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Passive Income: 12 Smart Ideas to Make Money

Katherine Gustafson is an author and personal finance expert from Portland, Oregon. She writes about investing for Wealthsimple as well as having written for Forbes, Business Insider, TechCrunch, and LendingTree. Katherine is a past recipient of the Izzy Award for outstanding achievement in independent media. She has a BA from Amherst College and an MA from Boston University.

Passive income is the Holy Grail of the business world—it’s income that takes little or no effort to bring in. This is the kind of income people make without doing a large amount of ongoing work. It includes renting out real estate, selling digital products, or selling ad space on a blog.

The catch is that “passive” income is very rarely truly passive. In many cases it takes a lot of work to get in a position to generate passive income, either by earning extra money to invest or putting in work upfront to create a product to sell.

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Although you may not be able to find a free lunch, you may well stumble across an almost-free one if you try one of the many options for making income while you sleep.

12 passive income ideas

Here are a few of the many ways to make passive income—or “passive”—income.

1. Investing

Investing money is the classic method of generating passive income. Look for dividend-paying stocks—these will generate passive income without you having to sell them. You’ll need a lot of shares to get a substantial stream of revenue from dividends, however, which means that this avenue for passive income isn’t open to you if you don’t have a large amount of money to invest.

Other investment options that can bring in passive income are high-yield savings accounts, CDs, money market funds, and index funds. Most of these vehicles have low interest rates, however, so it’s difficult to make much this way. And in all of these cases, as with dividend stocks, you need to have money to make money.

2. Engage in peer-to-peer lending

Another promising way of investing that can provide solid passive income is peer-to-peer lending, which involves lending money directly to individual businesspeople through an online platform. Use sites like Lending Club and Funding Circle to invest your extra money and enjoy a passive income stream from interest payments.

As with other forms of investment, peer-to-peer lending requires some upfront investment. This can be a good alternative to savings accounts and CDs, which tend to produce little interest, and stocks, which tend to be high-risk. Peer-to-peer lending sites use algorithms to help you assess the risk you take in investing your money that way.

3. Start a blog

Starting a blog is an often-mentioned method of earning passive income, though this falls into the deceptively non-passive category. It may seem like a blog is just an inert web page that sits there and earns money from adds. But it actually takes a tremendous amount of work to build a blog’s audience up and to maintain it so the audience keeps coming back.

If you can put in the work to make your blog popular, you’ll end up with a platform on which you can generate multiple streams of revenue from online ads and marketing products and services to your readers. Display ads on the sides of your blog pages can make you a steady stream of income, as can affiliate marketing in which a company pays you for promotion within your content. You earn money each time a reader clicks the affiliate link you’ve included and purchases a product or service.

4. Publish a digital product

One good way of making passive income is to create a digital product that you can sell to many buyers without having to ship anything in the mail. Of course writing a book or other similar product is hardly a passive activity, but once you’ve put in the work upfront you can continue to sell it and earn money from it for a long time without doing much more work.

Digital products that can do well are things like e-books, workbooks, and instructional guides. You can self-publish these items as PDFs and sell them yourself, or you can partner with another platform like the Amazon Kindle Direct Publishing platform, which takes a cut of your earnings in exchange for dealing with many aspects of the publishing and distribution process.

5. Create an online course

Another digital product that can help you create a good stream of passive income is an online course. Think about what you have to teach and learn to make a simple series of video or audio recordings to impart your knowledge to others. As with e-books, this options requires a lot of work upfront, especially if you don’t know how to create a course, but can eventually turn into an avenue for passive income.

There are many online platforms for course creators to use, such as UdemyTeachableThinkific, and Google Open Online Education. There are markets for courses of all kinds, from how to do strength exercises to how to code. Most people have knowledge and skill on which they can base a course. The challenges center more on finding the time and energy to finish creating the course and attracting an audience of customers once you’ve got your education empire started.

6. Earn real estate income

Owning real estate and renting it out—whether to long-term renters or overnight visitors—is an excellent way to make passive income. As with investing in the stock market and savings vehicles, you’ll need money upfront to secure the real estate you plan to rent. You’ll also need to make some ongoing investments for maintenance and upkeep.

But once you’ve got the domicile secured and ready for renters, you can start generating a healthy stream of passive income. This is especially true when you have long-term renters, since renting to them doesn’t require as much day-to-day management as renting out your place for a few days at a time using sites like AirBnB and VRBO.

7. Use cash-back credit cards

Cash-back credit cards can earn you a small amount of passive income, especially if you’re using them to buy things you would have bought anyway by some other means. While cash back isn’t likely to make you all that much, it’s an effortless way to get a little extra money.

There are many cash-back cards available, so it’s best to investigate which one will be best for your shopping habits. But if you get recommendations from blogs, try to discern whether the blogger is an affiliate of the company offering the card, which would mean that the recommendation is hardly impartial.

8. Sell stock photos

A number of stock photo websites offer a commission to those whose photos they license for people to use online or in print. If you’re an amateur or professional photographer, getting your photos onto one of these sites could be a way to earn a steady amount of passive income.

Sites you might look at to sell your photos are DepositPhotosStockPhotoDreamstime, and Shutterstock. You’ll receive a commission every time someone downloads one of your photos from these sites.

9. Refer friends and followers to companies

A place to pick up a bit of pocket change are referral programs like Ebates.com, which give you cash every time you refer a friend. You can also refer your followers on social media to these sites, which can end up providing very easy money to you if a lot of them follow your advice.

Many companies offer referral bonuses or cash, so it’s quite possible that companies you already engage with might have options like this to help you earn a bit more.

10. Subcontract services

This idea also falls into the not-that-passive category because it takes a decent amount of work to drum up customers for a service-based business. But if you can find a service that has a ready audience you are able to tap into, and if you have access to high-quality staff to perform the services, you can make a decent amount of money without doing all that much work yourself.

You can even subcontract out work like scheduling, bookkeeping, and social media marketing so that you’re really running the business with a few hours of weekly management of all the subcontractors you employ. This may not sound particularly passive, but it can earn you a lot more money in far fewer hours than many full-time jobs you might find.

11. Do drop shipping

Opening an online business has never been easier. You can even start up a retail business without ever handling or even seeing the product you’re going to sell. If you use a drop shipping service, the supplier will store and ship the products to customers on your behalf.

Your job is to find the buyers and manage customer service. You don’t need to invest any money upfront in inventory, and you are able to make a profit that amounts to the difference between the shipper’s wholesale price and the retail price you are able to charge. If you’re savvy about attracting an audience, this option can help you make some good money without a huge investment of time.

12. Rent out your car, RV, or boat

The Internet has brought with it a bevy of peer-to-peer vehicle rental platforms that allow you to make money by renting out your car to other people. For cars, try Turo or Getaround. For RVs, try RVShare or Outdoorsy. For boats, look at boatsetter or GetMyBoat.

These sites allow you to list your vehicle for rent, set prices, find renters, and receive payment. Renting out your vehicle, especially a larger or more in-demand type, can be a source of substantial extra income, and you have to do relatively little to manage your listings.

Don’t be passive about passive income

As is clear from many of the ideas on this list, you can’t just sit back and wait for passive income to come to you. You have to actively pursue passive income. Ironic, isn’t it?

In many cases, you’ll have to invest some money to create the passive income source. In others, you’ll have to do a solid amount of work upfront to set yourself up to earn money easily over time.

Last Updated May 14, 2020

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