will your revenue.
7. Build an Online Store with Dropshipping
Dropshipping is a great way to get involved in e-commerce without dealing with some of its biggest hassles. It allows you to sell products online without keeping inventory or dealing with shipping. All you have to do is set up an online store and advertise your products.
When customers order from your store, your third-party supplier ships them the products directly. In other words, you’re just the intermediary between the main supplier and the customer.
Dropshipping is a low-risk business model since you don’t handle storing, packaging, and shipping the products. You can also offer a wide range of products in your store, appealing to a larger customer base.
Again, how much you may earn can greatly vary. Some of the most famous dropshippers make over $10,000 a month. While these are exceptional cases, you should stick to a solid business plan to maximize your potential.
8. Rent Out a Room or Space
If you have a spare room in your house or apartment, why not rent it and make some cash off it? This is one of the best passive income ideas because it requires minimal effort.
Decide whether you want to rent out your space for long-term or short-term periods. Long-term rentals generate consistent income. On the other hand, short-term rentals can earn you more but require more effort from your side, like cleaning and managing guest turnover.
Some platforms that can help you find roommates include Zillow, Craigslist, Airbnb, and Vrbo. These platforms charge a flat fee or ask for a commission or service fee, so make sure to factor that in when deciding your pricing.
Depending on your location and what you offer, you might earn up to $1,500 per month on long-term rentals and anywhere from $50 to $300 per night on short-term rentals.
9. License Your Photography or Art
If you’re a photographer, you could license your artwork by uploading it on Shutterstock or Adobe Stock. You will earn 15% to 40% commission on the price Shutterstock receives for licensing your photos and 33% on Adobe Stock for each image.
The more you upload your photos on these platforms, the higher the chances of you earning. Also, a single image can be sold multiple times, over and over, without any additional effort from your side.
We should note that these platforms are highly competitive. Earnings are not guaranteed or consistent for all photographers.
10. Invest in Index Funds
Index funds are groups of stocks or bonds that track a specific market index, like the Dow Jones Industrial Average or S&P 500. They distribute your investment across several assets, which lowers the risk associated with individual stocks. These funds also provide instant diversification, reducing risks even more.
While index funds are mostly hands-off, they still require you to monitor the market, rebalance, and make informed decisions during downturns.
Over time, dividends and capital gains can provide you with a stream of steady passive income. Index funds are designed for long-term growth and can yield around 1% to 2% annually. Of course, this depends on the performance of the market.
There you have it — 10 passive income streams to make you rich. Remember, there is no one-size-fits-all approach to earning passive income. The best strategy is to assess your skills, resources, and financial goals to find out what works for you. Start small, gain confidence, and scale up!